Awhile ago there was a garbageman who had worked in this profession for several years. I don't remember his name so I'll make one up: his name was Dave. Dave loved playing the lottery on occasion and actually ended up winning $15m. For the sake of argument, we'll assume he took home $7.5m after taxes. For the next 8 years, Dave lived like a king: buying expensive watches, alcohol, and hookers. But at the end, he was broke and had to go back to working as a garbageman. How could this happen with such a life-changing amount of money? Dave didn't understand the power of 240.
Mathematically, 240 doesn't have any special properties outside of being equal to 12*20. You finance dorks probably already know where I'm going with this but it might still be valuable to some. You see, if you take $7.5m and divide it by 240, it gives you the monthly amount you would get assuming a 5% yearly return: $31,250. Going back to Dave the garbageman: if Dave understood this lifetime money hack of 240, he could have realized that by spending $31,250 or less per month, he could live that lifestyle until his end. But being mathematically illiterate and thinking that $7.5m was such a large number that it equated to infinity cost Dave a lifetime of financial freedom. Anytime you want to calculate the lifetime monthly value of a nest egg amount, just divide it by 240.
Alternatively, if you have a monthly amount that you consider a comfortable exit, then simply multiply that number by 240. For example, if you could enjoy life living on $40,000 per month, then you would need $40,000*240 = $9.6m (after taxes)
Don't be like Dave. Understand this simple trick of converting money to its lifetime purchasing power via our magical number, 240.
Mathematically, 240 doesn't have any special properties outside of being equal to 12*20. You finance dorks probably already know where I'm going with this but it might still be valuable to some. You see, if you take $7.5m and divide it by 240, it gives you the monthly amount you would get assuming a 5% yearly return: $31,250. Going back to Dave the garbageman: if Dave understood this lifetime money hack of 240, he could have realized that by spending $31,250 or less per month, he could live that lifestyle until his end. But being mathematically illiterate and thinking that $7.5m was such a large number that it equated to infinity cost Dave a lifetime of financial freedom. Anytime you want to calculate the lifetime monthly value of a nest egg amount, just divide it by 240.
Alternatively, if you have a monthly amount that you consider a comfortable exit, then simply multiply that number by 240. For example, if you could enjoy life living on $40,000 per month, then you would need $40,000*240 = $9.6m (after taxes)
Don't be like Dave. Understand this simple trick of converting money to its lifetime purchasing power via our magical number, 240.
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