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Financial Planning for Lifestyle Design

Tim Ferriss’s book The 4-Hour Workweek (#aff) has sold well over a million copies. I’ve purchased two, and several friends have based on my recommendations. That’s over a million people who have some sort of dream of lifestyle design – taking mini retirements, working less, and removing the delay from delayed gratification.

What Ferriss preaches in his book would seem to fly in the face of conventional financial planning. After all, financial planners urge you to save as much as you can today so that when you hit retirement age, you’ll have enough to avoid being the bag lady eating cat food. If you’re going to take mini-retirements, or if you’re going to buy that Bentley on a car payment, how in the world will you ever be able to retire?

The easiest answer is to throw caution to the wind and to just go for it. Hop on the plane, go to Thailand/Panama/Argentina/Wherever and figure it out. All you need is a backpack, a laptop, a passport, and a couple of months of savings, and if it doesn’t work out, then you can come back. There are some things you can do to improve your chances of succeeding and to still not mortgage your future for the sake of enjoying the present.

  • Take small shots. You improve your chances of succeeding if you can invest $1,000 each in ten ideas than if you invest $10,000 in one idea. The one idea has to succeed, whereas only one of the ten ideas has to succeed the other way.
  • When you succeed, match income streams with expenses. If you really are going to finance an Aston Martin for five years at $2,000 a month, then make sure that you have a steady stream of income to make that payment and automate it so that you don’t forget and have high end kneecappers coming to relieve you of your car.
  • Continue to fund retirement accounts. The tax free retirement or tax deferred retirement assets will be the primary source of what keeps you going as you get older. You really don’t want to commit your future self to a life of penury while the present self parties on. Scientists might have invented time travel by then, and your future self will be bent on revenge!
  • Make yourself extraordinarily valuable at work. While Ferriss advocates an approach in which you work yourself out of a job, the most likely outcome is that employment will continue to the source of your income. Be the idea machine that is so valued that you create negotiating leverage to take sabbaticals.
  • Look to your employer as the continuing source of income during the mini-retirement. Can you do high-impact, low time work for your employer and receive some portion of your previous wages? Can you do work with your employer’s customers or vendors in a way which doesn’t violate your employment (or consulting) agreement?
  • Lower all of your other expenses. The fewer commitments you have to meet while on mini-retirements, the less cushion you have to have.
  • Understand the cost arbitrage of other countries. I love the website Numbeo because it has reasonable data on the cost of living for a lot of cities in the world. Figure out how long it takes to amortize the cost of traveling there and back. If the cost of living in your target city is $500 a month less than where you live, but it costs $2,500 to get there, you’ve not saved anything until after five months there.
  • Verbalize your desires for opportunities. If you talk about what you want and tell people what you seek, you open the pathway for people to help you find it. People innately want to help others, so why not give them the opportunity to help you?
  • Have enough liquid funds to eliminate money as an obstacle to short-term success. Simply put, muses usually don’t work themselves out in two months. You really need at least six months to see if a muse is really going to work for you. The six months does not have to be contiguous, as you can always take shorter breaks. However, you don’t want to later tell the story that just as your idea was getting off the ground, you had to give it up because you ran out of money.
  • Use job changes as sabbatical opportunities. If you’re talented and show great potential for your new employer, then you have negotiating leverage to determine your start date. Employers always want great people now, but they’ll also be willing to take great people whenever they can get them, including some time in the future.

It is possible to have it all with a lot of planning and hard work. The pace of change and the expansion of opportunity gives us access to possibilities that a generation prior to us did not even dare dream of. With careful planning and attention to the financial aspects, it’s possible to turn dreams into realities, not nightmares.

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John Davis
John Davis is a nationally recognized expert on credit reporting, credit scoring, and identity theft. He has written four books about his expertise in the field and has been featured extensively in numerous media outlets such as The Wall Street Journal, The Washington Post, CNN, CBS News, CNBC, Fox Business, and many more. With over 20 years of experience helping consumers understand their credit and identity protection rights, John is passionate about empowering people to take control of their finances. He works with financial institutions to develop consumer-friendly policies that promote financial literacy and responsible borrowing habits.

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