The 4-Hour Workweek Just Cost Me $100,000
Sep 4th, 2007 by Lewis 24 Comments
As I continue to read through the The 4-Hour Workweek by Timothy Ferriss I have found out a lot about my own goals for the future.
The reason Timothy cost me $100,000 is because, since reading this book, my wife and I have decided to spend a full year traveling throughout Europe starting in 2017. As I’ve mentioned before, I hate going into debt for things like vehicles, travel and material goods. That’s why I’ve got a 10 year time-line to generate the cash flow necessary to fund the trip.
I figure that I will need approximately $100,000 to travel for the year. Easy right?.
I break my numbers down like this:
Using today’s dollars, I should be able to live on less than $200 per day. At 3% inflation, that means that the cost in 2017 will be approximately $269 per day. Multiply this out and I get ($269 x 365) $98,106.
There are three main ways to financially prepare for this trip:
1. Save the necessary funds
If I decide to take this route, I have 120 months to accumulate that amount of money. If I start with a fixed monthly deposit today and then increase the savings by 5% each year I will need to start saving $443 per month (with an 8% return) or $529 (with an 4.5% return.)
Pro: I can continue as I am for the next 10 years then have the money available for the trip - after one year the money is gone
Con: If I save this amount of money each month, I will be taking that cash flow from potential investments that will create cash flow for me
2. Borrow from equity
This is a way to take the mini-retirement without saving anything today. If I tap into the equity of a property, I will be able to withdraw the full $100,000 and take the vacation of my dreams. When I return, I will have the additional mortgage balance to pay back adding about $600 per month for another 25 years.
Pro: I can enjoy life today and push all of the expense of the trip into the future - isn’t this how most people think?
Con: Rather than paying $100,000 for the trip, I will end up paying about $189,000 including interest charges!
With this method: Can I push some of the $600 per month mortgage payment onto the kids for the next 20 years? They’re coming too!
3. Create cash flow from businesses and investments
If I am able to save $100,000 over the 10 year period, I should be able to direct that income into investments that eventually achieve my goal of $8,333 per month in positive cash flow.
Pro: If I am able to do this, then I don’t even need to limit my mini-retirement to 1 year. If I have a passive income of $8,333 per month, I can travel or ‘retire’ indefinitely.
Con: if this doesn’t work as I think, then I may not have the money available to pre-fund the trip (see option 2).
What would you do?
The important thing when you set a goal is to determine the best course of action to achieve the desired result. As you can imagine, I’ve looked at my options and have made a final decision. So I ask again, what would you do?
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Tags: business success, travel, goal setting, investing, making money, blog, cash flow
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$200/day? Surely you can do better than that. If you’re going for a whole year you will probably hit some of the cheaper spots too.
Mike
I thought about this as I was writing the article but I think that $200 is a safe bet looking this far out. Although I will probably be visiting some very inexpensive places, I want to make sure that I experience as much as Europe has to offer.
I was also thinking that since I plan to rent apartments monthly (to save money) I may still travel with that city as a base camp. Any excursions would be then additional to the monthly rent.
One thing I forgot to mention was that we are probably going to buy a car once we hit the European mainland. Of course, we’ll sell once we’re finished but who knows what the cost of insurance and all of those things will amount to.
Food will probably be more expensive since we will be eating in restaurants more (as little fast food as possible) and we’ll be feeding 4.
Hopefully I’ll be able to cut that number down significantly as the day approaches but I want to keep on the conservative side so I’m not short the funds on the day I leave!
You have the right idea with option 3, if you can generate enough monthly income from your businesses and investments to a very healthy income of $10,000 a month, why not take a 10 year holiday. Assuming you don’t completly stop working towards your goals after 10 years, you could be sitting on the beach in your own villa. and who knows some of us might be willing to come visit the Lewis Empire.
I read an article recently about how there are a lot of inexpensive (relatively speaking) islands for sale around North America. Maybe I’ll look some up and start my own government.
Yeah buy an island, then make me the Vice President, then I can make $10,000 a month and retire along with you.
Sounds good. I’ll put you on the ballot; however, there’s a good chance I won’t win the election if I let my family vote. Maybe I’ll create a benevolent dictatorship instead…
“Emperor Lewis” has a nice ring to it.
Myself, I’ve always preferred the title of “Lord President,” which would be a title held for life with an option, so should I return from the dead (cryogenic re-awakening, reincarnation, etc.) I am still in charge.
I was going to say that ‘Supreme Ruler and Dictator for Life’ would be great until I saw your “return from the dead” part. I think I’ll adjust the constitution to ensure my continued domain from the netherworld.
You’re such a big planner Lewis!!! It’s hard even just to plan a holiday within the next six months, much less 10 years from now. Anyway, you are going to need that much time to save all that money. If you are planning on taking off for a year travelling, you might as well do it in style.
Exactly. I did a backpacker trip through Australia for a year and was on the hostel circuit. I stayed in some places that I don’t care to remember (as much as I like to spend my nights with Rats and Spiders.) I’m looking forward to a year with some nice hotels overlooking the water and spending some time in museums. I think I’m also looking forward to some good ‘ol nomadic exploring.
Why can’t you do a mix of 1 and 3. Save and invest? Of your “set-aside” income, stick part of it in reasonable investments and the other part in your business ventures. If your business ventures succeed, you can always invest more into them if necessary and prudent. If they don’t succeed, you will still have the money you have saved.
I’m going to be saving the full 10% for retirement (long-term planning) plus investing in real estate (medium-term planning), baby #2 is on the way and my wife is taking 2 years off (good planning?) and now the travel fund. Can you spare any Kraft Dinner?
I find your “one year vacation” more as a dream that will give you passion for making money than really something you want to do
that’s just what it feels like when you read it 
It’s one of the first things that I’ve really seen as a motivator to really get cracking on the cash flow. Imagine being able to take a year (or two or three) without a worry about saving, paying bills or holding the job. The quicker I can create the cash flow that I am aiming at, the more secure the final goal will become.
I used a visualization technique I learned from The Secret to imagine part of the trip last night. If the lessons from the book/movie are correct, I’m going to have an awesome year!
Lewis, I would take the funds from business and investments. Granted the kids are coming along but really do you want to hand down the knid of debt a home equity loan would generate. What kind of legacy would that be. Saving for it, yeah right what is the return on a savings account 3-5%.
Either way I hope to read about your Dream vactation come reality in a post 10 years from now.
I hope we’re still all writing 10 years from now! Imagine the Search Engine results when we’ve got about 3,650 postings under our belts.
Regarding the kids:
I once read that the best gift a parent can give their children is to not live with them when they retire! I can’t imagine my children would keep the fond memories of the trip if I tack on a $200 charge to their allowance each month until they are 18.
I guess it’s business and real estate or bust…
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Sometimes, spending money is a priority to gain happiness. We never know when our last day on earth will be, so taking the trip sooner than later is a must. This kind of reminds me of a movie called Last Holiday with Queen Latifah who decides to take her ultimate vacation because she learns she has limited time on earth. Sorry to ramble, but I really liked this post.
I’m going for a combo of 1 and 3. I’ve got enough savings to cover $1000 a month and expect to be bringing in at least $1000/month in web income (if all goes well). This will be more than enough since I’ll be slumming in Asia and don’t plan on spending more than a grand a month. I guess the ideal scenario would see me not having to touch my savings at all! Time will tell.
I think it’s amazing that you’re planning so far in advance. If you work hard and have a bit of luck you could be making good money from the net sooner rather than later and you can chuck that extra money into a savings account that you don’t touch. That could either bring your trip forward or give you more money when 10 years comes around.
Good luck!
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just found your blog - cool idea!
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you know, there’s probably an optimal combination of all the above. Maybe you can f-=draw a line graph or whateverfo each option, weighing the pros ans cons in dollar amounts. see where the three lines intersect and do that combination.
I have absolutely nomath or econ skills to prove this, but it sure does sound like the perfect plan.
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