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Goal Setting

The 4-Hour Workweek Just Cost Me $100,000

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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