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Feb. 25, 2022

152. Know How Much Income Is Enough - Day 3 of the 3-Day Weekend Challenge

Get clear on what you need to earn to create the life you most desire, then decide what investments you want to make now and which can wait.


Get clear on what you need to earn to create the life you most desire, then decide what investments you want to make now and which can wait.

Access the "How Much Is Enough?" Worksheet here https://www.3dayweekendentrepreneur.com/how-much-is-enough-worksheet

 

 

 

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Transcript

Hey, everybody. Wade Galt here. Hope you are doing great today. In today's episode, we're going to talk about the third day of the three day weekend four day challenge, how to get get your income where you want it to be. But first, understanding what that income does for you and how much is enough.

 

So many people will set goals for their income and they're not certain what it's for. So they just want to make more and more money. And there's nothing wrong with that. But because they don't know what they would do with that money, sometimes they work way harder than they need to or they run past the finish line. In other words, they just keep making money and they never really apply it to what makes their life better, whether it's an experience, whether it's some sort of trip, whether it's investing in something that they believe in, whether it's saving for retirement, whatever it might be.

 

So what we want to be able to do is have you be extremely intentional with your money so that as you're making it, you're able to direct it in the areas that help you get somewhere in life, whether that's to, again, certain experiences or savings towards certain goals or helping you open a new business, whatever it might be. Because when you do that, then that gets you even more excited to then focus on the tasks, those highest impact, highest income activities that help you reach higher levels of productivity, higher levels of impact for the people you work with, and ultimately higher levels of income. So what I'm going to do here is share with you something. This tool here can help you get clear about how much you need to live, the lifestyle you most desire. And what we do here is get clear about what are the costs.

 

But we have five different categories here. And this is simply an example I'm going to walk you through here to keep it simple. And this is looking at what would it cost for a person to live with their absolute necessities with a little bit more than that, with some comforts with their luxuries? And what would it take for them to live at a level that they feel like is the top level they'd like to be living at? So absolute necessities.

 

This person here has identified different pieces in this tool. It's an Excel based tool. A person can type right into it, and the tool will do the math for you. It actually does the math up top, which we're going to look at shortly. But first, what we do is list out what would it take for you to live in this sort of way.

 

So this person here has identified how much it costs for their food, their clothing, their shelter, their electricity, the phone, utilities, any loans that they have. The two vehicles, let's say it's a couple here, health insurance, medical expenses, life insurance, disability insurance for the home, car insurance and emergency savings. And so being able to look at, okay, all of these things, what would they cost? And we're going to see up top what this turns out to be. And then we say, okay, well, what would it look like if we had things that they're not quite necessities like these are the absolute necessities.

 

And you might differ on these depending on your view of insurance or I don't know, electricity or whatever it might be. But in the second section, we say, okay, what if we had a little bit more, well, okay, cable TV, some entertainment, being able to give to charity, Ford, education, recreation, gifts to others, dining out, fast food. So this is a slightly higher level. The third level says, well, you know, at this next level, if I were making more, I'd get some nicer cars, let's say, and I'd be able to start saving for I'm just going to simply call this a basic retirement. And again, not looking to get too deep into the math of it here of calculating that out, but just saying, okay, this would be the third level.

 

The next level. What if I had somebody that was helping clean our house, I saved for a better retirement and had some even nicer shelter where we live? That would be a luxury level. And again, this top level where maybe we're traveling every month, get the best retirement that we want to save for a luxury shelter. Again, your numbers might be different, but first, just going through the exercise of listing this out to first of all, get clear about what really is a necessity and what's not.

 

And this is critical for looking at how you invest your time and your money. So, for example, if you are currently in a situation where you cannot afford things that are on your comforts or luxuries, rather than having the pressure on yourself to know that, gosh, I have to earn this right away. You can realize, okay, I want these things, but I don't have to have them. And so rather than working more hours than I want to right now, maybe I can ease my way into these things. Maybe I can find discounts or coupons or buy on Black Friday or whatever it might be, but I can ease my way into this rather than feeling like I have to do this right away.

 

So again, it allows you just that first awareness of what's absolutely necessary versus what's not and how you can play along in that way. And then as you go up the page here, so this is the I'm going to scroll up here, there's some numbers here that go into a different part of the equation. So these different costs, the absolute necessities, if I just sort of break this down here, total up to be $5,000. Let me do that right there. The absolute are $5,000 total.

 

The almost necessities add another $1,000, which leads to $6,000, the comforts, add another one, $500 a month. So that's $7,500, the luxuries, add another $2,500 for $10,000, and the rock star living requires another $6,000. So these are just different amounts of what it would total. So this number three here is a total of everything under number six. But now if we go back a little higher up here, we look at and say, okay, well, how much money did you make last year?

 

And again, this is a case study. You could type in, of course, your own numbers or whatever that is. This person made $100,000, and they Wade it in 2000 hours in the year. So $100,000 in 2000 hours, which is basically sort of a standard at least North America, United States of America work week, 40 hours a week times 50 weeks. So this person worked 2000 hours.

 

And if we take $100,000 divided by 2000, we see that this person made $50 an hour, and they eventually want to make $100 an hour. So there's also other pieces that go into how to make more money. Right now we're just looking at how much is enough. So if we look at this through the lens of this person's current income of $50 an hour, in order for them to afford their absolute necessities, they'd have to work 100 hours per month at that current rate, that current hourly income. To afford the almost necessities, they'd have to work 120 hours.

 

And to afford their comforts, it'd have to work 150 hours, which is about 37 and a half hours per week. So this person might say, well, yeah, wait, you know what? That's what I'm doing. This is kind of where I'm at right now. I'm somewhere in this neighborhood here, and I'm working 37 and a half hours a week.

 

I'm working basically five days a week, seven and a half hours a day, pretty much a 40 hours work week. And right now I can't afford the luxuries. I can't afford the Rockstar living, because that would be just way too many hours. That would be 50 hours a week or 80 hours a week. And I don't want to do that.

 

Or maybe you are saying, wait, I'm working 80 hours a week, and my numbers are slightly different, but I'm working 80 hours a week because I'm making 50 hours or $50 an hour. And so my income is higher. But also my number of hours are higher to be able to make that happen. And so, of course, if that were the case, this person would have different numbers up top here. They'd be working different numbers or different amount of hours that person would actually be working.

 

Let's see, 1960 a year and not in 2000 hours. But let's say they were doing that in 3200 hours. So again, still be creating a situation where they wouldn't be quite where they wanted to be. This person is okay, look, there's a couple of things going on here. Eventually I want to make this desired hourly income, this $100 an hour.

 

And when I make that $100 an hour, then my absolutes would only cost me 50 hours of work in a month. My almost 60. And as I go up the ladder here, well, I could get to my luxuries in 100 hours per month, and I could get to my Rockstar living in 40 hours a week or 160 hours a month. So what this does is give you a sense of what is it you'd need to be doing. And there's an interplay here.

 

So again, once you see this and say, okay, well, I'm currently here with my hours or wherever it is you are, there's obviously two things that can change if you get your income up. So let's say my goal for this year is to get to $60 an hour. Well, then, okay, it's $60 an hour. Now, that's taken me less time. And I can see what that impact would have here.

 

When I get to $75 an hour, that's going to make it easier for me. When I get to $80 an hour, again, it lets me see what I'd be able to do. But again, this is my average hourly income in order per hour, not just what I bill for because I might build for $100 an hour, but only work, let's say, 1000 hours in a year, in which case that would be my $100,000. And so if I wanted to make this 100,000 number and let's say I know I'm only going to be able to bill for 1000 hours. I'd have to be that $100 an hour.

 

So this is basically helping you look at what you'd be able to do at each of these levels and then to dial it back and say, okay, let's reverse engineer the whole thing. Now let's again look at the list one more time and see which of these things do I really need to have? Because once we make this connection that every time I'm doing one of these things, it's costing me time to earn the money. Whether I directly trade hours for dollars or not or whether I have a certain number of clients, it still takes time and effort usually to make money. And so if, for example, I said, you know what?

 

Some of these expenses I can cut down, I don't need as much. Well, then that allows you to perhaps be working less hours when we look at the equation up top. So again, a lot of this is about understanding that interplay between how many hours you work, what you're making, and then also your expenses, your monthly expenses after tax. In this case, we're talking about income after tax, how those interact with each other. And so this worksheet allows you to do this work on your own situation and make your list and fill this out here.

 

So that's something you can download if you like to do the work. All of this is just focused on helping you look at how can you make the most and so as an implementation strategy I'm going to suggest you that what you want to do is complete the how much is enough worksheet and then drop one item from your expenses. Drop one item that's not critical. So going back to our worksheet to say, okay I'm going to take one of these things here that's not critical and I'm going to drop it or I'm going to reduce it and that will help me start easing off the amount I need to be working and then also start looking at what are those tasks that really help you make the most amount of income and start investing more time there. And so if you can make one significant upgrade or change every month that's going to help make it easier for you to start moving in the direction of this and again investing less time doing work and having more time to do things you most enjoy.

 

So I hope you find this helpful this third day of the challenge. If you have questions on this please let me know. I look forward to hearing your feedback in the comments section and hearing how the work worked for you. If you're not already in the community you can go to threedayweekandclub.com and join the community and start being part of the group that's helping each other and learning how to create a time, money and happiness abundant lifestyle so you can fully enjoy your family, your friends and your life. As always look forward to helping you impact more people and make more money and less time do what you do best so you can better enjoy your family friends in your life.

 

Thanks so much for listening, I look forward to hearing from you. Have a good one. Bye.