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Question about the book - Finding your numbers?

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Bronze Contributor
Read Millionaire Fastlane
Speedway Pass
May 31, 2013
Ann Arbor, MI
In chapter 37 of TMF , MJ explains how to find the cost of your desired lifestyle and then how to calculate your business and money system targets.

The one part I don't understand is how to determine the monthly cost of your lifestyle.

Do you find the total cost of the things you want, and then divide by x number of months? How do you know what number of months to divide by?

Why do I want the monthly cost? If I wanted to pay cash, then I would still have to save my money each month until I have enough for that thing. I assume we're not talking about financing?

I'm really hoping someone can help out. I originally asked about this in Eskil's thread.

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Bronze Contributor
Read Millionaire Fastlane
Speedway Pass
May 31, 2013
Ann Arbor, MI
One more bump.

Please? I'll give you rep $$...

Should I explain my question further?


New Contributor
Jul 29, 2014
What do you mean? Please tell me which paragraph your referring to.

Or are you referring to more than 1 paragraph?


fancy slogan
Read Millionaire Fastlane
Dec 12, 2013
how to determine the monthly cost of your lifestyle
I assume we're not talking about financing?
Look, it does not matter, it's not about saving or financing or anything.

I figure you're asking about the 4-step process, so here it is:

Define the Lifestyle: What do you want?
Just write down the list of things that you want to have.

Assess the Cost: How much do your dreams cost?
1) For each thing - if you have this thing, calculate taxes and other expenses (fuel etc).
2) If you don't have this thing and you're planning to save $ to buy it later, then just calculate how much you have to save each month and for how long (then, once you bought it, you'll switch to #1)
3) If you're talking about financing, calculate the monthly payment and add monthly expenses from #1

In short, find out how much you're gonna pay monthly for every thing on your list, that's it. You can do it, right?
Calculate everything - cars, groceries, insurance, etc. Every single thing.

In MJ's example, you need $14k for all these things. Nothing hard so far, right?

Next part here, in order to have $14k of disposable income, you actually need to earn more than that, because you need to pay taxes.
So if you earn $14k and your tax rate is 40%, after paying the tax you'll have only $8.4k left, which is not enough, right? Because you need $14k left.

Therefore what you need to do is to calculate how much you need to earn to have $14k left.

If your tax rate is 40%, these $14k will have to be the remaining 60% , as 100%-40%=60%. Do you follow it so far?

If you don't like the math and don't get why MJ does what he does next ($14,000 / .60), do it this way:

60% = $14k
1% = $14k / 60 = 233.33 bucks
so 100% = 233.33 * 100 = $23,333

That's how much you need to earn every month to have $14k after taxes.

Have you followed the logic so far? Ok, the next part.

Set the Targets: Set the money system and business income targets.
All this multiply/divide thing is also is not as complicated as you think.

If you need $23,333 monthly, in a year it's $23,333 x 12 months = $279,996

Now, there's two main ways to get without doing 9-5, you can get $ from your business, or from your money system (some passive investment).

1) Money system (passive investment) - MJ expects that it brings you 5% yearly.
So these $279,996 that you need to get in a year, it's only 5% of some large sum of cash that you've invested into this passive money system.
Same calculation -
5% = $279,996
1% = $279,996 / 5 = $55,999.2
100% = $5,599,920

Which means that you need to invest $5.6M dollars into some passive system that brings you mere 5% yearly, then you'll have your $23k per month, so after paying the 40% tax you're left with $14k/mo that you need to pay for your expenses.

Any questions here?

2) Business system - any business that you have.
MJ expects that whatever your business earns, 40% goes to the taxes, another 40% you reinvest back into this business, and so you're left with the remaining 20% that you can take and use. You got that part?

Now, the same calculation. You need to take $14k per month, it's 20% of what your business should earn.

20% = 14k
1% = $700
100% = $70k

So your business needs to earn $70k monthly, then you'll have your $14k after-tax money. Okay?

Short summary: to spend $14k monthly you need to invest $5.6M or to have a business that earns $70k monthly.

Make It Real: Fund it and open it!
You've written down the list of things that you want to have, you've calculated how much they'll cost you monthly, you've calculated how much you need to invest or how much your business must earn monthly. That's it!
Time to go and either build this business that earns $70k, or earn and invest $5.6M.

Either way, you'll have your bag of toys funded.

Did it help you? Any questions?

Also please take into account that in most cases you'll likely to need to be able to run at least these simple calculations on your own (or do you want to pay someone to do that?) to analyze your business opportunities etc.

Of course you might be lucky to find and satisfy some needs without doing any calculations, but that's kind of ... less likely to happen. You'll need more luck for that. If you don't wanna rely on luck, please try to fully comprehend at least these simple calculations. Cheers!
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Bronze Contributor
Read Millionaire Fastlane
Speedway Pass
May 31, 2013
Ann Arbor, MI
Thank you for the responses! I was only asking about the cost of a monthly lifestyle. So if you look in the book, that is step 2. I fully understand the rest. Sorry for the misunderstanding Yury...

I guess the calculations for the monthly cost are just up to me, based on how I wanna pay for my lifestyle. In that case... problem solved.

MJ DeMarco

Staff member
Read Millionaire Fastlane
Summit Attendee
Speedway Pass
Jul 23, 2007
Fountain Hills, AZ
I guess the calculations for the monthly cost are just up to me

Yup. That could be 1000/mo if you prefer minimalist lifestyle, or do geoarbitrage. Number is subjective. Rep to @Yury


New Contributor
Read Millionaire Fastlane
Jul 14, 2021
Yup. That could be 1000/mo if you prefer minimalist lifestyle, or do geoarbitrage. Number is subjective. Rep to @Yury
I've been going the through the 'destination calculations' too, and I was puzzled by the part where you're calculating the ongoing maintenance cost of what you *have*, but I didn't see anything about the cost to *acquire* those things you'll pay to maintain (house, cars, cabin, etc.). Is there an assumed factor in this formula that I'm missing?
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