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Let’s get real about your money for a sec.
Not your revenue, but the monetary wealth that you’ve set aside for your future life.
Do a few quick, back-of-the-envelope calculations with me here.
First, add up all your major assets. This could be 401(k)’s, IRAs, stocks, bonds, mutual funds—any relatively liquid assets you own. Include your home’s current value.
Second, total up your debts, like mortgages, student loans and any consumer debt like car loans and credit card balances that you don’t pay off every month.
Third, subtract your debts from your assets.
Got it? That’s your net worth.
And if you’re wondering how much annual income that will throw off, most financial advisors use 4% of your investable assets (excluding your home and any gold bullion you have lying around) as a rough rule of thumb.
Which means if you have $1 million in investable assets, you can probably count on $40,000 a year (adjusted for inflation) as a reasonable withdrawal rate without a huge risk of outliving your assets. (Obviously I’m not a financial advisor and I’m definitely not giving you financial advice).
So why the financial calculations?
Because when you’re considering re-shifting your work and/or your life, these numbers will give you hugely valuable insight:
Can you take a few months—or years—to go do something meaningful to you that produces less or no revenue?
Can you slow or stop your revenue flow permanently and still be comfortable your life can unfold as you’d most like it to?
How much more revenue/money do you want and what makes the most sense to keep the spigot flowing for you?
How much risk makes sense in your situation?
What impact will various choices have on your income today and your net worth later on?
Thoughtfully answering these questions is why engaging a fee-only financial advisor is often an excellent idea.
As is defining your version of a rich life (with your life partner if you have one), the “enough” number that will fund it and the actions you’re willing to take to get there.
Because without a vision, a number and a plan, you may wind up like the broligarchs, constantly searching for their next (empty) fix of money and adulation.
Bottom line: knowing your numbers AND the life you most want is the perfect starting point to make excellent business + life decisions.
Related: How To Articulate the Revolution You’re Ready To Lead