فصل 3 بخش 7

CHAPTER 3.7

SPEED IT UP: 5. CHANGE YOUR LIFE—AND LIFESTYLE—FOR THE BETTER

My favorite things in life don’t cost any money. It’s really clear that the most precious resource we all have is time.

—STEVE JOBS

What would happen if, for just a moment, you considered making a change? A big change, like picking up and moving to another city? You could be living large in Boulder, Colorado, for what you’re paying just in rent in New York City or San Francisco. The cost of homes, food, taxes, and so on differ wildly depending on where you live. Our country—our world—is one of boundless opportunity waiting for you to explore. So why not take off the blinders just for a moment to consider what life could be like if you lived in a new city or town?

Are you freezing your butt off in the Midwest winters, or battling the heat of the summer in Atlanta, wondering year after year why you don’t hoof it to a better climate? As a native son of Southern California, I’m always amazed by people who spend their lives freezing to death in the Arctic tundra of Minneapolis or Chicago. And even if you don’t care about the weather, you’ve got to care about your cost of living. A million-dollar home in Washington, DC, costs a fraction of that in Raleigh, North Carolina—a city rated as the third best place for business and careers by Forbes, not to mention a high-tech and educational hub (that also has great weather). Or what about something more local: a move from San Francisco to San Diego? You can stay in the great state of California and still cut your housing costs by 32%.

It’s one thing to be tax-efficient in your investments; it’s another to be tax-efficient in your life. You’re trying to save 5% here, 10% there. What about saving 10% or 15% or more in everything you do by moving to a less expensive city or a tax-friendly state? Think about all the additional money you’d have to invest, share, donate if it didn’t go straight to rent, food, or transportation. One single move could give you a 10% to 30% increase in your income. If you’re already saving 10%, with a move you now can save 20% to 40% without spending an additional dime. This change in your savings rate will put some rocket fuel in your money machine that will massively improve the pace at which you achieve financial freedom.

I know what you’re going to say: “Move to a new city? You’ve got to be crazy, Tony. I can’t just pick up and move! I have a job, I have family, I have friends; I’ve lived my whole life in Dallas.” (Or Seattle or Miami or Denver.) But if you saw that you could save ten years of your investing life, reach your Financial Freedom goals a decade sooner or even more, might it be worth it?

Generations of Americans have looked at retirement as a time to pick up and move to a warmer climate, a less expensive city, or to a beautiful, low-key place like Boise, Idaho, or Greenville, South Carolina, to breathe clean air and enjoy the outdoors. But why wait until retirement? Why not change your zip code today? Why not find a place to raise your family that allows you to reduce your cost of living and elevate your quality of life at the same time, while you’re young enough for both you and your children to reap the rewards?

If you’re still shaking your head no, I get it. I was with you on this one, actually—until recently. I grew up in California and never imagined living anywhere else. Even when I started traveling extensively and buying homes and properties all over the world, California was always my home base.

Then in 2012 California raised taxes on the highest income earners by more than 30%, to 13.3%. After a lifetime of paying through the nose on state income taxes (historically among the most punishing in the country), the tax situation got even worse. My effective tax rate—after federal and state income taxes, Social Security, investment taxes, payroll taxes, and the Obamacare tax—shot up to 62%. That meant I was left with 38 cents on every dollar. Just 38 cents! And on top of that, the new state income tax increase was made retroactive, meaning that I was going to have to pay additional tax on income I had already earned that year. They changed the rules of the game after the fact! I had reached my limit—this was outrageous. Because of my travel and the time I spent in my other homes, I was living in California for only 90 days out of the year! Just 90 days for literally a multimillion-dollar state tax bill? California was no longer sustainable for me—I’d had enough!

I had played by the rules, and the rules had come back to bite me. But instead of feeling sorry for myself, I voted with my conscience—or with my feet, I should say. Along with thousands of others, Sage and I realized we were no longer welcome in California. So we decided to take the plunge and look for a new place to live. (In fact, California has lost over $30 billion in annual income tax revenue over the last two decades to states such as Nevada, Arizona, Texas, and Wisconsin. If you want to see how big this trend is and how many people are moving from high-tax to low-tax states, go to www.howmoneywalks.com.) We turned it into a kind of treasure hunt. We looked at places like Lake Tahoe, where we really liked the mountains, the mix of seasons, and the small-town vibe; and Austin, Texas, where music, energy, and high tech come together to create the fabric of an innovative and connected community.

We looked at Florida too, reluctantly. All I knew of Florida were alligators and old people. But that’s the stereotype, not the reality. What we found instead was a paradise in Palm Beach. After looking at 88 properties in three states in just three weeks (I told you I’m a massive-action guy), we found the only brand-new home on the water in Palm Beach. Two acres, nearly 200 feet of ocean frontage on one side, and the Atlantic Intracoastal Waterway on the other, with a 50-foot boat dock. I feel like I’m back in my home in Fiji—it’s extraordinary. Sage has everything she wants close by: world-class restaurants, shopping, easy access to the entire East Coast, and all the privacy and serenity of living on an island right here in the United States.

Of course, the price tag was way higher than I ever wanted or imagined paying for a home. But Florida has no state income tax. We went from 13.3% state income tax in California to nothing—nada, zip. So here’s the kicker: with the state taxes we’re saving every year, we are literally paying off our entire new home in six years! Did you catch that? We’re paying for our entire home out of the tax savings we now get as residents of the Sunshine State instead of the Golden State. Kind of makes you think we should have done it sooner, huh? Better late than never.

And if that weren’t enough (which it is!), we’ve massively improved our quality of life in the bargain. Every day we pinch ourselves as we wake up with magnificent weather: 78 degrees with a cool breeze off the ocean and water you can melt into, it’s so warm. In fact, Sage and I have become almost evangelical in our enthusiasm for our new home; we tell friends and family to think about moving down to Palm Beach to join us. My youngest son has already moved here. Two of my dearest friends in the world are on their way down from Connecticut and New York, and they’re here to stay. And, of course, even if they’d decided not to move here, we would have happily taken our tax savings and flown them all out here to visit us in paradise anyway!

So whether or not you decide to join us in Palm Beach, there’s a new zip code out there that might be just right for you. You don’t have to wait for retirement to get there. From Nashville, Tennessee, to Portland, Oregon, and from Augusta, Maine, to Ann Arbor, Michigan, there are hundreds of affordable havens for young and old alike: retirees looking to stretch their savings and continue to enjoy a rich, rewarding lifestyle; and young professionals looking to jump-start or reimagine their careers. Check out U.S. News & World Report’s feature on the best places to live for as little as $75 a day (http://money.usnews.com/money/retirement/articles/2013/10/15/the-best-places-to-retire-on-75-a-day). Also seriously consider the seven states where there’s no state income tax at all: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Or try Tennessee and New Hampshire, where only your dividend and interest income are taxed at the state level. The Memphis and Nashville music scenes and more money in your pocket—how bad does that sound?

GIVE YOUR GLOBE A SPIN

And while we’re at it, why not think all the way outside the box on this one? Forget just a 10% to 20% increase in your spending power, how about cutting your cost of living by a third, or in half? Get out your globe and give it a spin—and think about some of the beautiful (and beautifully affordable) places you could live if only you expanded your horizons.

There are huge opportunities all over the world to improve your lifestyle and lower your expenses, in places such as Bali, Fiji, Uruguay, Costa Rica—if you have the courage and the freedom to go for it! You can rent an extraordinary apartment in the mountains outside of Buenos Aires, Argentina, for a fraction of what it would cost for a studio walk-up in a major US city. You can move to the Czech Republic and find a room just off Wenceslas Square in Prague’s New Town area, the heart of the city’s cultural community.

Remember my BMW-loving son? After he traded in his fancy wheels for a chance at a better lifestyle, he decided to think really big. He went down to Costa Rica for a couple of days and was completely blown away by the extraordinary culture. Turns out there is a huge English-speaking community in Costa Rica—tons of ex-pats who discovered their money went a lot further down there, their days were a little richer, their nights more exciting. And Costa Rica isn’t just a place to relax and unwind. Some of our leading companies have established important bases of operations there. Procter & Gamble, Heinz, Microsoft, Intel—the list goes on and on, which means there are countless career opportunities available.

Life can be an adventure. Take a trip and explore a foreign city with an eye toward moving there. Turn your next vacation into a fact-finding expedition, where the endgame is to try on a whole new way of life. You don’t have to live in a box and go through the same motions each and every day. You don’t have to worry about making your rent or covering your basic expenses if you open yourself up to the idea of massive change. Lift yourself from your comfort zone and spend 60%, 70%, even 80% less money, getting you to your goal of financial freedom that much faster. And while you’re at it, improve the quality of your life in an exponential way.

Even if a move across the world seems too radical now, think about this option over the long term—a five-year plan or a ten-year plan, or maybe a retirement plan. Why not at least open yourself to the idea that there’s a beautiful and affordable place out there waiting to be discovered? Our world is dynamic—it’s changing constantly. The idea that a move would be bad for your kids is a thing of the past. We live in a global economy; what an amazing experience to give your kids an opportunity to see the world, learn a new language, adapt to a new culture. You can make a family decision about creating a better quality of life for everyone.

Life is like a bicycle. To keep your balance, you must keep moving.

—ALBERT EINSTEIN

At the end of the day, it’s all about being more efficient and more effective with your earnings and your savings and speeding up your path to Financial Freedom. You can find a way to improve the quality of your life while reducing your cost of living simultaneously. It’s the ultimate win-win. At the end of the day, the best investment you can make is the one you make in yourself and your lifestyle.

Wow, you’ve taken three giant steps toward Financial Freedom:

Step 1. You’ve made the most important financial decision of your life.

You’ve decided to become an investor, not merely a consumer. You’ve committed a percentage of your income to save and invest in your Freedom Fund, and you’ve automated it.

Step 2. You’ve become an insider who knows the rules of the game.

You’ve debunked the 9 Myths, and you’ll never be taken advantage of again.

Step 3. You’ve made the game winnable.

• You know exactly how much money it will take for you to achieve Financial Security, Independence, or Freedom. You know your Three to Thrive: your short-term, medium-term, and long-term goals.

• You’ve come up with an initial financial plan and a timeline for achievement. You’ve used the app to calculate approximately how long it will take you to meet financial goals you’re most committed to.

• You’ve reviewed the five ways to speed up your plan. Ideally, you’ve begun to brainstorm ways to apply these insights to sock away more money or keep more money in your financial Freedom Fund. This can help you reach your cherished financial goals even quicker.

So what’s next? Step 4 answers the obvious question that’s probably burning in your mind: “Where do I put my money? What specific investments will maximize my upside and protect me against the downside?” It’s time to make the most important investment decision of your life. It’s time to learn the power of asset allocation . . .