$100 a day

I remember back in my traveling days how we’d be so happy to earn $100 per day.  It was our goal, and if we hit it, all was well in the world.  It might not sound like a lot to many of you, but it really was an incredible amount of money for us, and here’s why:

Our accommodation was covered, no utilities, nothing.  Food was included, and beer was $1 a pop.  After a while I got an expense account on top of that too, so it was pretty hard to spend money.  Oh, and tax was optional… basically, $100 a day meant $3000 per month take home pay, and it was very hard to spend it.  I was thinking recently how I’d be super happy with $100 a day again, but with a couple of changes..

Passive, not active

Those $100 days might have been 16hr shifts, we worked for the money.  Moving forward, $100 per day from passive activity would be absolutely game changing.  When I was pondering this I thought to myself that investment income didn’t count.. it would have to be some other source, such as a book royalty or something.  I then pondered what about $100 from royalties, and $100 from the market?

Money don’t care

These are just some silly thoughts I had when reflecting on the ‘good ole days’ but money doesn’t really care where it comes from, so there’s really no harm in getting $200 per day from the market rather than figuring out how to pen a book.  If you think of that as $73,000 per year, it’s actually a ton of money.. and it would require a substantial ‘nut’ in order to produce.  If you could get about 3% from a 30 year treasury, you’d need $2.4M in the bank to make that work out.

Using some high level math.. if we decided to cut the amount in half again, and go for $100 per day from a passive gig, and $100 from ‘the market’ that shows us that the value of a passive activity that can pay off $100 per day is $1.2M.

There’s a price for diversification

Above, I simply sliced the amount in 2, but we should note that there is a tangible value to diversification also.  The person with 20 streams of income each providing $10 per day is in a safer position than the person with just one.  This makes the passive gig that much more valuable.  So in a sense, while money don’t care where it goes, it’s quite important where it came from….

Building an array of wealth vehicles

If you knew it would cost $1.2M to produce $36.5K per year but weren’t anywhere near that, what could you do to move in the right direction?  There’s two approaches here that I find interesting. Diversify from day one, IE put a dollar in 20 buckets and start building them all, or put all $20 into one, and when it becomes self sustaining, move to the next.  It’s kinda like the notion of Debt Snowball vs Debt Avalanche.. in reverse I guess.

Thinking about your IRA you could consider this as splitting the direction of your money into two (of 20) buckets. The IRA will become its own entity and grow, but in funding it you are slowing down the full frontal attack of filling the first bucket.  The time when you see people understanding this concept is when they start their own business, and decide to put all their money into making that work, rather than saving.  In a sense, saving into an IRA harms the growth of the business.

All paths lead to Rome

Its an interesting thing, whether you elect to focus all of your energy in building up buckets one by one, or if you want to start spreading the money out from day one.  Ultimately, if you get to the age of retirement and are fastidious, both methods should work out just fine.

You should note that the biggest flaw with this post is that it started out me thinking about the good ole $100 days… and that number has no meaning beyond that.  In order to learn the number you really need you need a financial plan.  Also, we need to remember that the sooner you hit a bucket goal, the better, as it should provide you with income beyond what you consume.