Even though money doesn’t grow on trees, there is a way to build your own money machine. Unfortunately, this money machine won’t look like your own personal ATM that you keep in your basement. However, it will help you achieve financial independence. In this episode of Money Mile, you’ll learn how to build your own money machine with the story of two triathletes.
You will want to hear this episode if you are interested in…
- Harry and Jenny’s story [1:22]
- Design your own money machine [2:45]
- How triathletes naturally know about diversification [5:12]
- The keys to balance [7:06]
- The homework [8:44]
The story of Harry and Jenny
Harry and Jenny are two hard-working triathletes who know how to work hard to accomplish challenging goals. They want to ensure that they are living a good life now and in the future, so they must strike a balance.
While they have discovered loads of financial resources on the internet, the information can be confusing. They aren’t fooled by get-rich-quick schemes–they simply want to achieve more balance in their lives. To ensure that they are saving enough now to build a better future they need to come up with a plan. They need to design a money machine.
How to design your own money machine
Designing a money machine is a lot like putting together a race strategy. First, you need to understand the size of the money machine that you need to build. Will it be large or small? For triathletes, this is like understanding whether you are preparing for a sprint distance or an iron man triathlon. The race strategy will be different for each.
Start your money machine design by determining how much you’ll want to spend in today’s dollars. Next, you’ll need to understand your withdrawal rate–the portion of the money machine that you want to take out per year. This information provides will give you an estimate of the size your money machine needs to be so that you can understand how much work you’ll need to put into it.
Understanding your risk tolerance
After you understand where you’re starting from then you can begin to think about your risk tolerance and your return expectations.
Your risk tolerance is like a triathlon course map. The map will show whether it will be an easy course or more challenging. In the same way that you can’t change your course map, neither can you change your risk tolerance.
All of this information combines to determine your savings amount–the rate you need to save each year to reach the appropriate sized money machine that you want. Your savings rate is like the pace that you need to run to finish the race at your desired time. This will determine whether you need to sprint to play catch up or whether your race will be an easy jog.
Triathletes know all about diversification. If you are a great swimmer then you may need to work on your run more during training. A diversified portfolio is similar–it provides a combination of things working together to achieve the desired money machine.
Discover how to strike the right balance
At the end of the day, balance is key. Trying to balance work, family, finances, and triathlon training is a lot to ask yourself. You need to take a step back from time to time to see what’s important or where you need to spend more time and energy.
Listen in to hear the five keys to success to achieve better balance on your financial journey. You’ll also hear today’s homework so that you can have concrete things to implement to get one step closer to your financial goals.
Resources & People Mentioned
- Episode 8 – The Five Foundations of Financial Fitness
Connect With Justin Waller
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