If you’re like a lot of people, one of your top financial goals is to increase your income to “seven figures”. But “seven figures” can mean wildly different things… and if you have a net worth of $1 million, you’ll be living much differently than you would with a net worth of $9 million.
In his brand-new book, Seven Years to Seven Figures: The Fast-Track Plan to Becoming a Millionaire, Michael Masterson suggests that you ask yourself, “Would a net worth of $1 million be enough?”
Here’s how you can find out.
Start a list of regular monthly expenses: mortgage payments or rent, bills, car payments, grocery bills, etc. (You can estimate these costs as they would apply to your dream house, dream car, etc.)
Add to this an estimated cost of the activities that are important to you each month — tennis lessons, dinner and a movie with your spouse, a weekend trip out of state, etc.
Now add the estimated cost of those things that would make up your dream lifestyle — a new Ferrari, two-week vacations to the Caribbean, scuba diving gear, a sail boat, lunch once a week with your sister, etc.
Add in the cost of anything else we may have forgotten.
Multiply by 12.
Your total represents the cost of living your dream lifestyle for one year.
If your dream lifestyle total is…
- … less than $65,000 you should aim for a net worth of $1 million
- … between $65,000 and $160,000, you should aim for a net worth of $1.5 million to $2.5 million
- … between $160,000 and $358,000, you should aim for a net worth of $3 million to $5.5 million
- … between $358,000 and $585,000 you should aim for a net worth of $6 million to $9 million
How much wealth do you need to accumulate to live the lifestyle of your dreams?[Ed. Note: Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]