Welcome to part 2 of the Solvable Problem™ series. The focus in this article will be what you are actually solving for in your Solvable Problem™.
If you missed part 1 of the series go back and read through the article linked below first.
How do we create our dream life?
Let’s dive into it.
Your Dream Life
Everyone single one of you will have a different dream life, different Core Capital numbers.
Don’t feel that just because your favorite twitter influencer has a Lambo that you need to get one too. This is especially true if you have no interest in cars or if it’s not even practical for you because you have 6 kids and would benefit from a bigger car to fit them all.
When you create a plan you are estimating what the future reality will look like and you are hoping that your plan is accurate and meets that future reality- Dr. Jeff Spencer.
Often times when reality shifts we try and bend reality to fit our plan.
There are so many unknowns that we will never be able to account for in our plans. Because of the unknowns it will be okay if your dream life changes and to change some variables when new and more accurate information presents itself.
2 Rules For Core Capital
Your Core Capital is the total investment required to fund everything you want in life.
There are 2 rules that we like to utilize:
- 4% rule
- 2% rule
These rules are just examples and are principles adopted from S&P investing, but of course you are free to create your own plan with your standards.
1. If you pull 4% of your total investment out every year, you most likely will not dip into principle at any point in time.
2. This rule is for legacy building. Once you have achieved all the money that could fund all of your needs and dreams in your lifetime, we can look at the 2% rule. If we take 2% of our investment capital every year to fund our life, then not only will we not touch our principle (2<4% rule), but our investment will still be able to compound year after year. This will allow for a bigger nest egg to be able to pass on to future generations.
If your dream life is $100,000/year. We then divide that by 4%.
This would mean we have at least $2,500,000 invested.
If your dream life is $100,000/year. We then divide that by 2%.
This would mean we have at least $5,000,000 invested.
The numbers of 2,500,000 and 5,000,000 would then represent our Core Capital numbers.
This all depends on your priorities.
This is why Core Capital numbers can & will be different for people, which means that the Solvable Problem™ will also be unique to the individual.
In our opinion, it would be important to be able to discuss these priorities and define what they are with anyone that is a stakeholder in your life to get everyone on the same page. (Wife, husband, parents, kids, etc).
Example Priorities (definitely not limited to these 3)
- Upgrade your house
- Quit your job
- Travel 3 months/year
What are the priorities that would make the biggest difference in the happiness level/fulfillment out of your life?
This is an important concept, especially if you’ve been in crypto, there are so many individuals who have timelines that often are not realistic given their situation.
I’m going to be a millionaire in 1 month off my investment of $20 into BabyMilkInu.
Investors typically have timeframes that are generally into the years to allow for time and randomness to play out. Day traders versus swing traders will all have timelines that are different as well.
It would be important to recognize what & how you are utilizing your assets to be able to develop appropriate timelines as well.
Don’t forget that each of your Core Capital priorities can also have different time frames as well.
Core Capital Dream Life Calculator
If you are a very detailed and granular individual this spreadsheet framework below may help you with finding those Core Capital numbers.
Just note that you do not have to have the exact dollar figures for your Core Capital numbers in order to be successful especially given that these priorities may change overtime.
Watch the Youtube video linked at the bottom of the article starting from 9:30 on the section on how to utilize this document.
Focus On Your Priorities
After doing your Core Capital dream life calculations you may come to an enormous dollar number. This dollar value may be something you never even dreamed of being able to achieve. That’s alright because you are now outlining the variable values and it is now up to you to figure out how to solve for those variables or change the variables (timeline is usually the one) given your current situation.
How can I get to where I am at now to the dream calculation numbers in the timeline I’ve outlined for myself?
This is where priorities will come in handy.
Your #1 priority is to upgrade your house to the 3 million dollar dream home. Let’s say that the Core Capital number is $106,776 yearly in the timeline that you chose for that priority.
Take a look and see what your current life expenses are.
Those expenses are currently $60,000 a year.
Upgrading to the new home eliminates $24,000 from your previous living expenses.
(60,000 – 24,000) +106,776= $142,813 per year
Applying the 2% and 4% rules we will be able to find our Core Capital numbers for the #1 priority of owning our dream home.
2% rule– $7,140,699
4% rule– $3,570,349
Having this information is great, but the true power really lies in your own application. These are the main questions I want you to answer and put into writing.
- What are your priorities?
- What are the timelines for those priorities?
- What are the Core Capital numbers to be able to achieve your priorities?
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. Share your 6WU below.