Say you want a Ferrari or you want to live in Maui for a year. No, there aren't "do these three things and you can afford it", but maybe with some planning, you can actually afford it in your life.
How many ping-pong balls can fit into a Boeing 747?
When I was preparing for interviews for becoming a product manager, I encountered this classic question.
The point of this brain teaser isn't to get a correct answer from you, but for you to demonstrate your problem solving skills, and I believe it's crucial to answer how to afford a Ferrari.
Let's start with the obvious: the number of balls = volume of a 747 / volume of one ping-pong ball. OK, the problem just gets a little easier, now you just need to estimate the volume of a 747, and the volume of a ping pong ball.
I will assume that the 747's length is around 75m, excluding the head and the tail, let's say 60m. 747 can seat 10 people each row, including two aisles will be 12 people's width, around 12*40cm. Let's round it to 5m diameter. The volume will then be 375 pi cubic meters.
Ping pong ball: around 40mm diameter so 0.00005 pi cubic meters.
The answer will then be 375/0.00005 = 7.5 million ping-pong balls.
You might ask "How to estimate the size of 747 and a ping-pong ball?" First of all, you can just estimate it, the answer itself isn't important. Second of all, we are not in an interview right now, google the volume of each and get the answer, and you can do it too.
So how to afford a Ferrari?
After a quick search, I found this used Ferrari with decent mileage and price. It is 150k. Sounds pretty expensive, but how do you afford it?
First, calculate how much you earn each year and how much you have saved. Now, it doesn't make sense to use spend all of your savings on a Ferrari, right?
You can afford it if you are rich (enough)
If you are rich, obviously you can afford it, but how rich? If you are Bezos and spend less than 1% of your wealth to get a Ferrari, it would of course make sense.
How about 5%? 10%? 20%? It depends on the person, but given that Ferrari hold their value, I will say 15% for me.
Now let's use what we learned in the ping-pong ball problem, and do some simple math to see how much we need: 150k / 15% = 1 million. It's a lot, but you can probably do it before retirement if you are doing it right.
Related: Income Tax 101: How to Calculate
See? It isn't that hard and it's not just a daydream.
You can also afford it if you really want it
Assuming you are a car guy, and you have been wanting a Ferrari since 10. You think that owning a Ferrari is your ultimate goal in your life and you don't care if you live in a cheap place or you can't eat out now and then.
If that is the case, then say you spend 50% of your wealth on it with a 20% down loan, you just need 150k * 20% / 50% = 60k.
Now that looks much easier, right? Maybe 60k doesn't sound enough for you, but you can easily tweak the numbers.
What do you want to afford in your life?
A Ferrari might not be your dream, but something must be. It can be an international trip, a nice house, or even a huge donation to a charity you care about.
Make a bucket list of things/experiences you want to afford, do the maths, and categorize them by how much you need to have to afford it. For example 1 million for a nice car, and 10 million for a fancy house, and 100 million to be a board member of a museum cuz why not ;)
Now we have our goals, in the next article we are going to talk about how to make them more feasible than they sound like.