What's your number? Do you even have one??
/“What’s your number?” he asked, setting his drink down on the bar.
I could barely hear him. There were 3 men behind me who were clearly already there for a while, and they probably weren’t aware how loud they were.
It was 2010. We were at Nobu in Midtown Manhattan, a 15min walk from the head office of the hedge fund I was working for. I was sitting with a friend who happened to work for Goldman Sachs in New York. We were catching up for the first time since the big Crisis of 2008.
“Don’t ask me that”, I responded. “After the hit I took with the collapse of Lehman in 2008, my number seems too far away now!”.
On Wall Street, it’s common for every ambitious person to have a “number”, a target amount of money they want to make before they leave the industry.
Some are driven by greed and they just want to make as much money as possible.
But others know very well how nasty the financial industry can be. They’re genuinely nice people who want to do good, have a good life, and want to hit that “number” before getting out.
The concept of “the number” is something that has helped me stay focused in my career and how I spend my money.
I have numerous financial responsibilities I have to attend to on a monthly basis.
We live in a very uncertain world where your ability to generate income can change for the worse in an instant.
Unexpected “large” expenses can pop up any time.
You have a limited about of energy: the older you get, the less energy you have to work and make money.
You should be 10000% self-dependent. Never factor in inheritance or any other external factor into your financial planning.
This is why having a “number” is important, and “keeping an eye on that number” is even more important.
If you don’t have a “number”, you’re just working without a goal.
Even worse: you’re spending with no rules!
Having a “number” will allow you to:
Focus on what matters in your career
Make sure you get out of debt
Make sure you don’t over-spend your money
See your progress on a daily basis and make adjustments to your income-generation and spending to get you there closer.
What are the characteristics of a good “number”?
It has to be resilient against economic shocks (e.g. inflation);
It has to be enough to give you comfort that you can cover all expected and UNEXPECTED expenses in the future;
It has to work FOR YOU: it has to generate enough passive income to allow you to sustain the lifestyle you chose for yourself, your family, etc.
It has to allow you to live “debt free” or at least with a “comfortable” level of debt;
It has to be achievable within a reasonable period of time: ideally before you reach the age of 50 and your energy drops dramatically;
It has to be something you can monitor and develop multiple ways to get to it (not just your daily job, but your investment plans and alternative sources of income).
So if you don’t have a “number”, spend this weekend with a pencil and a calculator and find yours, and start planning to how to get there.
