# The Time Replacement Model (TTRM)

There are plenty of different ways to calculate your targets and goals. You can estimate total revenues, spendings, monthly targets, annual targets… but my favorite model at the moment is TTRM, which stands for: “The Time Replacement Model“.

The idea is pretty simple. If you are overall happy with your current lifestyle and earnings, the first thing you do is to calculate how much you actually currently earn per hour. To calculate this as accurately as possible, you should take your monthly NET salary and add any bonuses, benefits and basically, everything that ensures your current lifestyle. It is important to go by the NET salary calculation because taxes are counted different for salaries/wages and for capital gains. In fact, in most countries in the world capital gain taxes are significantly lower compared to taxes which are paid for regular incomes, which means that you require much fewer capital gains before tax to get the same after-tax result if compared to a regular salary/wage. I will write about this point (since it is quite significant) at a later point.

The calculated total amount of your income needs now to be divided by the number of working hours that you are in fact working at the moment. The hours that are listed on your employment contract don’t matter. What matters is the real amount of time that you pour in. Having done that, you will see a number that will come close to what you should get per hour to maintain your current lifestyle – without getting out of bed.

Now here we get to the fun part: You can now very easily calculate how much of your invested money will create how much of capital gains to replace how many of your working hours!

Just for the sake of an example, let’s say that my calculated or expected salary per hour is 25 EUR. Now, if I invest let’s say 1000 EUR in the BDC Aurelius which yields 9% at the moment this will generate an annual income of 90 EUR. I am currently living in Thailand where the tax on dividends is 10%, so at the end of the day, I will have 81 EUR left.

81 EUR divided by 25 EUR is equal to 3,24 – which is the number of hours (per year) that I was able to replace by this investment.

I truly love this model because it gives you a very simple way of estimating and realizing how investments work and it also gives you this kind of positive feeling of knowing that this 1000 EUR will make sure that starting next year you will have 3,24 hours more of your time. 3,24 hours more freedom. Make it 4000 EUR and it will be already 12,96 hours. Every 1000 EUR that you pour in bring you closer to your target by another 3,24 hours.

The true beauty of this is also, that this investment doesn’t replace the time only for your current or next year. If the company keeps paying or even increasing its dividends, the amount of replaced hours is increasing with every year. It scales fully automatic without any additional input from your side. If the dividend keeps stable, in the 2nd year, it will have already replaced 6,48 hours of work, in the 3rd it will be 9,72 hours and so on.

Now, if you lack the vision then this model can also be frustrating. After all, if you got a 40-hour work-week, for the whole year with 52 weeks it’s a total of 2080 hours to replace. With a stock such as Aurelius in the sample above, this would translate into an investment of almost 624.000 EUR. Since only a few stocks can reach a yield like this, you will quickly realize that you more likely will require almost 1 Million EUR in savings to get to this point which is admittedly a very high target.

But it doesn’t mean you can’t get there, it doesn’t mean you need 1 Million EUR and it doesn’t even mean that you really need 25 EUR per hour. The sooner you realize how many possibilities are out there to find your freedom, the more motivated you will be to invest and to get closer to making your dream come true.