• 02:56:41 am on August 2, 2008 | 0

    One of the Final 15 asks:

    I am having a little trouble working through the worksheet, cause my numbers are staggering. Can you take a look at what I have so far and give me your input.

    We will be helping to rework these numbers for the 7 Millionaires … In Training! once we go ‘live’, so don’t worry too much about the veracity of your numbers … for now.

    [ AJC: you should see a little scroll bar at the bottom of this post to help you see the missing columns to the right … inconvenient, but it’s all we got to work with, here 🙂 ]

    But, let’s take a quick look at their spreadsheet and see if we can make a couple of comments that might help all:

    Now 1 Year 5 Years 10 Years 20 Years
    Annual Income:
    From Job/s $ 98,000 $ $ 122,500 $ 147,000 $ 196,000
    From business/es $ 4,000 $ $ 5,000 $ 6,000 $ 8,000
    House/s: $
    Purchase Value $
    Car/s: $ 4,500
    Purchase Value $ 2,000
    Other Major Purchases:
    Rosarito(rental #1) $ 100,000 $ 125,000 $ 150,000 $ 200,000
    New Mexico(#2) $ 20,000 $ 25,000 $ 30,000 $ 40,000
    Costa Rica (#3) $ 45,000 $ 56,250 $ 67,500 $ 90,000
    Travel:
    Peru $ 5,000 $ 6,250 $ 7,500 $ 10,000
    Mexico $ 3,500 $ 4,375 $ 5,250 $ 7,000
    Argentina $ 2,500 $ 3,125 $ 3,750 $ 5,000
    Europe $ 10,000 $ 12,500 $ 15,000 $ 20,000
    Living Expenses:
    Total (or list here) $ 44,000 $ 55,000 $ 66,000 $ 88,000

    First, let’s look at the NOW column:

    – We have somebody earning $98k a year (presumably, pre-tax … it’s OK either way, as long as you stay consistent) from their job and they receive a little business income as well (I suspect that this represents the income – either gross or net – from the rental properties, listed below).

    – It appears that they don’t yet own their own home, or else I would expect to see the approx. CURRENT VALUE listed here (e.g. $250,000). It seems as though this person owns two older cars with a combined estimated current value of $6,500.

    – This person appears to be a real-estate investor, with three rental properties: I am guessing that the numbers here represent the EQUITY (deposit + any capital appreciation since acquiring the properties) not just the purchase price, if they are financed.

    – We have a traveller, here. I bet that they are smart enough to write off some of their costs of travel against the business income (and, carry forward some of the losses if they can). I would expect to see travel to become a big part of their future expenses (people who get rich tend to travel more/better).

    – Living expenses for NOW would include everything: food, clothing, rent/mortgage payments (on all properties, if the income was listed as gross, above) as well as the car payments, if any.

    It looks like nothing much changes + 1 years, so let’s skip to +5, +10, +20 years :

    – It looks like this person has simply inflated their current costs by the inflation factors that I provided, which is fine. It means that they are happy with their current lifestyle and want to keep working for the next 20 years.

    So, let’s help this person calc. their Number, but let’s make a couple of assumptions:

    1. They intend to keep their rental properties as rentals and use the cash-flow to help find their ‘retirement’, so we will keep these types of investments out of equation (for now).

    2. Let’s assume that they own a house currently worth $250k (with a $125k mortgage) that they intend to upgrade to a $750,000 townhouse (really $500k to buy in today’s dollars, but in +10 years our Inflation Factors table tells us to add 50%).

    3. We had better buy them a couple of newer cars at some stage ($10,000 each in today’s dollars).

    4. They intend to ‘retire’ in 10 years and decide, no matter what their current salary, they just need to cover their expenses + travel.

    So, let’s see how that alters the calc’s:

    Now 1 Year 5 Years 10 Years 20 Years
    Annual Income:
    From Job/s $ 98,000 $ $ 122,500 ???????
    From business/es $ 4,000 $ $ 5,000
    House/s:
    Purchase Value $ 250,000 $750,000
    Car/s: $ 4,500
    Purchase Value $ 2,000 $30,000
    Other Major Purchases:
    Travel:
    Peru $ 5,000 $ 6,250 $ 7,500
    Mexico $ 3,500 $ 4,375 $ 5,250
    Argentina $ 2,500 $ 3,125 $ 3,750
    Europe $ 10,000 $ 12,500 $ 15,000
    Living Expenses:
    Total (or list here) $ 44,000 $ 55,000 $ 66,000 $ 88,000

    What about the +20 years?

    Well, I am assuming that when this person ‘retires’ in 10 years that they will want to maintain their retirement lifestyle forever (it will inflate with inflation).

    Tomorrow, we will examine how the Number will help this person achieve that.

    BTW: for our 7 Millionaires … In Training, your financial ‘dirty laundry’ will be spread out for all to see … no anonymity for you (first names/state/photos only, of course) 🙂

     

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