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Millionaire Fast Lane Chapter: Tax question

Taxes and regulation

Bmanning93

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In Chapter 37,

MJ wants you to assess the cost of your lifestyle that you want to achieve. Which I did, coming to a $41,100 per month expense including House, Cars, Travel, Food, Clothes, Health Insurance, and allowances. I understand that is a lot but I have set out everything I want to achieve and want to do what it takes to get there. My question that I am asking is why do I need to divide by 0.60 for taxes for my lifestyle. This has raised my $41,000 per month expense to $68,333 which I am wondering why that is necessary to obtain for tax. This creates a large difference in my finish line. Can someone please explain why/how that works like that so I know why I need that to reach my target.
 
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MJ DeMarco

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Because if you have $41,000 in expenses you need to earn $68,000 before taxes. Expenses are paid with AFTER TAX money.

If you earned $41,000 to pay $41,000 in expenses you would only have about $26,000 after taxes to use. There would be a deficit due to taxes.

Hope this makes sense.
 

Agent X

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It's to account for income taxes since you can only pay for your other expenses after income tax. 40% is used in the book as an estimate based on the higher tax rate in the united states. Obviously that rate may change and your situation may be different based on the tax code where you live. It's a good number to use as an estimate for many western countries give or take a few percent.

But I wouldn't worry about it too much until you actually have a lot of money coming in and you're thinking of cashing out to use a money system for your expenses. Otherwise, just use those numbers as an estimate and motivation to get there. You may find as you go through the process that your priorities change and so your income/escape number changes.
 

Bmanning93

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Because if you have $41,000 in expenses you need to earn $68,000 before taxes. Expenses are paid with AFTER TAX money.

If you earned $41,000 to pay $41,000 in expenses you would only have about $26,000 after taxes to use. There would be a deficit due to taxes.

Hope this makes sense.
Understood! Thanks!
 
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biophase

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$41,000 sounds like a lot. Even with a nice house and cars, that’s a lot of money to be spending a month. I’m curious to see how that is broken down.
 

ljean

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I used to think I wanted to be able to spend $40k/mo. Now that I can I have no real reason to. House pmt is $3500, car is $600, food/clothes/bills another $5000.
 

MJ DeMarco

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$41,000 sounds like a lot. Even with a nice house and cars, that’s a lot of money to be spending a month. I’m curious to see how that is broken down.

I used to think I wanted to be able to spend $40k/mo. Now that I can I have no real reason to. House pmt is $3500, car is $600, food/clothes/bills another $5000.

It truly does seem like a lot.

At some point Ill do a financial expose on my setup (kinda like N. Kagan did) so people can see just how much things cost with respect to how and where I live. I think people will be utterly shocked ...
 
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biophase

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It truly does seem like a lot.

At some point Ill do a financial expose on my setup (kinda like N. Kagan did) so people can see just how much things cost with respect to how and where I live. I think people will be utterly shocked ...
Early this year me and Noah had this conversation. We were trying to figure out how to spend $83k a month ($1M a year) and we had to really spend, I mean waste money to even get to $50k/mo. I mean we were adding things like a massage every day, live in housekeeper, personal chefs, personal drivers, etc…

Yeah, I think I’m around $5000 a month lol. And I doordash every single meal!

Even after my new house is done and it’s got a mortgage I’ll be right around $10k. I could add in a Lambo and a Ferrari and not even be above $20k.
 

WJK

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That's a lot of money to spend per month.
I'm a minimalist and I HATE to spend money on most things. I just don't need a lot of stuff. I don't want all that stuff to own me. Why should I spend my time taking care of stuff? I can always buy more stuff, borrow it, or rent it. But I cannot get more time added to my life!
There's no one that I want to impress these days. I don't live by other people's opinions. I just want to be comfortable in a space that is easy to care for.
I cook homemade meals and we only eat out about once a week. It's healthier for us and the food I put on my kitchen table is prepared with lots of love.
I love driving my old Jeep and my pretty pick-up truck. They are both perfect for our climate and winters. My old Jeep has a lifetime warranty on it. The dealership fixes any problems for a $100 deductible. (They don't have those warranties anymore -- they're losing money on me every time I take it for repairs!) When I take it in for more work, they try to sell me a new one. I keep retorting that I'm happy with the one I have. I bought my truck from an impound yard at an auction for a fraction of its market value. My mechanic came and did a lot of work on it. It's loaded with a lot of features. The best part about my vehicles is that they are free and clear. I don't have payments -- like 90% of the vehicles on the road.
Living simply and close to the bone is an art. Yes, if I really want something, I can go buy it or rent it. I can hire someone to do the job and have him bring his tools to the party.
First, I must ask myself IF I really want it. Is it worth my time and energy? And then, here's the biggie... Will it still mean something in a week? in a month? a year? I don't want to pay too much attention to scratching a little momentary itch.
 
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