Their eyes got wide.
“Wait, explain that again. $30,000 you said?” Will asked.
I was reviewing Will & Colleen’s financial plan with them for the first time and we were on the “Leaky
Boat Money” page.
“This is how much money is unaccounted for. The formula is simple:
Cash Inflow – Cash Outflow = $0
The money coming in has to go somewhere. So you’re either saving it or spending it.
Or to break down further…
Income – (Savings + Expenses) = $0.
So that $30,000 you see there is money that’s unaccounted for.
We verified your income then we subtracted out what you told us you were saving and spending and
there’s $30k that’s either being spent or being saved.
It’d be nice if it was being saved, but after 14 years doing this, I can tell you it’s almost always being
spent.
And if it’s being spent and you don’t even KNOW it’s being spent, it’s probably on things that you don’t
actually care about.
It’s like you’re driving a leaky boat across Lake Tahoe.
It doesn’t mean you won’t get to the other side, but it you’ll definitely go much, much slower.”
“Holy Smokes!” Colleen exclaimed. “So you’re telling me we’re just ‘leaking’ $30,000 a year?”
“That’s right. But don’t worry, we’ll plug the holes in your boat. We’ll systematically track down your
leaky boat money and make sure it’s being saved (or at least being spent on things you actually want).”
Will and Colleen are an example of conversations we have every week with our newest Financial Zen
members.
And finding your leaky boat money is a great example, (but not the only one) of the Optimization
Principle.
People THINK they need MASSIVE ACTION to get MASSIVE RESULTS like retiring in 10 years.
But the truth is, small, nearly imperceptible changes is what gets you MASSIVE RESULTS.
Plugging your leaky boat will get you massive results.
You don’t need to trade it in for a speed boat. Just optimize what you’re already doing.
