WTR Discussion: War Between Current And Future Lifestyle from Wealth Tactic Rebels

Wealth Tactic Rebels

Kevin M Dumont

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WTR Discussion: War Between Current And Future Lifestyle

30 minutes Posted Apr 19, 2019 at 12:00 pm.

] Wealth Tactic Rebels.

] Welcome to another discussion with wealth tactic Rebels the podcast for people who see things differently,

] There's always a tension between our current lifestyle Desires and our future lifestyle reality,

] Today we will look at this concept of Lifestyle in the context of how much we make how much we save and where that might leave us in the future will explore the tension between current and future lifestyle,

] When we're trying to evaluate today's lifestyle versus our future lifestyle it's important to understand well potential.

] If you even pay attention to that and some people don't of course you know who you are.

] And you know it's not a big deal I can stand here and there it's just never going to head out to what I want anyway and I exercise with them.

] And you currently have a net worth of us a million and a half dollars.

] And you're hoping to get 6% on your Investments okay so those are in place for the calculation.

] And when I calculate it what it tells me is that from now until my retirement age that is over the next 10 years.

] My lifetime my income potential is 3.1 million dollars that's my income potential.

] But when you finally think wait a minute I'm going to make 3.1 million dollars,

] The next part of it is what about our wealth potential.

] Well I well potential believe it or not is just shy of seven million dollars now,

] 3.1 was a big number 7 million I guess more than double well if we take what we're making and we accumulate.

] Go back to the question if you think about your wealth and income potential and if you run this calculation I challenge you,

] Let's continue the exercise here so.

] We all know that you can't keep all of it if anybody can save 100% income from somewhere else.

] Everybody has a different tax situation,

] Lifestyle how much of go what's going through my fingers is going directly to my lifestyle okay.

] If that's you and you don't already have it mean if you're not already financially independent and financially wealthy so to speak.

] And yet in just 10 short years.

] Taxes 30% Debt Service 20%.

] We spent 3.8 million in 10 years.

] Follow me well first of all taxes can I change that well if you have a good accountant FL to squeeze a little more out but you surely can't eliminate it.

] And hang down those credit cards you could eliminate that transfer on that higher interest,

] Okay tell if we do that we have essentially doubled our savings rate Heavenly from 10 to 20 what's the result is that.

] There's only one of the discussion we could have here you can say look I know I need to change my lifestyle in order to make this work right if you're that person that's okay you could do that,

] Your savings on your lifestyle are equal I'm saving 30% and I'm living on 30%.

] The results of that would be even more savings would be about 4 million dollars in savings and you'd only spend 3 million quite interesting,

] You also have saved more which makes it more likely that you'll be able to stay in the lifestyle that you're accustomed is to in the future,

or lifestyle because we haven't saved enough okay,

] Would you stop doing where do we stop living where we living but maybe evaluating deficiency of it and evaluating our Tendencies to want to increase that lifestyle,

] And then I wanted to not sit in the coach seat anymore wanted a little upgrade and then I wanted to stay in that nice and actually in the sweet because I was able to get an upgraded blah blah blah.

] This is an unusual situation maybe some people out there can relate to this,

] Okay now this is quite interesting but you know this is my first apartment out of college.

] And is living in a rural area till is a little literally it was little A-frame Shack,

] Lifestyle creep if I call it as I see it with my car's you know a secret that I love cars,

] It just keeps growing exactly

] The other thing I said I do is you know one of the things we have talked about you in several episodes of love tattoo Rebels is.

] What is for our future lifestyle and it's connected to two

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Show notes

Did you know you’re waging a war every day of your life? It’s a powerful, often devastating war. It’s the WAR of YOUR CURRENT AND FUTURE LIFESTYLE.

The good news is, you’re not alone. There’s help. Listen in as WTR discusses the war between your current and future lifestyle. We help you understand, and put into perspective, what is really going on. We will help you take possession of your biggest, little-known asset, so you can better determine if your current lifestyle is in balance with your future lifestyle.

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Transcript

[

Ingenious Tactics to accumulate wealth, for people who see things different.

[

I'm your host Kevin Dumont and I've been thinking differently in the well field for well over 10 years.

Today we're joined by our co-host Brian. Hi there everybody Brian Dumont here, owner and manager of Dumont Wealth.

Happy to be here Kevin. Happy as always to have you Bri. Looking forward to our discussion today. And today we're going to talk about lifestyle.

[

we're very good at sending our own lifestyle ever upwards, no one wants to move back down the lifestyle staircase, so to speak, to a lower lifestyle.

So the Paramount question that arises today is a my spending my desired future lifestyle today.

[

and look at some honest ways to help evaluate where we're at because ultimately lifestyle is what we all dream of and dreams can sometimes become reality,

We work to make that happen.

[

So let's discuss with Brian a little bit about well potential what that means.

So what potential is a concept really that we can kind of used to hang our hat on when it comes to looking at our well rather looking at it on a monthly basis or an annual basis.

And I were often used to thinking about how much money we make or how much we have based on the current balance in our accounts.

[

Or how much we have of a regular flow of income on a monthly basis.

Or how much we have on an annual basis for instance when we file our taxes that's one way to look at it but the truth of the matter is well potential is a much larger concert it really looks at.

Over our lifetime what can we learn and what can we save like that is because,

once you do you can ask yourself is very important question and I didn't question is this if you knew your total life wealth potential.

Songs for example would you treat it differently than thinking about it in small pieces that's the question.

I don't know I don't know you know but when you look at something and you realize that really is an awful lot more than I thought you know if you think it well.

I only make X dollars.

[

And it looks for the first time perhaps at what they're doing.

Wealth and income potential leaders over their lifestyle it becomes a much different kind of thing so let's run a quick calculation together,

maybe one or two just as an example so people can kind of think about that's okay.

You're going to retire in 10 years at 65.

Currently your income is 250,000 that income is growing over time of let's say a little bit above the inflation so that 5% a year.

[

Just stop and think for the fish I can make some 50s very normal right every all of your friends make 250 give or take.

[

now that's a different thing isn't that so much larger number it sounds like a lot of money,

3.1 million is a lot of money really is you can do something with that right so that's where it starts impact how we think about our money.

[

South $7000000 wait a minute are we getting to that number.

[

Wealth by 3.1 million.

Ever going to grow that buy our income as well as by our rate of return we put all that together assets and income and interest of course.

We end up in 7 million dollars that's just over a 10-year. No think about it wait a minute.

I'm thinking about two things normally I'm thinking okay I'm making $10,000 a month or $250,000 a year.

I've got a little over $1000000 shaves right and doesn't feel like it's worth that much but when you calculate it out over sometime.

And you look at your wealth and income potential that were talking some sizable numbers.

[

does not change how you look at it while I mean I would think so if people are thinking like you're saying I know I only make this amount of money it's a it's a different mindset that we were thinking G I made

$150,000 no $200,000 a year,

I really am going to have 10 chalem / 7 g i really millionaire you know when you're a millionaire you're going to treat you treat your my little differently.

You know you might realize that in fact hey,

this is really important I can do something with this conclusion and I'm hoping people come to and they'd make us calculation for themselves,

because it can have an impact on the way you think about it and might even go so far as to help you want to shave a little more now.

[

The truth is the All-Star three-point 1 million you're going to earn in our example or the seven million you could have in your hands.

[

So how much do we have to deduct from that so to speak,

to come up with what we really could end up with by the end of the 10-year. By the time we're ready to retire right.

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business owners W-2 employees Etc I'm just going to take out a flat 30% for the sake of the argument here okay to make an impact then,

most people most Americans most of us have some type of debt service right whether that's mortgages were,

personal loans or leverage on a business Excedrin right in fact.

33 cents on the Dollar on average is what we spend in debt service believe it or not.

I'm going to put a slightly more conservative lights 20%,

and again you need to do this or your own numbers yours could be a lot less or a lot more people are up in the 50% tile on your debt service right next to the next one of course is.

[

The only other thing on my list is savings so if you're not shaving that means the rest of their 50% is going to Lifestyle okay.

[

Can you eat of the shading something right now what's the average savings rate in the US by 5% right,

meaning let's let's say if it was 5%,

that would mean that 45% of the money going through your fingers is lifestyle and your only shaving 5%.

[

We're expecting that 5% savings to somehow magically support a lifestyle that was eating up 45% of your cash flow right now so,

let's be a little more generous let's say that you're doing what is considered really good which is 10% savings,

and you're living on 40% right so just to review your income allocation is going like this.

[

Lifestyle 40 savings 10.

When I cut calculate on that what it does is it subtracts all of the expenses and it just takes our savings and adds them by our interest rate which was 6% we were using.

And where do we end up we started at a million and a half today,

end up in 10 years at having saved 3.1 million dollars that something right but guess how much we spent.

We spent over that same. 3.8 million dollars.

[

Emulated 3.1 million and now we expect to retire for the next 30 years on the 3.1 million you see the problem,

you don't even have to run the calculation there you just run that by your head real slow and you see the potential problem okay

and I haven't even mentioned information which is going to even eat at those shavings any more overtime going forward,

so what are we going to do well.

There's only a couple things we can do with only got what was done right and that's another part of this point when you look at your entire well potential,

now you can start giving it up in a way that might get you to where you need to be a little bit more closely.

Which is that discussion we're going to have in a couple minutes about current income vs future income.

You cannot generate the income you're going to need in the future if you're only shaving 10% in our scenario it with me,

so where's the money going to come from how can we reallocate some of where our money is going to the future rather than to turn.

[

Okay let's just leave it at 30%.

Well possibly right,

if you did not anymore maybe it would go down and maybe a few you know this is a question and I can't answer this for you cuz there's a lot of variables here for instance,

if you have a mortgage that you're paying three and a half percent interest deductible and your net cost of that mortgage is two and a half but in your investment accounts earning 6.

Does it make any sense to take money out of your investment account to pay off a mortgage that is now essentially putting your savings into a bucket learning two and a half.

You've lost if you calling me there.

You lost three and a half on your opportunity cost that's not a good deal okay on the other hand is going towards credit cards,

and you're only earning 6% in your investment account will now maybe we need to look at that right,

and you know my taking some out of that.

[

you follow me the number of juggling factors here but in series if we could find a way to bring down our debt service let's say bring it down from 20 to 10%.

Well,

I'm sure my wife would find a few good places to put that 10% in our lifestyle bucket

we could direct it to our savings bucket couldn't we that make sense,

because that way we would not have to adjust our lifestyle down where he knows you said at the beginning I haven't met anybody

ever in my many years of working in the financial services that said to me Brian can you help me reduce my lifestyle funny question that person yet so.

[

Well here's the results we know I would have over a 10-year. Savings of 3.5 or million dollars.

And we would have spent only 3.4 livre first the situation we now have shaved more over the next 10 years then we have spent message that's quite interesting isn't it.

[

make sure you reduce it by 10% which is a lot okay if you found a way to do that now.

[

now that's on something else because what that does is by reducing your future lifestyle need along with your current lifestyle need.

[

sing a balance you can as you say stay where you are if you do come on down this one way or another things change its inevitable,

right exactly cuz where we started with this scenario was really an out-of-balance situation,

it was that I thought we were spending today to maintain our current lifestyle we were spending part of our future lifestyle rent.

Meanings that once we get to the teacher we're not to be able to

you know and I think the long would that sometimes what you talking about is it necessary that we have to.

[

absolutely I tendency is definitely to try to increase and that's how we kind of Lorelei,

here's an example for you to travel right now I'm back for a moment that first trip I took after I got out of college to Europe.

You know I flew the most basic coach seat I could find ice I stayed in a youth hostel cuz I thought it was cool

you know and I lived on French bread and peanut butter and then I eventually graduated to Nutella cuz it taste better,

I still save a little money for some wine you know but it was not expensive

what happened was a spiny thing as years went by suddenly I found myself staying in a hotel.

[

Everything Has Changed not happens over time it's not like.

[

I can relate to it you know my wife and I took a recent trip to the Caribbean,

trying to kind of limit our expenses somewhat by going to an all-inclusive resort

but the problem is you get to an all-inclusive resort which first of all is obviously nicer this thing as a youth hostel just a few dollars more,

you can have closure the beach and have more service and then,

you get that and I so we can have this other upgrade and then you might want to get that because it's tempting to make it valuable and then they show you the real sweet that you could actually have you can become a member and you know it,

let me tell you it's an endless pit to go down you just want to keep upgrading upgrading cuz they keep giving you more and more for it.

And it's that Temptation that is difficult because,

you know if you upgrade too far then it's like you saying you start to throw things out of balance your current vs your future lifestyle tension again.

Exactly that's the point it's so easy to do that in our.

[

on the side of a hill you're laughing cuz you remember this place and I and this is going to this is going to date me but that rent was three hundred bucks for the month

okay. It was three hundred bucks for a reason,

I was happy as a clam you know cuz I had my first apartment anyway what happened after that well then some sometime later on

good night condo in the Sheep neighborhood and in Boston and then another one in New York and then there was a second home and,

you know that there's a bigger condo and Lifestyles a funny thing you know as soon as the income,

and that's why every once in awhile I always encourage people to step back and look at where they are now and where they want to be and see if,

Darin Downs like we just did with our example earlier you know.

[

and my first car was a I think it was 12 year old Towne Honda then I got a little bit newer one is in use only like 5 or 6 years old,

it all cop cars later I'm up into a brand new car,

brand new Honda then a couple cars later I'm into a BMW then you know well I like are so I'm going to round up that I have friends that like cars I'm going to dance,

next thing you know I'm not just going to an event I'm trying to participate in them.

[

exactly it but in the other sense it can easily get out of balance when we don't down periodically and look at the numbers you know to help us get some,

and again that whole a concept wealth potential overall you know.

Cannot just that one thing and he doesn't like to ask people you know what are the ways that you're tempted to possibly,

lifestyle a little bit too far ahead right now and I'll strip your future lifestyle.

[

Our personal economic model are 10 and I think we has Kevin we have the shop somewhere I can people see it in the show notes which is a corset,

passionate speech you'll find this episode current future lifestyle episode on the show notes and we'll make sure we have a big,

they are going to do there okay great see is you will see a big tank on the left that's called.

Lifetime Capital potential that's what we've been talking about okay and at the bottom of that tank the money flows out of it and directly to our lifestyle that is our current lifestyle,

okay it's very easy it just slows right down straight across and out.

It's okay by contrast though there is a pipe on this cash flow that goes in the direction up word meaning.

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