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63: Self Employment + Retirement: Work-Optional Lifestyles

Wealth by Design

Release Date: 03/14/2019

MINISODE: Hurricane Hiatus - An Update on the Wealth by Design Podcast show art MINISODE: Hurricane Hiatus - An Update on the Wealth by Design Podcast

Wealth by Design

Hello, loyal listeners! We wanted to let you know that we have a quick update on the podcast and a few things that are happening over at Toujours Planning right now. As you may know, we are a Lake Charles-based business and family, and our community, homes, and offices were devastated by Hurricane Laura in August.

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Wealth by Design

Do you need a financial planner? A financial advisor? An investment professional? A money coach? And what are those initials after their names?!

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Wealth by Design

In this minisode, Dustin breaks down the Sir Templeton’s quote: “Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria.”. He also discusses timing the stock market, why it’s a bad idea, and what you should do instead.

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Wealth by Design

We’ll keep the intrigue to a minimum. In our opinion, the answer to this question is a resounding yes. Sharing your finances with your partner builds trust. Keeping them separate can breed suspicion and worry.

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Wealth by Design

In this minisode, Dustin recaps what a stock actually is and how stocks are bought and sold. He discusses how people’s emotions cause those peaks and valleys in the stock market, and how you can avoid that dangerous herd mentality when it comes to your own investing.

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Wealth by Design

Katell and Jon, a husband and wife design team, are founders of Reverielane, a purpose-driven brand and web design firm.

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Wealth by Design

We talk about fear a lot on our podcast. Fear is natural and, TBH, necessary. But fear can also make you focus on the wrong thing when it comes to your net worth. Paying down debt rather than building up your assets, to be specific. And that’s what we discuss in this week’s episode: where our fear of the “debt boogeyman” comes from, our three-step strategy on how to overcome it, and what part of your finances you should be focusing on instead.

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Wealth by Design

The robots have taken over. Just kidding. But, they have taken over a major chunk of the financial industry in the form of robo-advisors. But the truth is, we think robo-advisors are actually pretty useful. Of course, there’s a time and a place to use them, which is exactly what we cover in this episode of Wealth by Design.

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Wealth by Design

There are a lot of misconceptions about investing in the stock market, thanks to fear-mongering in the news, horror stories from family and friends, and a lack of education about the stock market in general. Your fears may also be why high yield savings seems like the better option for your money. In this episode, we talked about the differences between high yield savings and stocks. We know you’re probably a big fan of saving because it’s “safe,” right? Well, we’re about to rock your world.

info_outline [Summer Remix] 98: Leaving Behind the “Punch Clock” Mindset show art [Summer Remix] 98: Leaving Behind the “Punch Clock” Mindset

Wealth by Design

The concept of a punch clock — punching in to start a shift and punching out when it ends — is ingrained in many of us, even as business owners who write our own checks and make our own schedules. But it doesn’t have to stay that way! On this episode of Wealth By Design, we talk about how you can start changing your mindset and your life right now.

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More Episodes

Not everyone dreams of retirement and retirement means something to different to today’s generation — especially if you’re an entrepreneur or business owner. But even if you don’t plan on calling it quits permanently one day so you can hang out with your grandkids or curse at your neighbors for walking on your lawn, you might want to have some money in the bank. Why?

So you can do whatever the hell you want, that’s why.

This week on Worth It, Dustin and Danielle are digging into what it means to live a work-optional lifestyle. And while it doesn’t look the same for everyone, there are some hard-and-fast rules that can help you save up for your own work-optional lifestyle with the help of a “backup life bank.”

WHAT YOU’LL LEARN

01:35 What a launch and retirement have in common

02:35 The difference between retirement “back then” and retirement now

03:22 What to do when you don’t have to work for money, but still want to feel useful

04:25 How retirement might mean different things to different people

04:40 The definition of “work-optional lifestyle”

05:40 The importance of knowing what you need to get by when you don’t want to work

06:50 How to factor future income into your early retirement

07:46 What the Journal of Financial Planning says you need to have saved to retire

08:25 What financial planners do to help you figure out retirement savings

09:23 How much of your income you should be saving and giving

09:33 The importance of having a backup life bank

11:12 What to include in your backup life bank calculations (hint: everything)

13:02 Why investing is a very smart way to get your backup life bank filled

13:43 How to DIY your backup life bank calculations

LAUNCHING YOUR OWN WORK-OPTIONAL LIFESTYLE

Even if you’re like Dustin and you don’t see yourself ever quitting your day job, it helps to have money in the bank for a rainy day or a really big emergency. Better yet, it helps to have money you can fall back on when you want to take a sabbatical, or have a kid, or just relax for a while. Nobody said you have to stop working, but a work-optional lifestyle gives you the flexibility to define that work. Best of all, you don’t have to worry about who’s paying the bills while you’re off doing whatever you want to do.

But to rock the work-optional life, you need a backup life bank. Others might call this a retirement fund, but you’re too cool for that. You need a backup life bank that:

  • Helps you pay all the bills you want to keep paying (hello, mortgage!)
  • Lets you do the work that speaks to you most
  • Accrues interest so you don’t have to worry about inflation and cost of living

So what do you need in your backup life bank to launch your work-optional lifestyle? That’s different for each person — and it takes a little bit of math. *groan*

CALCULATING YOUR BACKUP LIFE BANK BALANCE

According to a 1994 Journal of Financial Planning — yeah, Dustin is that old — the safest percent to withdraw from retirement (or backup life bank) funds is 4% per year. By withdrawing 4% from your backup life bank each year, the account can still accrue enough interest (on average) to account for inflation and increased cost of living. But what does 4% withdrawal rates mean for your work-optional lifestyle?

It means that you’ll need about 25 times your minimum income requirements to live a work-optional lifestyle (or to retire entirely). Your minimum income requirement is everything you need to live the way you want, from your Tesla Model X payment to your mortgage or your monthly massage subscription. Whatever you want to sustain in your work-optional lifestyle should be accounted for in your minimum income requirement. Then, you need to times that amount by 25.

For example, if you know you need $80,000 a year to maintain your lifestyle without changing anything, you’ll need 25 times that — $2 million — in your backup life account(s). Once you have that amount, you can pull 4% of your funds out each year ($80,000 —- isn’t math cool?). Of course, if you live in a van down by the river… you may need a little less than $80,000 a year.

HOW TO SAVE FOR YOUR WORK-OPTIONAL LIFESTYLE

Are you reading this AND thinking “$2 million?? Who can save $2 million??” You’re not alone. That’s why Dustin and Danielle are breaking down their tips to help you accrue that backup life bank on this week’s episode (hint: saving pennies won’t cut it, you’re gonna have to invest).

In the episode, Dustin and Danielle touch on how to “DIY” your backup life bank by:

  1. Calculating your net worth
  2. Starting to save and invest today
  3. Building up your backup life bank based on the 25x Rule

If you’re hoping to live a work-optional lifestyle and want to know how to get there, this episode is for you. And if you’re not sure that you can do this whole “backup life bank math” thing by yourself, you can always contact Toujours Planning to see if our financial planning services are a good fit for you.

Resources & People Mentioned