فصل 3 بخش 1

SECTION 3

MAKE THE GAME WINNABLE

CHAPTER 3.1

WHAT’S THE PRICE OF YOUR DREAMS? MAKE THE GAME WINNABLE

All men dream, but not equally.

T E LAWRENCE

I usually kick off my financial seminars with a question: “What’s the price of your dreams?” Then I invite people to stand up and tell me what it’s going to take for them to be financially secure, independent, or free. Most of them don’t have a clue. There’s a lot of shuffling and squirming in the room, and then maybe a few hands shoot up. In hundreds of seminars with hundreds of thousands of people from all walks of life, I’ve heard just about every number imaginable.

So let me ask you personally now: How much money will you need to be financially secure, independent, or free? Just take a guess. You don’t have to be right—or even logical. Is it $1 million? $5 million? $500 million? Take a second right now, go with your gut, and write down the number, either in the margin of this book, in a notebook app, or just on a scrap of paper. It’s important to write it down, because writing it anchors it and makes it real.

Did you get it done? Soon you’ll see why this step is an important first action.

Now, my experience tells me that if you’re like most people, that number probably feels a bit large to you right now, doesn’t it? Well, keep reading, because we’re going to do a few easy exercises to help you tame that number. And I’ll bet you’ll find out that it can be made much smaller than you ever imagined. In fact, you’re going to learn there’s not just one “magic number,” because there are five different levels of financial dreams that will set you free. And no matter if you’re just starting out or getting ready to retire, no matter how solid or shaky your balance sheet is right now, I guarantee you that at least one or two of those dreams will be within your reach. How? It starts with understanding what you truly need.

Recently, at one of my high-end programs, a young man in the back of the room stood up to name the price of his dreams. He threw back his shoulders and announced, “A billion dollars.” There were a lot of ooohs and aaahs from the crowd. This person was in his 20s, one of the younger participants at the conference, and he probably hadn’t earned his first million yet. So I asked him to consider what that number really meant.

Remember in chapter 1.4, “Money Mastery: It’s Time to Break Through,” when we talked about how everything people do, they do for a reason? Just as a reminder, there are 6 Basic Human Needs: Certainty, Uncertainty/Variety, Significance, Connection/Love, Growth, and Contribution. So why did this young man want a billion dollars? Which of these needs was he trying to meet? Certainty? You can get Certainty in your life for a lot less than a billion dollars! How about Variety? You can get plenty of Variety with a million dollars, or much less, right? Connection and Love? Hardly. If he gets a billion dollars, there will be a lot of people who want to be in his life, just like lottery winners who suddenly discover dozens of relatives and “friends” they never knew they had. With that kind of money, he’ll get connection, all right, but not the connections he wants and needs! Growth and Contribution? By his demeanor, I doubt these were at the top of this young man’s list when he named his number.

So when you look at the human needs, which one do you think drives him the most? Clearly, it’s Significance. As he said, with a billion dollars, people would take him seriously; he would matter. This might be true. But the problem is when he gets a billion, it still won’t be enough—because when you seek Significance, you’re always comparing yourself with someone else. And there’s always someone bigger, taller, stronger, faster, richer, funnier, younger, more handsome, more beautiful, with a bigger yacht, a nicer car, a nicer home. So while there’s nothing wrong with significance, if you make it your number one need, you’ll never be fulfilled.

But rather than lecture him, I decided to show him he could feel significant with a lot less money—which would make his life a lot easier. After all, he was just picking his number out of the sky. Saying he needed $1 billion made him feel like he was going after an important goal. But the problem is, when you have this huge goal in your head—if in your gut you don’t believe it’s going to happen—your brain rejects it. It’s like living a lie. Have you ever done this? Come up with some ginormous goal, and then a voice in your head pops up to say, “Who are you kidding?” The truth is, you’ll never make it happen until it sinks deep into your subconscious—the part of your mind so powerful that it makes your heart beat 100,000 times a day without your ever having to think about it.

Have you ever been driving your car and gotten lost in thought and then suddenly looked up and realized, “Holy sh*t, who’s been driving my car for the last five minutes?!” Thankfully, it was the amazing protector of life, your subconscious mind.

Imagine your brain divided into an upper half and a lower half; the upper half is the conscious mind, while the lower half is your subconscious.

Ideas keep trying to lodge in your head, such as “I’m going to make ten million dollars!” or “I’m going to be financially free by the time I’m forty!” But your upper, conscious brain goes, “Screw you! There’s no way in hell that will happen!” It quickly rejects the big idea and bounces it back out into space like a tennis ball. But if you resolve within yourself the sense of absolute certainty that “I’m going to do this!” and then you start to build a plan—something extraordinary happens. You begin to develop the certainty you can actually achieve it. And with newfound confidence, you suddenly see there is a way to get it done. You’ll find a role model who’s already achieving what you’re after, and you’ll take massive action. The goal seeps down into your subconscious, and it goes to work to make your dream a reality. That’s when the magic happens!

Now, I doubt that you think you need $1 billion to fulfill your financial dreams. But I’d be willing to bet that the number you chose to feel financially secure or independent is pretty intimidating. Almost everybody makes that number bigger than it needs to be, because he or she doesn’t take the time to calculate what it really costs to live at different lifestyle levels. And that’s why so many never begin to work toward it. They talk a good game, get excited about it, they tell people their big dream, but they never act on it. Why? Because psychologically they don’t have Certainty that they can do it. And Certainty is the first human need that influences our behavior or actions. Fact. If you’ve failed to act in your financial world, it’s partly because you’re uncertain, you’re unsure as to what is right or wrong and which approach will succeed or fail. Or you’re feeling overwhelmed by the complexity of the system that no one has taken the time to walk you through with clarity. With uncertainty, we default to doing nothing or at least procrastinating. We put off until tomorrow what we need to do today.

To help my would-be billionaire friend identify the real price of his dreams, so that they could lodge in his unconscious and become real, I asked him some questions. They’re the same kinds of questions I’ll be asking you in a moment to guide you on your path.

I started by asking my young friend what his lifestyle would be like if he had a billion dollars. He thought for a moment and then said, “I’d have my own Gulfstream!”

“Your own jet!” I said. “Where will you fly to?”

He said, “Well, I live in New York. I’d probably fly down to the Bahamas. And I’d probably fly to LA for some meetings.”

I had him write down how many times he’d fly in a year, and he figured it was probably a maximum of 12 flights. And how much would a jet cost him? We looked it up, and a long-distance Gulfstream G650 would cost him about $65 million; a slightly used Gulfstream IV would only set him back about $10 million. Not including fuel, maintenance, and crew. Then we looked up the cost of chartering a private jet instead of owning one: a midsize jet was all he really needed for himself and three family members to fly, and that’s around $2,500 an hour. He would be flying for maybe 100 hours a year for a grand total of $250,000 per year, or around $5,000 per hour; or $500,000 if he wanted to fly by Gulfstream on every flight—still far less than the annual price of maintenance on many jets, and at a cost that would be less than 1% of the cost of buying that Gulfstream. Even from the stage, I could see his eyes lighting up and his mind working.

“So what else would you buy with your billion dollars?” I asked.

“A private island!”

That was something I could relate to. I own a small island paradise in the country of Fiji. It was a wild dream I had early in my life to find an escape someday where I could take my family and friends and live. In my early 20s, I traveled to islands all over the world searching for my Shangri-La. When I arrived in Fiji, I found it. A place with not only magnificent beauty but beautiful souls as well. I couldn’t afford it at the time, but I bought a piece of a little backpacker resort with 125 acres on the island. I really didn’t have the money, and it probably wasn’t the best investment at first. But it was part of what I call my Dream Bucket—something you’ll learn about later in this book. Still, I made it happen, and I’m proud to say that over the years, I’ve purchased and converted it into a protected ecological preserve with over 500 acres of land and nearly three miles of ocean frontage. I’ve turned Namale Resort and Spa into the number one resort in Fiji for the last decade, and it’s consistently rated among the top ten resorts in the South Pacific. But how often do I visit this paradise? With my crazy schedule, maybe four to six weeks a year. So my dream has come true: everybody else has a great time there!

I told my young friend, “If you want to enjoy your own island, you might not want to be in the hotel business. And trust me, you’re only going to be there a few weeks a year at the most.” We looked up the costs and found out he could buy an island in the Bahamas for $10 or so—and then he would have to spend $30 million to $40 million to build a small resort! Or he could rent my friend Richard Branson’s Necker Island resort for a week and bring all his friends and family for less than $350,000, with a staff of 50 people to take care of them all. If he did that every year for a decade, it would only cost $3.5 million versus $30 million to $40 million, with no work to maintain the property.

We worked through his list, and guess how much it would take to have the lifestyle he wants for the rest of his life? When we added up the real cost of even his wildest dreams, not just his needs, it came to a grand total of not $1 billion, not $500 million, not $100 million, not $50 million, but $10 million to have everything he dreamed of having in his lifestyle and never have to work to pay for it—and his dreams were gigantic! The difference between $10 million and $1 billion is astronomical. These numbers exist in different universes.

The challenge is, when we get to really big numbers, people’s minds don’t fathom what they really mean. There’s a radical difference between a million, a billion, and a trillion. Even President Obama uses the terms millionaires and billionaires in the same breath, as if they’re in any way related—they’re not. Let me prove it to you. I’m going to give you a little test. I want you to think and make a first guess as to the answer. This exercise will help you gain perspective on a million versus a billion versus the figure the government now uses so often: a trillion. In fact, in Washington, a trillion is the new billion, as they say.

My first question is: How long ago was one million seconds ago? Take a moment, even if you don’t know—what do you guess?

The answer is: 12 days ago! How close were you? Don’t feel bad, most people have no clue. If you got it, congratulations. Now we’re going to up the ante. Since you now have a perspective of what a million is (a million seconds being 12 days ago), how long ago was a billion seconds ago? Stay with me, come on; make a guess, commit to a number. The answer is: 32 years ago! How close were you? For most people, they’re pretty far off. That’s the difference between a millionaire and a billionaire: 12 days or 32 years! Do you see what I mean by saying they live in “different universes”? You can never say “millionaires” and “billionaires” in the same breath and be talking about the same thing.

Just to complete the thought: When you hear the US government has $17 trillion in debt, how much is a trillion? Well, if a billion seconds was 32 years ago, how long ago was a trillion seconds? The answer: nearly 32,000 years ago (31,689, to be exact)! When humans were not even called humans! The point of this exercise is to get you to realize that we blur large numbers, and if you get down to the facts, an extraordinary lifestyle probably costs less than you think it does.

But back to our would-be billionaire. Now, don’t get me wrong: $10 million is still a hefty sum but probably within reach for this young entrepreneur over the course of his career. Who knows? He might actually end up with a billion—if he invents the next Instagram. But what if he doesn’t? He could still live the extraordinary life he was dreaming of for 99% less money than he thought he needed. He wouldn’t need to be a billionaire to live like one.

I’ll be willing to bet that once you find out the real price of your dreams, the number it would take for you to really get where you want to be is a lot less than you think! And always remember the ultimate truth: life is not about money, it’s about emotion. The real goal is to have the lifestyle you want, not the things. When you die, someone else gets those things anyway. They’re not yours. I have no illusions: as much as I cherish and enjoy “my” resort in Fiji, I know I’m just the caretaker. Someday someone else will own this property. But I love that I have nurtured it into a destination where people from all over the world come to experience joy, romance, and adventure. It’s part of my legacy—and that’s what gives me joy. Attaining possessions is not the goal. Money itself is not the goal. Our worth is not measured by the weight of our bank accounts but, rather, by the weight of our souls. The path to money, the places money can take us, the time and freedom and opportunity money can bring—these are what we’re really after.

You can have it all. Just not all at once.

—OPRAH WINFREY

Take a moment now and think about what you really want your money to buy. Not everybody wants to live like Donald Trump or Floyd “Money” Mayweather! Is your dream to travel the globe, exploring ancient cities or photographing lions in the Serengeti? Is it owning your own beach house in the Bahamas or a penthouse in New York? Is it starting your own business—the next Snapchat, or creating an extraordinary contribution to humanity like the next Charity Water? Is it something as simple as sending your kids to college and having enough left over for a house in the country with a big vegetable garden? Or is your dream just peace of mind—knowing you can be free forever from debt and worry? Wherever your dreams may take you, I’m going to show you a path to get there. Even if you don’t get all the way to the summit, you can reach the dreams that matter most to you and celebrate your victories along the way. Because money is a game of emotions, and we’re going to come up with some numbers that will ring your bells and make you say, “I’m certain! I promise myself I can get there!” Like all journeys, before you get started, you’ll need to take stock of where you are. We’ll work together on a few simple calculations. If you’ve never taken the time to figure out exactly what it’s going to take to achieve your financial goals, you’re not alone. Often, many of those who have earned millions of dollars haven’t developed a plan to sustain their lifestyle without having to work at least some of the time. And as we’ve already said, more than half of Americans haven’t even tried to calculate how much money they’ll need to retire, including 46% of all financial planners! Why don’t we know our basic financial picture? The number one reason I’ve found, after hearing from hundreds of thousands of people from a hundred different countries, is that people are afraid to know.

It’s like stepping on the scale. You know you’ve gained weight, but you don’t want to know how much. It’s a form of denial; a way to put off making a change. High school wrestlers and professional boxers step on that thing every day, so that if they’re off target on their weight, they’ll know right away and can do something about it. You can’t manage your health if you can’t measure it. And the same goes for your finances. You can’t reach your financial dreams unless you know precisely how much it will take to get there. I’m here to help you set yourself apart from the masses who hide their heads in the sand when it comes to their money. In a minute, we’ll do some quick, easy number crunching to find out where you are and where you need to be. (If adding a few figures is a challenge for you, remember that there’s a calculator on your phone! And you can also go to our app, which will ask you the questions and calculate the numbers for you automatically.

But first let’s look at those five financial dreams. When I say the words “financial security,” “financial vitality,” “financial independence,” “financial freedom,” and “absolute financial freedom,” do those sound like the exact same thing to you? Do they bring up emotions that feel different in your body when you say them out loud? Give it a try. Which one feels higher: security or vitality? How about vitality or independence? Independence or freedom? What about absolute freedom? Each of these five financial dreams is incrementally bigger, isn’t it? And the numbers needed to reach them would be different.

Of these five dreams, you may discover that you are committed to only two or three of them. For some people, financial security alone is life changing and gives them enormous freedom. And so, in designing this exercise, I’ve included these dreams as steps along the road to absolute financial freedom. Or, if you remember that mountain earlier in this book, as base camps along the climb to the summit. And remember, not all of us need or want to go all the way to the peak of Everest. For some of us, financial vitality would be a blessing, and independence would put us over the moon! Not all of these dreams are “musts” for everybody.

I’m going to invite you to read the five and pick the three that matter to you most—what I call the Three to Thrive. You’ll have three targets: short-, medium-, and long-term goals. It’s set up this way because we don’t build on failure; we build only on success. If you’re just shooting for the big number in the distance, it might feel too far off, or even overwhelming, and as a result, you may never truly begin the journey. We need a target close enough that we can feel certain it’s achievable, and in the relatively near future. That’s what gets you to take action and turn a short-term goal into reality. And remember to claim your victories along the way. Why wait until you’re financially independent to celebrate? Why not win at different stages? That’s what encourages you, excites you, and gives you momentum.

It takes as much energy to wish as it does to plan.

—ELEANOR ROOSEVELT

DREAM 1:

FINANCIAL SECURITY

What does security mean? Instead of telling you what it is, let me ask you: How amazing would you feel if these five things were paid for as long as you live, without ever having to work to pay for them again?

1) Your home mortgage, for as long as you live—paid forever. You never have to work again to pay for your house!

2) Your utilities for the home—paid forever. You never have to work to pay your phone bill or to keep the lights on.

3) All the food for your family—paid forever.

4) Your basic transportation needs,

5) Your basic insurance costs—all of them paid for without your ever working another day in your life.

I’d bet that your quality of life would be pretty fulfilling, wouldn’t it? You’d feel pretty secure if you knew these things were covered.

Now for some good news: Remember that number you wrote down earlier—the amount you thought it would take to be financially secure and free? It was probably not as extreme as my billion-dollar friend’s number but probably felt pretty large, didn’t it? Well, I’ll bet when you figure these numbers out, you’re going to be surprised that the dream of Financial Security is probably a lot closer than you think. Or if you’re one of the rare few who underestimate, you’ll have a reality check, and you’ll know the precise number it will take to realize your financial dreams.

If you haven’t downloaded our free app already, do it now. It’s really simple: What’s your current mortgage payment? (If you’re in an early stage of your life where you don’t own a home yet, put your monthly rent here. Or you can estimate or check online what your mortgage payment would be on something that may not be your ideal home, but more like a starter home.) If you have your records, great. Next, what’s your utility bill each month? Third, what do you spend on food? Keep going, and if you don’t have the numbers, take a guess—you can always go back and change them later, but you don’t want to lose momentum. Let’s really get a number down that’s reasonable. Or pick up your bank book or go online and get your numbers. Just to keep the momentum for you right now in case those aren’t easily accessible, let me give you an example.

Do you remember my friend Angela, who I introduced to you in the first chapter? She’s 48 years old and single. She’s trying to figure out what it would take to be financially secure. Her first guess was $3 million. Could that be right? Or even in the ballpark? So I asked her to go through this exercise, and write down her five basic monthly expenses. As it turned out, her numbers were almost identical to the national averages, which you’ll see in the list here.

1) Rent or mortgage payment:

$__ per month (Angela’s Average: $1,060)

2) Food, household:

$__ per month (Angela’s Average: $511)

3) Gas, electric, water, phone:

$__ per month (Angela’s Average: $289)

4) Transportation:

$__ per month (Angela’s Average: $729)

5) Insurance payments:

$__ per month (Angela’s Average: $300)

Total basic monthly expenses: ___ × 12 = ____ per year

(US average basic annual expenses: $34,668)

When she was done, I had her add it up and multiply the monthly total by 12. That shows the annual income she’ll need to cover these items for life—without working—to be financially secure. As you can see, her number of $34,000 is virtually identical to the number for the average American.

Now, how would Angela be able to have $34,000 a year without working? Remember, she’s going to build a money machine. She’s automated her savings of 10% of her income. She’s putting it in a Roth 401(k), where it’s being invested in low-fee index funds with an estimated growth rate of 6%. (This is the percent that Jack Bogle estimates the markets will return over the next decade. However, the average stock market return has been 9.2% over the last 20 years.) We ran it through the wealth calculator, which you’ll do in the next chapter, and she found out that instead of the $3 million she thought it would take to achieve financial security, she would need to accumulate only $640,000 in her Freedom Fund to have that $34,000 a year for the rest of her life—less than a quarter of the amount she thought she needed!

At first she was shocked. She asked me in disbelief, “That’s all it would take for me to have this? I’d still have to work, right?” I told her of course she would, but not to pay for her home, food, utilities, transportation, or basic health care! By the way, these five items, on average, represent 65% of most people’s expenses. So Angela now had a way to pay for 65% of her overhead without working. And remember, most of us want to do something meaningful. Without work, we’re a little crazy. We just don’t want to have to work! She could work part-time to pay for the rest of her expenses or full-time and have all that income for other things. I asked her how that would make her feel if everything from her home to transportation was paid for without her working for the rest of her life. “Extraordinary!” she said. “That’s an achievable goal. That’s something I could figure out how to make happen.” I said, “Exactly!” And what you could see in her eyes was a sense of certainty, and because she was certain, she had a reason to act.

I reminded her, “By the way, this doesn’t have to be your ultimate goal. It might be your short-term goal.” For some people, all they want is financial security, like someone in a later stage of life who may have taken a hit in 2008. For someone who is middle-aged or young, you’ll blow through this goal—as long as you know what your number is and you act upon the seven steps of this book.

If you’re wondering, by the way, how long it would take to accumulate whatever your security number is, take heart. You don’t have to do this calculation. We’ll do it in the next chapter, “What’s Your Plan?,” and if you want, the app will calculate the number for you. Together we’ll create three plans: a conservative plan, a moderate plan, and an aggressive plan. And you’ll decide which of these plans are most manageable and achievable.

Remember the aspiring billionaire? His annual income for financial security was a mere $79,000. A far cry from the billionaire neighborhood. Your number might be higher or lower. All you need to know now is the annual income you need to achieve financial security. If you haven’t already done it, calculate the numbers on the app or do it right here now.

By the way, we can’t go on to the next goal without talking about something that’s a simple requirement, not a dream. And it’s something almost everybody should be able to achieve relatively quickly, though few people have it in place: an emergency/protection fund. According to a Princeton University–University of Chicago study in 2014, 40% of Americans say they couldn’t come up with $2,000 if they needed it. Yikes! That’s terrifying! Why do we need to have an emergency supply of cash on hand? What if there’s an unexpected interruption in your income flow? It happens in almost everybody’s life at some point. An interruption can be a health problem, it can be a problem with your business, it can mean being displaced from a job. So you need some money to cover yourself for somewhere between three to 12 months. But for most people, three months is too short a time, while 12 months may seem like a lot. So perhaps you start by putting aside a few months’ overhead, and gradually build toward six or 12 months’ worth. Wouldn’t it be wonderful to know that if something happened, you had a year to be able to get yourself back on track? You’d still have a roof overhead, food in the cupboard, and the bills would get paid.

Again, this goal is not for an annual income for life. Once you have that, you’re set. This goal is just emergency cash to protect you until you develop a large enough nest egg to take care of yourself every year for the rest of your life without working, no matter what happens.

How much do you need? Well, you know what your monthly overhead is. So write down that number and memorize it. Again, you can do this exercise on the app, and the number will be saved for you and always available at a glance in your pocket. My friend Angela, who set aside 10% of her salary to build her money machine, started looking into her spending patterns to find more savings. Remember how she realized it was cheaper to buy a brand-new car than to keep fixing her old one? Well, she also found a way to set aside an additional 8% to build her emergency protection fund. She completed her goal, and now she sleeps much better at night! If you haven’t already, it’s crucial you set up an emergency fund. (And I guarantee you’ll have some great new ideas on how to do this after reading chapters 3.3 and 3.4, “Speed It Up.”) Keep that amount in cash or in a safe place like an FDIC-insured bank account.

Now let’s move on to the next level of dreams. With security achieved, let’s look at: DREAM 2:

FINANCIAL VITALITY

What do I mean by vitality? This goal is a mile marker on your path to Financial Independence and Freedom. You’re not all the way there yet, but it’s the place where you can be secure and also have some extras thrown in that you can enjoy without having to work.

What do you pay for clothing every month? Is it $100? $500? $1,000? How about for entertainment (cable TV, movies, concert tickets)? How about going out for dinner? Is it Chili’s or Nobu tonight? So for food and entertainment, are you shelling out $200 a month or $2,000 plus? How about small indulgences or little luxuries like a gym membership, a manicure or massage, or monthly golf dues? Is it $50, $500, or $1,000 plus? Whatever it is for you, how would it feel if half of those costs were already covered without having to work, for the rest of your life? That’s what happens when you reach Financial Vitality. Sounds like something worth celebrating, doesn’t it?

Here’s how to calculate your Financial Vitality:

1) Half of your current monthly clothing costs

$__ per month

2) Half of your current monthly dining and entertainment costs

$__ per month

3) Half of your current small indulgence or little luxury costs

$__ per month

4) Total additional monthly income for vitality

$__ per month

5) You already know your monthly Financial Security number (line 6 from page 216), so add that here $__ per month

6) Total monthly income necessary for Vitality

$__ per month

7) Now multiply that by 12 and you’ll have the annual amount you need for financial vitality: $__ × 12 = ____ per year

DREAM 3:

FINANCIAL INDEPENDENCE

Pop the champagne, because when you’ve reached Financial Independence, you no longer have to work to have the same lifestyle you have today! The annual interest earned on the return from your savings and investments (your Freedom Fund) will provide you with the income that you need—while you sleep. You are now truly financially independent; that is, independent of work. How amazing would that feel? What kind of peace of mind would that bring you and your family?

Financial Independence means that money is now your slave—you are not the slave to money. Money works for you; you don’t work for it. If you don’t like your job, you can tell your boss to shove it. Or you can keep right on working with a smile on your face and a song in your heart, knowing that you’re working because you want to, not because you have to.

So let’s figure out how much money it would take to maintain your current lifestyle. This number might be really easy to calculate because, unfortunately, most people spend as much as they earn! Or sometimes more than they earn! If you made $100,000 and you spent $100,000 that year (including paying your taxes) just to maintain your lifestyle, your financial independence is $100,000. If you spend less than you earn, congratulations! Unfortunately, you are the exception, not the rule. So if it costs you only $80,000 to live, on a $100,000 salary, then $80,000 a year is what you need to be independent.

So what’s your Financial Independence number?

Go to the app or write it here now: $___.

Remember, clarity is power. When your brain knows a real number, your conscious mind will figure out a way to get there. You now know the income you need to be financially secure, vital, and independent. So let’s see what happens when your dreams get bigger.

Dare to live the dreams you have dreamed for yourself.

—RALPH WALDO EMERSON

Let me tell you the story of Ron and Michelle, a couple I met at one of the seminars I hold every year at my resort in Fiji. They were in their mid-30s, with two small children. Successful people, they owned a small business in Colorado. Ron was great at running their business, but neither of them paid attention to their household finances. (That’s why he was in Fiji attending my Business Mastery event, to grow his business 30% to 130%.) Their accountant drew up personal financial statements for them every month, but they never bothered to look at them! No wonder they were having trouble envisioning the life that they wanted—which turned out to be a life of contribution.

When I asked Ron what he needed to be financially set, as I asked the young would-be billionaire, his number was $20 million. I wanted to prove to him it could be a lot lower than that and still have an extraordinary quality of life for him and his family, so I walked the couple through what they actually spent every month. (Bear in mind that, as business owners, Ron and Michelle’s annual household income is clearly higher than the average American’s.) First we started with Financial Security, and he told me his five numbers:

Mortgage on their main home

$6,000 per month

Utilities

$1,500 per month

Transportation

$1,200 per month

Food

$2,000 per month

Insurance

$ 750 per month

Total

$11,450 × 12 = $137,400 per year

So for Financial Security, all they needed was $137,400 in income per year. Well within their reach! By the way, if Ron wanted to know how much he would need to accumulate in his nest egg or his Freedom Fund, most financial planners would tell him to multiply his annual income number by 10, or even 15. But today, with such low returns on safe, secure investments, that’s not realistic. Remember, on the way up the mountain (the accumulation phase), you might put your investments in an aggressive portfolio that could give you 7% to 10%. On the way back down the mountain (the decumulation phase), you will want your investments in a secure and less volatile environment, where by nature you would likely get smaller returns. So it might be smarter to use 5% as a more conservative assumption. Ten times your income assumes a 10% return. Twenty times your income assumes a 5% return.

Ron discovered that financial security would be within reach—20 × $137,400 = $2,748,000—a number far less than the $20 million he’d projected.

For Financial Independence, they figured they needed $350,000 a year to maintain their lifestyle at the current level, because they had a second home and a lot of toys. Michelle was fond of things with Louis Vuitton labels on them. So, conservatively, they needed $7 million ($350,000 × 20) in their critical mass to live that way without working. Ron was amazed to realize that this number was almost two-thirds less than the $20 million he thought it would take! And he’s going to get there a lot sooner than he imagined, having to save $13 million less than he’d previously estimated!

DREAM 4:

FINANCIAL FREEDOM

Once you’ve freed yourself from the need to work for the rest of your life, how about freeing up your lifestyle? Financial Freedom would mean you’re independent, you’ve got everything you have today, plus two or three significant luxuries you want in the future, and you don’t have to work to pay for them either. To get there you need to ask yourself, “What annual income would I need to have the lifestyle I want and deserve?” What do you want the money for? Is it for the freedom to travel? To own a bigger home or a second vacation home? Maybe you’ve always wanted a boat or a luxury car? Or do you want to contribute more to your community or church?

Let’s go back to Ron and Michelle. They were already living the lifestyle they wanted for $350,000 a year. So, I asked, what would make them feel financially free? Would it be a bigger home? A condo in Aspen? A boat?

You know what Ron said? He’d feel financially free if he could donate $100,000 a year to their church—and maybe throw in a small Bass fishing boat and a ski vacation condo in Steamboat Springs for his family.

It was an awesome answer. I was so moved by his goal to contribute, I couldn’t wait to help them find a way to make it happen. I pointed out that Ron made about $500,000 a year in income, and spent only $350,000—he could already set aside that kind of money for the church if he really wanted to. But how great would it feel if he and Michelle could make that kind of contribution without working? Just from investment income alone?

After adding the costs of financing the boat and condo, along with his contribution, for Financial Freedom they would have to add $165,000 a year to their number for Financial Independence. In other words, they would need $515,000 a year (× 20), or $10.2 million in their money machine. But remember, this number represents an even better lifestyle than he has today! It’s a lot, but still roughly half of what Ron had thought they needed just to be independent.

The world that Ron and Michelle wanted was so close—they just didn’t know it. But once you figure out the price of your dreams, there are ways you can get there faster and for less money than you ever imagined.

What would it take for you to be financially free?

What items would you add to your total: A sports car? A second home? Or a big donation, like Ron and Michelle? Whatever they are, write them down, and add the cost to your total for Independence. That’s the price of Financial Freedom. And if it seems too steep, just wait. You’ll learn how to tame that number in the coming chapters.

DREAM 5

ABSOLUTE FINANCIAL FREEDOM

How about Absolute Financial Freedom? What would it be like if you could do anything you wanted, anytime you wanted? How would it feel if you and your family never had to want for anything again? If you were able to give freely and live completely on your own terms—not anybody else’s—and all without ever having to work to pay for it. The money you make while you sleep—your investment income—would provide for your unlimited lifestyle. Maybe you would buy your parents the home of their dreams, or set up a foundation to feed the hungry or help clean up the ocean. Just picture what you could do.

I asked Ron and Michelle to tell me the biggest dreams they could dream. What would Absolute Financial Freedom look like for them? Once again, I was deeply moved when Michelle told me her paramount dream was to buy a ranch and turn it into a church camp. What would it cost? Ron figured about $2 million to buy it, and $1 million more for improvements.

I could see the excitement build in them when we ran through the numbers.

If they borrowed the money to buy the ranch, they would need about $120,000 ($3 million at 4%) a year to service the debt. And that was already within reach!

So what else? Ron loved adventure and travel, and owning his own plane was an ultimate dream. So I walked him through the same exercise I did with my young would-be billionaire friend, and convinced him that renting a jet would give him a lot of the same convenience and satisfaction at a fraction of the cost of owning and maintaining a Gulfstream or a Cessna Citation. Do you follow me? You don’t have to own the jet to have the lifestyle. You don’t have to own the sports team to sit in the sky box. And you don’t have to pay for the whole team to be an owner—you can be a partial owner and get all the privileges. That’s what my friend Magic Johnson did when he was part of the group that purchased the Los Angeles Dodgers, along with my friend Peter Guber and several other partners in Guggenheim Baseball Management, which spent $2.15 billion to get the team and stadium. I can promise you Magic didn’t put in $2.15 billion—but he still gets all the joy, the pride, the excitement, the influence, and the fun of being an owner.

This thinking can create the quality of life you want for yourself and those you love. What makes most people just dreamers versus those who live the dream is that dreamers have never figured out the price of their dreams. They make the number so big they never begin the journey. There isn’t a dream you can’t realize if you’re committed enough and creative enough, and if you’re willing to find a way to add more value to other people’s lives than anybody else.

Now, as you can tell, for most people, this category is mostly for fun. In my seminars, I do this exercise only with people who have really big dreams and want to know the price of them. I understand that most people will never achieve Absolute Financial Freedom, but there’s power in dreaming and unleashing your desires. Some of these high-octane dreams might excite you and make you want to earn more, and help you reach your goals faster. But there’s another reason to do this exercise. You might achieve financial security without working, and then by working part-time at something you enjoy, you could be financially independent. Or it’s possible you could achieve Financial Independence through your investment income and part-time work, allowing yourself to experience the luxuries of Financial Freedom with that income.

So go for it! You never know what you could create if your desires were truly unleashed!

So for a 20-foot fishing boat, a $100,000 yearly donation to their church, a ski vacation condo, a plane, and turning a ranch into a church camp, plus the lifestyle they have today without having to work, Ron and Michelle would need an income of $673,092 per year. Multiplied by 20, they would need to achieve a critical mass of $13.5 million. Still a third less than the number they thought they needed for mere security or independence!

What are your numbers?

1) Luxury item 1 per month __ $__ per month

2) Monthly income for Financial Freedom (page 222) $__ per month

3) Total monthly income number for Absolute Financial Freedom $__ per month

4) Now multiply that by 12, and you’ll have the annual amount you need for Absolute Financial Freedom $__ per year

There is only one thing that makes a dream impossible to achieve: the fear of failure.

—PAULO COELHO

How do all those numbers you’ve written down look to you now? I hope that you’ve seen how the price of your financial dreams can be much smaller than you ever thought, and that you’ve picked out three to aim for, including at least one short-term goal and one long-term goal. Which of these dreams are your Three to Thrive? The most important for most people—the most common “musts”—are Security, Vitality, and Independence. Or for those who want to reach higher, it’s Security, Independence, and Freedom. If you haven’t already done it, pick three and write them down. Make them real and put them in your app; key reminder messages will be sent to keep you on target.

If you’re a baby boomer who’s had a tough time since the meltdown of 2008, which one of these dreams is the absolute must for you? Security, right? Here’s the good news: you may not have as many years to build your savings and investments to a critical mass, but you can absolutely have Financial Security, and I’ll show you how. Maybe you’ll never get to Independence, but maybe you will if you make it a “must.” If you’re starting younger, you’re way ahead. You might be able to go for Freedom or even Absolute Freedom and not even be stressed about it. But it’s important to decide what matters most to you and know your numbers. Why? Because in a few moments, we’re moving on to the next chapter, where you’ll be able to calculate how many years it will take for you to achieve these dreams based on how much you are saving at a reasonable average annual rate of return. And then we’ll make a plan to get there. This is where the rubber meets the road. I’m going to walk you through each step, and everything will be automated for you. It’s absolutely critical that you keep moving forward.

I want you to feel empowered and excited by the journey you’re on.

I want you to know that you’re the creator of your life, not just a manager. Sometimes we forget how much we’ve really created in our lives. I don’t care who you are, I know there are aspects of your life today that once were just a dream or a goal, or seemed impossible. It could have been a job or higher-level position you wanted that at the time seemed beyond your reach, or a car that you were obsessed with, or a place that you always wanted to visit. Maybe you even live there now. Maybe there was somebody in your life, someone you never thought might even go out with you, and now you’re married to them. Instead of being back in those days of dreaming, wondering if this person would ever make love to you, perhaps they are beside you now. If so, reach over and give them a kiss right now and remember this relationship once seemed impossible, and you created it.

What’s in your life today that was once a dream? What was a desire you had in the past that at the time seemed difficult or impossible to achieve—but now it’s in your life today? If you’re going to remember that you’re the creator of your life and not just the manager of your life’s circumstances, first, you must reconnect to the things you have created consciously. Take a moment and jot down three or four of those things. And take note, your list does not need to be made up of all giant accomplishments. Sometimes the little things that seem difficult or impossible, when conquered or realized, provide us with essential lessons on how to achieve the big things. Also, there may be some things in your life today that once seemed difficult or impossible, and now you have them, but you take them for granted. The law of familiarity says that if we are around anything (or anyone) long enough, we tend to take things just a little bit for granted. So awaken to your appreciation, and jot down your list now.

Second, you have to review what steps you took to turn that dream into your reality. Take a moment right now. Select one of the things you have achieved. What were some of the first actions you took? Jot them down now.

I’ve interviewed literally tens of thousands of people about how they’ve taken something that seemed impossible and woven it into their life. How did they create it? How did you? There’s a process we all go through. It’s a matter of three steps.

Step 1: Unleash Your Hunger and Desire, and Awaken Laser-like Focus. Something happens within you: either you become inspired by something that excites you so much that your desire is completely unleashed—you become completely obsessed with it—and you focus on the object of your desire with laser-like intensity! Your imagination is ignited. Or you hit a wall, a threshold, a place inside yourself, and affirm that you will no longer settle for life as it has been. You make a decision never to go back, and you become ferociously focused on the new life or object you desire. It could be a job change, a relationship change, a lifestyle change. You unleash your hunger for it—and wherever focus goes, energy flows.

Have you ever experienced this? You bought an outfit, or you bought a car, and suddenly you saw that car or outfit everywhere? How did that happen? Because part of your subconscious mind, called the reticular activating system, knows this is important now, so it notices anything that relates to it. Those cars and outfits were always around you, but now you’re noticing them because your subconscious makes you aware of the very things you were not seeing before.

That’s what’s going to happen as you’re reading this book. You’re going to start noticing the fees charged by mutual funds and hearing about asset allocation. You’re going to start hearing things you’ve never heard before—high-frequency trading! dollar-cost-averaging!—and they are going to come to life for you because now your brain knows they’re important. Anything that’s important, anything that’s focused on, energy flows into it. And when you have that level of hunger, desire, and focus, step 2 starts to happen.

Step 2: You Take Massive and Effective Action. If your desire is truly unleashed and you are obsessively focused on what you want, you will be called to do whatever it takes to make your dream a reality. There are no limits to the energy and flexibility you’ll have in the pursuit of what you want. In your heart, you know massive action is the cure-all. If you’re willing to put in the effort, you’ll get there. You’ve done it before, right? Maybe there was a time when you just had to see the girl you loved, so you borrowed a car and drove all night through a snowstorm to visit her at college. Maybe you moved heaven and earth to get your child into the best school to suit her needs. If it’s a “must” and not just a “should,” you’ll find a way.

But there’s one caveat, of course: you need to put effective execution behind all that effort, right? What if you drove through that snowstorm without a map and ended up in the wrong city? You can throw all your effort into saving for the future, but put your money in a 401(k) loaded with high fees and poorly performing mutual funds, and you’ll get nowhere. Or you can invest everything in one company and watch the stock drop 40% in a day. So if you’re willing to do whatever it takes, you still have to execute your plan carefully, and keep adapting your approach. Because effort with effective execution creates magic. This book is your map, your blueprint to take you from where you are today to where you want to be financially. By consistently taking massive and effective action, and adapting your approach whenever it doesn’t work and trying something new, you will move toward your dream, but there’s one final, extraordinary element that plays an important role in whether your dream becomes a reality or not.

Step 3: Grace! Some call it luck, coincidence, fate, or God’s hand. I call it grace: the acknowledgment that there’s more in this world than just ourselves, and that perhaps a higher power gives us both the privilege of this life as well as the gifts of insight and guidance when we’re open to them. It’s amazing how, when you take care of the first two steps, God or the universe or grace—whatever you like to call it—tends to step in and support what you’re doing. Things flow to you when you do your part first. We’ve all experienced the phenomenon of serendipity. Something happens that defies explanation, so we call it a coincidence. We miss a train and meet the person we end up marrying. We fill in for a friend, and it leads us to the job of our dreams. We didn’t figure it out in advance, didn’t earn it—it just happened. To me, that’s grace. And the more you acknowledge and appreciate the grace that’s already in your life, the more you experience the gifts that are beyond what you’ve created. I’ve had it happen many times in my life, and I know it’s real. I also know that gratitude connects you to grace, and when you’re grateful, there is no anger. When you are grateful, there is no fear.

So, are you ready to become the creator of your life, not just the manager of your circumstances? Do you know what you’re really investing for? An income for life! Are your dreams becoming a part of you, a “must” that your unconscious mind focuses on night and day? Are you willing to do what it takes to make them a reality? Then it’s time to turn the page and do what so many others fail to do.

It’s time to make a plan. . . .