“My dreams feel impossible. Everything is so far away. Five more years until I pay off the car. Twelve more years until I pay off the house. Do I have to wait until I’m 50+ to enjoy life?”
Let’s say you have a goal that’s audacious and unconventional.
You want to create $45,000 per year in passive income. Or you want to live 100 percent debt-free. Or you want to spend a year traveling across Europe, South America and Southeast Asia.
How soon can you do this?
Sooner than you might think.
Let’s look at the numbers. Let’s assume that you have a take-home pay of $50,000 after taxes and after other paycheck deductions, such as 401k and HSA contributions.
Let’s also assume you’re financially solvent. You have an emergency fund. You don’t have high-interest debt. Everything you save can get dedicated to your audacious idea.
Your dream is to take a one-year sabbatical from work. You want to enjoy a mini-retirement.
Based on those assumptions, with a take-home income of $50,000, how soon could you save enough to cover your annual cost-of-living?
- If you save 10 percent of take-home pay, you’d reach your goal in 9 years.
- If you save 20 percent of take-home pay, you’d reach your goal in 4 years.
- If you save 30 percent of take-home pay, you’d reach your goal in 2.3 years.
What we’re seeing is the relationship between timeline and intensity.
If we casually save, we reach goals slowly. If we intensely save, we reach goals faster.
Walking, jogging and running will carry you across a mile. The difference is speed.
This sounds like “duh, Captain Obvious!” until you think about common objections to brave, bold lifestyle ideas:
- “But it’ll take forever!”
- “But I’d need to be obsessed!”
One of those statements will always be true. The other won’t.
- If you stroll, it will take forever. But your efforts will be minimal.
- If you sprint, you will need to be obsessed. But you’ll reach the finish line faster.
This applies to any goal:
- Paying cash for your next car
- Wiping out your student loans
- Reaching financial independence
Imagine losing one pound per month. Your lifestyle changes would be minimal. Swap out sodas for water. Replace cupcakes with fresh fruit. Your progress will feel like nothing. But after a year, you’ll have lost 12 pounds.
By contrast, imagine losing one pound per week. Your lifestyle changes would be drastic. But in less than 3 months, you’ll have lost those same 12 pounds.
The question, therefore, isn’t: “Could it happen?”
The question is: “How long am I willing to wait? How obsessed am I willing to become?”
We created a YouTube video on the relationship between timeline and intensity. You can check it out here:
P.S. Coming soon — my 2017 rental property income report and year-in-review! Stay tuned!
- Track your net worth.
- Start a side hustle! How to start a blog in 5 minutes.
- Travel without paying for flights. Here are my favorite cards for free airfare.
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