I am going to show you how to connect spending, time and wealth.
Let’s bring back my 20-something self. He was living in London, working in finance and renting a room to keep his overheads down.
Coming out of college, having more cash flow than he needed, he felt rich.
But was he?
He earned $75,000 and was spending $32,000. How wealthy was he?
Remember from last week, his net worth was $20,000.
Net Worth “divided by” Spending = WEALTH IN TIME
His WIT was 7 ½ months.
Roll forward to my early 30s. I’m a young Private Equity partner and hit $1 million net worth.
I was spending $250k a year, felt flush, but was I wealthy? Let’s find out.
$1,000,000 / $250,000 = 4 Years
Not wealthy, especially when you consider my life expectancy (>50 years).
At 31, I realized my spending was buying me NOTHING. What I liked to do was swim, bike and run. I had fantasies of leaving the corporate world. I took action.
I applied to emigrate to New Zealand. Arriving in Christchurch, I was able to buy a five-bedroom house for US$110,000. My cost of living plunged to $25,000 (NZ$60,000).
My WIT jumped to 40 years.
I didn’t return from my leave of absence. Most of my family thought I was nuts.
Best trade I ever made.