Capital Investment Advisors

What’s Your ‘Walk Away’ Number?

What’s your walk away number?

How much money would you need to ditch your 9-to-5 workday existence for a life of unbridled freedom and leisure? I’m not talking about hitting a long-time-coming savings goal, such as reaching your retirement nest egg target. I’m talking about receiving a life-changing, one-time pay-out from something like the sale of a business, lottery win, amazing stock pick or inheritance.

How many zeros would have to be on that check?

C’mon, I know you’ve thought about it. Who hasn’t fantasized about having the financial means to quit their job on their own terms? We’ve been doing it since jobs, bosses and commutes were invented. In the 1970s this magic amount was called “drop dead money.” If you had it, you could tell an employer, or anyone else for that matter, to, well, you get it.

Give me a figure.

While I can’t guess your walk away number, I can make this prediction: There is a good chance you will give me a figure that’s, well, not as big as it sounds. Based on conversations I’ve had over the years, I suspect you might chuck your daily grind for $10 million. Does that sound about right? It’s a nice chunk of change, for sure. Let’s see how that might play out.

If you invested that $10 million and received an average annual return of 4%, your annual income would be $400,000. After allowing 20% for taxes, that number shrinks to $320,000 or $26,666 per month.

For most of us, that’s a pretty good income. If you were living on a monthly after-tax net of $5,000 before you scored that $10 million windfall your income would have increased 5X. Bonus: you no longer need to save the recommended 20% a month because that box has been well and truly checked. You’d be backstroking in piles of cash, right? Well, maybe for a while.

See, here’s the thing. We think we’d be flush because we pair that new income with our current expenses. With $10 million in the bank, the considerable mortgage on our four-bedroom, two-bath rancher suddenly looks like a pittance. Those draining credit card and auto loan balances can be disposed of with a snap of our newly golden fingers.

But that’s not how it usually works out. When our income rises (a little or a lot) our spending comes along for the ride. Again, I can’t know how you would choose to spend your new-found income. However, I don’t see you staying in the 4/2 rancher or driving that Chevy Equinox much longer.

I doubt someone of your new status will be content to rent at the beach. Or the mountains. You will want to buy a place (or places) where the family can gather at the drop of a hat.

Speaking of kinfolk, wouldn’t it be nice to share the wealth with them? Help the kids buy a bigger house. Send the grandkids to college. Take everybody on one of those week-long Disney cruises.

And when you aren’t engaged in family bonding at the beach or in the mountains, there is so much world for you and your spouse to explore!

See where this is going? No matter how much money we have, our spending and income levels move in tandem. Scoring your drop dead money may change your life in amazing ways, but it is unlikely to free you from the obligation to be thoughtful about your finances.

So, let me ask again. What’s your walk away number?

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