Ryan's Number

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  • October 27, 2008

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Ryan’s Number

For those of you still struggling with the ‘mechanical’ aspects of this exercise – which (to paraphrase Ryan’s literally right-on-the-money comments) will be one of the most valuable things that you will ever do – I recommend modeling Ryan’s spreadsheet below.

As to his analogy about cars, all I have to say about that is right here in this YouTube clip …

As I’ve mentioned before, this exercise has been one of the most valuable things I have ever done.

To do the research for, truly think out what you want your life to be like, and then visualize yourself living it is powerful.  Scary, but powerful.

Once you see yourself living the life of your dreams, how can you accept anything less?

But to see how big of a number is needed can be quite daunting to say the least!

My hope is that by taking the time (and really it’s just a couple of hours) to complete this exercise I am making a roadmap for myself to follow, and lighting a fire up my butt to gas up the car, check the tires and start this journey already!!

My other hope is that by putting it out there (on 7m7y.com) I am holding myself accountable to achieve this number.  So if you’re reading this, please do two things for me and yourself.  Check back in a little while (or every day!) and see if I’m on track.  Then taunt me if I’m not!

For yourself, why not take a couple hours and find your own number.  You owe it to yourself.

Housing Needs Total needed in 10 years:

House #1: $3,000,000 (in today’s $) $4,500,000.00
House #2: $1,000,000 (in today’s $) $1,500,000.00
TOTAL $6,000,000.00

Current House Value $665,000.00

Value in 10 years – current mortgage: -$312,500.00

TOTAL $5,687,500.00

Other Needs Annual amount needed

(in 9 years)
Vacations:
(2) 10 day vacations for 5: $40,000.00
1 (7) day luxury vacation for 2 $20,000.00
2 weekend trips for 4 $10,000.00

Cars: 2 Mercedes: $15,000.00

Gifts: $8,000.00

Meals: $40,000.00

Golf: $20,000.00

Philanthropy: $60,000.00

Season Tickets: $30,000.00

Spa: $25,000.00

Where did that $ go?: $18,000.00

Gardner: $7,500.00

Part-time Maid/Nanny services: $25,000.00

sub total $318,500.00
Times 20 $6,370,000.00
Investment fund: (if I see an opportunity) $500,000.00
House $5,687,500.00
TOTAL $12,557,500.00

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Reader Comments

Comment Number:
1
Written by:
Debbie
Posted on:
October 27, 2008 at 10:25 am

@Ryan – so is your date 9 years from now that you need that full amount?

Comment Number:
2
Written by:
Ryan
Posted on:
October 27, 2008 at 9:22 pm

@Debbie – That’s right, actually just under 9 years now. It will be my 40th birthday. I couldn’t ask for a better gift!

Comment Number:
3
Written by:
Josh
Posted on:
October 27, 2008 at 11:30 pm

Hey Ryan, I love the Maid/Nanny idea. I just can’t seem to put my clothes away.

Comment Number:
4
Written by:
AJC
Posted on:
October 28, 2008 at 11:10 am

@ Ryan – Great spreadsheet format; others can use this by listing all their ONE-OFF EXPENSES under ‘housing expenses’ and all of their ANNUAL EXPENSES under ‘other needs’.

I would recommend that others who want to try this format begin by listing TWO dollar columns:

1. For each line item in today’s dollars
2. for each line item inflated to future dollars

… but, you did this all in one which is fine.

I do have a question though:

Have you covered annual living expenses and taxation etc. for a family (as Michael Masterson suggested in this series of posts: http://7m7y.com/2008/07/25/living-off-100000-per-year/ )

e.g. income tax / electricity / gas (home ad car!) / phone / internet / cable / groceries / clothes / kids clothes / school / college / etc. ?

For example, Debbie (who provided this list) has estimated $443k for 2 kids, 4 years each at private college (in 2018 dollars)

Comment Number:
5
Written by:
Ryan
Posted on:
October 28, 2008 at 1:50 pm

@ AJC – Good question. We have been putting funds away monthly for college, so hopefully that won’t be an issue (crossing my fingers for state schools with scholarships!!). Electricity, groceries (though we’ll be eating out a lot! and have accounted for that), internet, cable, phone, clothes, and gas are not in that figure and have now included them into my figure pushing it to 13 mil!

As for income tax, could you shed some light (without endangering your status with the IRS!) on this subject? Do you have a formula for this? How much do millionaires pay in taxes? I realize we will be in the highest tax bracket, but what can you realistically expect to pay Uncle Sam?

Let’s assume in my case that we will have $350,000 in annual income. Let’s also assume that our vehicles, health insurance, child care, some travel, phone, internet, and other business type expenses will be under our corporation.

We could also, potentially, have some serious mortgage expenses to write off. Though we previously discussed paying cash for houses upon retirement, it might make more sense to have the cash to buy our houses, but invest it elsewhere so as to reap the tax benefit.

Lastly, we will be donating approximately $60,000/year. Much of this might not be considered charitable donations, but could probably be deemed business losses.

So in this scenario, what figure should I put in for taxes? This will also change upon “standard” retirement age, correct?

Thanks!

Comment Number:
6
Written by:
AJC
Posted on:
October 28, 2008 at 2:17 pm

@ Ryan – Good question/s right bakatchoo … 🙂 Michael Masterson includes tax rates in his living off $xxxk a year tables [see my 3 consecutive posts commencing with this one: http://7m7y.com/2008/07/25/living-off-100000-per-year/ ] I believe (erroneously) “assuming a … tax burden of 35%” for all the reasons that you suggest.

I recommend that you pick a tax rate b/w 25% and 35% and use that, knowing that there are legal and moral ‘things’ that you and your accountant and attorney will figure by the time you get there … believe me, you won’t even get near your Number without having a lot of these things in place already.

Your example of assuming that you will be paying cash for your house but perhaps refinancing to release some of the equity for other things is a good one e.g. I have a HELOC on my home for investing in the US stock market, where I am still 100% leveraged … I like to ride the thin edge of the razor 😉

Comment Number:
7
Written by:
Josh
Posted on:
October 28, 2008 at 5:48 pm

@AJC – I’ve been looking for ways to avoid taxes lately. Can you suggest a resource to teach me how to avoid paying to much tax on short term stock investments?

Comment Number:
8
Written by:
AJC
Posted on:
October 28, 2008 at 8:07 pm

@ Josh – LOL … no! The IRS reads my site, too, you know 😛

Seriously, if you are trading, you need to find a good accountant; you probably need to set up a LLC if you want to create carry-forward losses, and avoid pushing your personal tax rate up too high. But, that all depends on your personal situation, so the accountant (find a good one who understands business and investing … not just an income-tax paper pusher) is the ‘solution’.

Comment Number:
9
Written by:
My Mountain’s too steep! - Part 1 «
Posted on:
November 14, 2008 at 12:49 pm

[…] Ryan’s Number […]

Comment Number:
10
Written by:
Lee
Posted on:
November 23, 2008 at 5:14 pm

Ryan…. Where are ya dude? I haven’t heard anything from you lately. Hope things are going well and you’re still on the climb with us. We’re all here to help if you need it.