Welcome to the first part of the Solvable Problem™ series. This article will focus on what the Solvable Problem™ is & what this concept really means. We will also take a look at the equation and the variables and how to define what that really means for yourself.
If that sounds like something you’re interested in then keep reading.
What is the Solvable Problem?™
The big macro picture of this concept developed by Dan Nicholson is:
How do we get everything we want out of life? How do we engineer a path to get us there with the least moves, least amount of risk, most amount of options, and most certainty possible in an uncertain world?
Temet Nosce – “Know thyself”
The only way that we can engineer this path is knowing yourself on a deeper level.
Your solvable problem will most likely change as you continue to learn more about yourself and that’s okay!
The solvable problem should be thought about as a dynamic function rather than a static one.
The Solvable Problem™ consists of priorities. Here are some examples:
- I want to make sure that when my kids are old enough to appreciate it, that I don’t need to work for money, so if we wanted to travel around Europe for 6 months, I don’t have to worry about having a job to return to, or taking the work with me.
- I want to pay off my house so that I don’t have the stress of having a mortgage and can focus on doing the things I want.
There are 2 ways we can go about achieving these priorities.
In the waterfall methodology, you will concentrate your efforts into achieving your first priority.
I want to buy my dream house of 3 million with a downpayment of 20%, which is 600K.
Every extra payment that you can afford or the investment vehicles that you are utilizing will be going toward funding the 600K needed for the downpayment. Once you’ve achieved this you’ll place the downpayment down and you’ll start on the next priority. (This example is assuming that you’ve accounted for being able to pay the mortgage of the property).
You are setting aside your savings/investment vehicles to fund each priority. Let’s say you have priorities of:
- Funding the house
- Being able to retire in 20 years
- Your dream car
Your allocation for the extra funds could look like:
- Funding the house (20%)
- Being able to retire in 20 years (60%)
- Your dream car (20%)
Ultimately you end up achieving them all roughly around the same time.
Whether you utilize the Waterfall or Parallel methodologies will be up to your own personal disposition.
The next article in this series will walk you through how you can calculate your “Core Capital” number which will be an important factor within these variables. These are the questions that you’ll need to be able to answer.
This exercise will not be easy especially if this is your first time.
Take your time and just notate that it may change after a couple months or years should new information present itself that will help you to make a better decision for you.
Once we have these questions answered we now have an understanding of what variable we are solving for.
X + Y = 25
There are so many numbers that X & Y can be that this doesn’t give you any idea of the direction to take.
X +10= 25
Now we just need to solve for X, a much simpler equation.
What do you want out of life? Own a 3 million dollar house on the beach
When do you want it to happen? 20 years
How much capital do you have invested now? $1
How much $ can you add each month? $500
We can solve for the rate of return that we need to be able to achieve 600K down payment for our 3 million dollar house that we’d like to own in 20 years.
So with the variables we have filled in we would need a 14% annual return on our investment to be able to achieve our priority.
Hope this article helped to shed some light on the idea of a Solvable Problem™ and what this would mean for you.
Share your 6WU from the Solvable Problem™ Series
Remember: Wisdom comes from multiple perspectives, help others learn from you. Weeks or months from now come back to this & see what others have added to the thread to see if you can build on your own wisdom. Drop your 6WU in the thread below.