“Wealth consists not in having great possessions, but in having few wants.”
In this episode of the Actively Passive Show, Travis discusses how it is possible to be twice as rich by desiring less, what that means, and how you can apply it to your own life and investing strategies.
1. The Goal Is to Increase Your Happiness
Despite what it may sound like, Travis isn’t advocating restricting the things that bring you fulfillment and happiness — actually, just the opposite. The goal is to increase the happiness that’s in your life.
Something he sees, however, is people spending their money on things like second vacation homes and nice cars in order to prove themselves. These items aren’t bringing them true fulfillment and happiness — they’re simply a way to keep up with the Joneses.
2. How Do You Know When Enough Is Enough?
Once in an interview, Jim Carrey was asked about his thoughts on retirement. He said, “I have enough. I’ve done enough. I am enough.” This is an important mindset to have in order to avoid getting stuck in the success cycle, where you can never achieve enough or accumulate enough wealth. In the end, it’s just money.
Knowing when enough is enough requires perspective, humility, self-awareness, and understanding you, Travis says. “It’s about understanding your own goals and your own journey and your own fulfillment and happiness.”
3. 5-Minute Fulfillment Exercise
Travis recommends getting a pen and paper and trying this short exercise, which has been immensely helpful to him.
- Write down 10 things that bring the most happiness and fulfillment to your life.
- If you have a spouse or partner, ask them to do this exercise as well, but independently from you.
- Come together and share your lists. Circle any commonalities and discuss any differences.
- Crunch the numbers. Try to write down your estimation of what each of these things might cost monthly.
- Add all the numbers up and combine them with the cost of your monthly regular bills — internet, insurance, car payments, etc.
- What is your total? Maybe you realize you need $10,000 per month to cover the cost of the things that bring you happiness. That’s only $120,000 per year.
4. How Passive Income Can Help
Whether you receive your passive income from real estate cash flow, note lending interest, or dividends from the stock market, you have the power to build up income sources that don’t eat up your time. This way, you can focus more on the things you love.
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Travis Watts: Best Ever listeners, welcome back. I'm your host, Travis Watts. This is the Actively Passive Investing Show. There's a quote that has really stuck with me, and I'll probably get it butchered up because I'm going off of memory here. It was during my study a few years back into stoicism. So all of these philosophies from nearly 2000 years ago. And I can't remember if it was Epictetus or Seneca, or Marcus Aurelius, I don't know who coined it, and again, I'm probably butchering it. But it's something to the extent of, "You can be twice as rich by desiring half as much." And I think there's so much power to that and I want to break that down.
I don't want to scare you away by thinking this is an episode about live below your means, cut up your credit cards, or do what I used to do in college, three meals per day, $2 per meal, $6 food budgets. I'm not advocating to restrict the things that bring you fulfillment and happiness, it's actually the exact opposite. So what we're talking about is the philosophy that I subscribe to, and it's that you want to increase happiness. That's usually the end goal at the end of the day. Why do we do the things we do? Why do we go to jobs? Why do we work up corporate ladders? Why do we save? Why do we invest? It's to have a fulfilling and happy life.
What you want to definitely keep an eye out for is this idea that you need to keep up with the Joneses. This idea that we have such mass marketing in our culture, and everyone's trying to sell everything, quite frankly, but a lot of luxury and high-end that just honestly doesn't exist in a lot of parts of the world. When you go travel to parts of Asia, or when my wife and I were backpacking in Thailand, there's not people roaming around in the BMWs, in the Mercedes, in the Ferraris, and Lambos, and the mansions, and wearing Gucci stuff. These are people just wearing unbranded clothing on motor scooters with a family of four, and quite frankly, they're just generally very happy and very fulfilled as individuals. So that's kind of what we're contrasting and talking about in this episode here today.
This is a very prevalent thing that happens in westernized countries. I see it all the time here in America, whether it's talking about realtors driving their BMW or whatever, or a doctor, or a dentist having their second vacation home and/or their nice cars and stuff. And there's nothing wrong with having this stuff. I'm not trying to advocate that at all. The point is that I think a lot of people are doing it to prove themselves, and not because those are the items that actually bring true fulfillment and happiness.
One of my favorite actors in childhood was Jim Carrey. And he's gone through a pretty interesting life. And if you've tuned in here, there was a recent episode a couple of months back, where he's talking about potentially retiring and stuff. And he says to the person interviewing them, "I have enough, I've done enough, and I am enough." And I thought that's really powerful stuff; that is the core of what we're talking about.
And a couple of years ago in fact, on this show, I believe the episode was called something like "How To Know When It's Enough" and I talked about getting stuck in the success cycle where once you have 1 million then you need two, and once you have two, you need four, and four to eight, and eight to 16. It just never stops. You're on this hamster wheel until the day you die, and you look back and you think "It was just money. It was just money. Why was that so important, and I missed out on so many other things?"
I want to share the true story about, I don't know, six months ago of an investor. I work in investor relations and I'm on the phone with this guy. And he's in the medical field, I forget what his exact title was. And he's telling me he owns this practice and he runs this other small business thing, and he said, "Travis, here's my deal." He said, "I've just got to level with you... I can't live on any less than what I'm living on right now. I've got a couple of kids, my wife, myself, we do our vacations, and we live a normal life and all these things."
I said, "Okay. Well, fair enough." I totally understood. I said, "If you don't mind me asking, how much is that that we're talking about?" And he said, "It's 600,000 per year." He said, "I don't see how I could trim any of that fat. We're down to what we need to live on at this point and I'm just looking to expand from there."
The reason I share the story with you is it's quite amazing to me; there's nothing wrong with having wants and needs, and certainly, if you can have an income that high that you're utilizing. The thing is, if you look statistically you go to bls.gov, Bureau of Labor Statistics, and you check out the median and average incomes and things in the United States, we're still in the $50,000 USD range as far as what typical American is earning. So to hear such an extreme - and of course, it's not that extreme; you've got the Johnny Depp's of the world and other people who are making hundreds of millions and going through that kind of cash. But it just made me realize this is important to bring up.
If I can reach five people on this episode that really resonate with what I'm talking about here, I think it was well worth my time to share this information. It's about perspective, it's about humility, it's about self-awareness, it's about understanding you, it's about understanding your own goals and your own journey and your own fulfillment and happiness.
Break: [00:06:38] - [00:08:26]
Travis Watts: So what I'm going to share with you here real briefly over the next few minutes is an actual exercise. And I really do encourage you to try this. So get a pen and paper or get your phone and open up the notes on there, or grab a computer and type this out. But really do this, or at least make a note to do this when you have the time to do this. It only takes as little as five minutes as much as maybe a day to dedicate this amount of thought. But I promise this can be very transformational for you and your spouse, partner or anyone else in your life.
This exercise is something that my wife and I pulled from a documentary we were watching about the FIRE movement journey, Financial Independence Retire Early, a few years back. And we did it. We did what I'm encouraging you to do and it made a huge difference in our life. So I want to share that with you here in this episode.
So first thing is this is the exercise, real simple, write down 10 things that bring the most happiness and fulfillment to your life. Don't get caught up in the weeds and too much detail around it. Don't worry about money in terms of writing out this list. If the thing that truly brings you the most happiness is a Lamborghini, write it down. It doesn't matter if you have the money for that or you don't, just put the money thing aside. Anything and everything. Spending time with kids walking in nature, going to the movies, having a date night once a week, your favorite things to drink or eat, social things, vacations... I'll pause here for a minute and I'll let you think about that list.
Now, you want to have your spouse or partner, if you have a spouse or partner, to do the same exercise, but independently. So you're not sitting together and brainstorming and talking, you're doing this independent. And then you're going to come together --this is number three-- and you're going to share your top ten list and circle any commonalities, talk about any differences, and kind of work together to try to understand better what's bringing you fulfillment.
Now, the last step to this is to crunch the numbers. I encourage you to just jot down - I know they're going to be guesses, okay. But based on the top ten things you wrote down, try to really quickly, off the top of your head, at least for a starting point (again, don't get caught in the weeds on this) try to write down what these things might actually cost.
I'll give you some examples. You want a four-bedroom, single-family house to live in in Florida, maybe that's going to cost you $700,000 or something for a real nice house or a new built house or something like that. So maybe your mortgage payment's 3500 bucks a month; maybe you enjoy walks in nature or on the beach since you're in Florida, and spending time with kids and family and friends, maybe just the time spent and certain events are actually free. Maybe one of the ways to treat yourself is gourmet chocolate, or a high-dollar bottle of wine, or something like that, and you do that, I don't know, once a week, once a month, something like that. So a hundred bucks right there a month.
Maybe buying organic, fresh, healthy foods from either a particular store, or having those foods delivered so you don't have to go grocery shopping, whatever that might be, 600 bucks a month, I don't know, depends on your family size.
Vacationing, maybe you'd like to go on three vacations a year so you're going to allocate 1000 bucks a month into an account saving up for these vacations. Reading books, one of my favorite things to do as little, as 50 bucks a month. You get a library card, maybe it's free, get an Audible account, maybe it's 20 bucks a month or something like that.
Gym membership - maybe you like to stay in shape or have kind of the luxury high-end equipment to use, 100 bucks a month there. And then of course, bills and internet and miscellaneous and insurance and cars, I'm just going to throw all that in a bucket; for example purposes right now, we'll put 4000 bucks a month right there.
So if you collectively add all of those numbers up that I just discussed -that's just one example. Not obviously saying that's your example, or mine, just an example. That would be around $10,000 per month in terms of a lifestyle.
Now, that's quite crazy to really think about that you could have all of those things in your, life if those are the things that bring you the most happiness and fulfillment, for $120,000 per year. Some of you know, at this point, where I'm going to take this conversation.
Now I'm going to pull out the old passive income card. And so I just can't help but share; this is what's made the biggest impact in my life. This is the foundational piece to what I teach and what I'm passionate about, and it's investing for passive income. Whether that's cash flow from real estate, whether that's interest from note lending or other sources, whether it's dividends from the stock market, whether it's royalties from music, or oil and gas or different sources. The point is, building up income sources you don't have to trade your time for, so that you can focus on more of the things that you love.
If we use that example that I painted for you 120K a year, some example numbers would be you get a million and a half invested at 8% a year cash flow or passive income, that gives you $120,000 per year.
So there you go, it's a work-optional life, it's no longer an obligation to get caught up in the success cycle and work till you're 75 and then have a few years of freedom, and then call it good.
Time freedom, financial independence, financial freedom, I don't know, just whatever you want to call, it doesn't matter. To me, that's the name of the game, and for some people, that's achievable in their late 20s, or mid-30s, or 40s, or 50s, or 60s. Quite frankly, it doesn't matter per se when you get there. It's just that eventually you can free up your time and have more choices in your life.
Now, you may be like the medical professional that I talked to, you may need 600,000 per year, and that's totally fine. That's $50,000 per month in passive income. So that'd be 7.5 million invested, 8% of your cash flow, that gives you 50k per month. Or a lot of people ask me why 8%. I'm never recommending, endorsing, I'm never giving any kind of financial advice. That may be my number, that may be what has made sense for me personally. That's not to say it makes any sense for you. Your number could be 15%. Maybe you got some kind of e-com business that's on autopilot, that's pumping out big money there. Or maybe 4% a year, maybe you're saying, "I don't like risky assets at all. I don't like to be in anything like stocks or real estate. I just want to do some very conservative bonds or something. So maybe 4%. The point is you just have to run the math for you and decide what makes the most sense.
So with that, you guys, I'm just leaving you with that final thought. I truly appreciate you tuning in. As always, I'm Travis Watts, host of The Actively Passive Investing Show. I hope you've found some value in this episode here today, and remember the stoic quote that you can be twice as rich by desiring half as much. Have a Best Ever week.
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