Don’t know? I’m going to show you how to calculate your maximum income.
I bet you could tell me how much money you made last year, but have no idea how much money you spent last year!
I’ll be honest, I used to not be able to tell you either, until I learned how to calculate the cost of my ideal lifestyle.
Once I knew my number, how much I need to make each year to live the life I wanted, it was one of the most liberating experiences of my life!
Before that, I felt like I was chasing after more and more money, but the finish line to satisfaction kept getting moved further and further away.
How Much Money Do You Need?
When I ask people that question, the most common answer I get is $100,000.
Then I ask them where they pulled that number from. They have no idea.
There was probably a time in my life when I would have told you I wanted to be a millionaire.
So what’s wrong with those numbers?
They aren’t based on calculations for how you want to live your life. They are status symbols that are designed to impress others. Society has deemed these milestones as success markers.
I’ve had the opportunity to make well over $100,000 a year and I can honestly tell you I wasn’t any happy than I was making $60,000 a year.
In fact, studies have shown, most people experience peak happiness at around $75,000 a year. Every dollar earned after that has a diminishing effect on their happiness.
I honestly do not judge anyone who says they want to make way more money above $75,000.
I just challenge anyone who hasn’t run the calculations on their ideal lifestyle that determines that is, in fact, their number. The number they truly need to live the lifestyle they want.
So how do you calculate the cost of your ideal lifestyle?
To make it super easy for you, I have created a Lifestyle Calculator.
I designed this calculator with three basic goals in mind:
- Find out how much money you spend right now.
- Calculate the cost of your ideal lifestyle.
- Identify how your current spending is out of alignment with living your ideal lifestyle.
It’s an easy to use spreadsheet with all the formulas plugged in. All you need to do is add in your numbers. There are 4 tabs:
- Regular monthly expenses, like your rent or mortgage, utilities, groceries and any other recurring monthly expenses.
- Unbudgeted monthly expenses, like clothes, gifts, emergencies and any other expenses that come up in the course of a year that don’t occur on a monthly basis.
- Debt. You can even calculate how fast or slow you can eliminate all your debt!
- Ideal lifestyle needs. The most fun section of all! Calculating the stuff you want, the experiences you want and how you want to improve yourself.
The coolest part of this exercise is to get you to reflect on where your life is and where you want it to go in terms of your financial habits.
If you want to work for yourself, calculating the cost of your lifestyle will help you understand how much money you need to make each month. Knowing your monthly income number will give you more confidence in your version of success.
In one of the most empowering experiences of my life is knowing my maximum income. When I was single in my 20s it was $50,000. Now that I’m married and in my 40s, our household number is $125,000.
So what’s your number? Find out now!