Note:  This post is related to The 4-Hour Workweek.  Reading the book first will help your understanding of this post.

In review of the math behind costing dreamlines, I have one major problem with Tim’s approach:  The Aston-Martin.  With this example it’s evident that he’s taking at least a 5 year loan.  He really pushes figuring out minimum payments to determine what lifestyle you can afford.  The net result is obvious – the minimum amount of money you need to generate, on a daily basis, to make it by.  When considering the Aston-Martin example, this is pretty much only possible with a car loan, assuming we’re starting from zero.  One of the main themes of the book is to eliminate needless expenses, and the least needed expense of all is interest on debt.  His intent is to show you that living like a millionaire is much more attainable than you probably thought.  The goal is to motivate you.  The truth is that when you convert the numbers to more familiar metrics (annual income) then we see that the true goal is not to have debt for a fancy car, so much as to expand your income.

He doesn’t really say anywhere that he advocates debt, but using his Aston-Martin example, the income needs to be generated for 5 years – either before or after buying the car.  This is not a 6-month dreamline in my book; it’s a 5-year dreamline.  It’s not an “unreasonable goal” to buy a car with money you don’t have – that’s what American’s have been doing for 100 years:  Have your cake now, pay for it later.

A car loan is most typically 5 years.  It’s reasonable to buy a car which costs 1-years salary, and then pay 20% for 5 years.  Tim claims that his dreamline requirement is about $200 (I’m rounding up from $197) per day.  This works out to be $73,000/year… after taxes.  If we assume he pays 33% in taxes, then he has to make $110,000/year.  I know; he stresses not to think about money in this way.  Before addressing that, let me make my point clear:  Buying a $120,000 car with a 5 year loan, when you make $110,000/year is not impressive.  It’s merely reasonable.

Does making $110,000 in a year sound difficult?  For the average person, yes.  Does making $300 in a day sound difficult?  Not really.  I did it a few times as a teenager without really trying.  I think the main point is that if you can consistently make a reasonable target daily income, then over time it adds up to be quite a bit.  That’s the key:  consistency.

Elimination of debt should be near the top of anyone’s list, if they truly want to be free.  Yes, there are ways debt can work in your favor, but that’s not an excuse to buy luxury items you don’t need.  By eliminating debt and generating some savings, you have the benefit of getting your money to work for you rather than against you.  This truly is automation of income – you literally do nothing, and you make money.  If it’s up to me, I’d rather be the guy earning the interest than the guy paying the interest.  Ultimately, buying a car with a loan may be commonly accepted, but it seems like just another “fat man in a red BMW convertible” scenario.  The goal shouldn’t be more stuff with more debt, the goal should be to make your means expand to your lifestyle.

If you lack motivation, then use these tricks to realize it’s within your reach, but don’t buy more stuff with more debt; expand your means.  There’s just no way around having to pay for the car eventually, and you’re better off not having to pay interest on it, too.  Luckily, the next section of the book is exactly on that topic:  generating income.