If you haven’t read my last post “Sarah’s Dream Day [How a Dream Day can set you up for Financial Freedom]” do that now. Monday we looked at what our ideal day would be. That allowed us to pick apart what’s actually important to us, and what’s not so much. We’ll talk about that later in this post today, but for now, let’s move onto the next step- calculating the costs of a dream.
Take every aspect of your dream, and slap a price tag on it. Yeah I know, it’s not as dreamy, but it is necessary.
- How much will that land cost?
- The house?
- The furnishings of the house?
- The appliances?
- The fence?
- The barn and outbuildings?
- The animals?
- The hobby items? Like the kayaks, saddles, dirt bikes, etc?
- The necessary stuff? Like the solar panels, the vehicles, and the tools?
Make a list, and write down the prices.
If you already own some of these items, such as the dream house, or some of the hobby items, mark down their initial purchase cost as $0.
If you’d like, I have a pre-made list ready for you to print and write on, or simply fill out on your smartphone, tablet or PC. It’s at the bottom of this post in a box titled “Get the 15 Page Financial Freedom Workbook”. Put in your email and it’ll be in your inbox!
Add up the Costs
Now, beside that upfront cost (the big purchase price) of each item, write down each item’s annual upkeep cost. You may need to do some research on this one. For example, a hardshell kayak may have a purchase price of $200-3000, but it’s upkeep costs may include a new life jacket for each season, water and park passes, or even fishing gear if you fish from yours. You may also have the hidden costs of storage and transportation. If your paddle breaks, it needs replaced too. If you have a vehicle that needs transported down river for you by someone else, factor in those costs in your annual upkeep cost too.
After doing this for every item, add up the two lines of costs- your purchase prices, and your upkeep costs. The total of your purchase price is actually not that necessary, it’s just big number. But, the total cost of your annual upkeep is important. Hold onto that number for a moment.
Now, add up your cost of living (that includes your fuel, food, debts, insurance, clothing, etc), but be sure to not double up your costs. If you already counted your home owner’s insurance, utility bills, property taxes, and general home upkeep costs with your house- don’t factor those costs into your cost of living category.
Now, add the cost of living category to your annual upkeep cost. Now add 10% on top of all that (because it’s easy to forget some upkeep costs, and accidents do happen). That’s how much money you need to bring in annually to live comfortably.
Analyze your numbers
For Devin and I, our upfront cost is almost 5x’s more than our annual upkeep cost, which is great because our upfront cost is only about a year and a half’s worth of our income. We should be able to get set up for our ideal lifestyle within the next 5 years.
If you’re not as fortunate as us to have cheap sense of style, this is where Monday’s list of what is, and what isn’t important to you, comes in.
If you remember, my dream day didn’t include TV or social media time. I can cut out cable, possibly HULU, and data for my smartphone. I may even go back to a flip phone like it’s 2002. I also don’t include fast food in my “important” list, so I can cut that too. Looking at your list of “important” and “not important” what can you cut out?
On Monday we’ll talk more about making your “upfront” and “upkeep” costs seem less daunting. I feel like you’ll appreciate this new method I’m bringing in. 🙂
Part III is now out! Go read it here.
– So what are your thoughts on this process of mine so far?
– How expensive (or inexpensive) are your “upfront” and “upkeep” costs?
– If you downloaded my free “Finding Financial Freedom Workbook” how are you liking it so far? Did you fill it out on your device, or print it out? Do people even have printers anymore?
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