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Learning to live a frugal but satisfying lifestyle is key to achieving freedom and independence.
Frugal living helps you achieve financial independence in two ways, in increasing your savings level and decreasing the required investment amount needed to provide an income to meet one's expenses.
Example:
Our protagonist earns $4,000 a month after taxes, and lives a lifestyle with $2,000 a month in expenses, putting away $2,000 a month in savings. At an expense level of $2,000 per month, the annual expense is $24,000. As a rule of thumb, one can expect to withdraw 4% of one's investments annually, without using up the invested funds. Four percent is 1/25, and one can express the same rule of thumb as one needs 25 times one's annual expenses invested to provide an investment income equal to one's expenses. In this example, an expense level of $24,000 would require an investment amount of 25 x $24,000 = $600,000.
At a savings rate of $2,000 a month, it would require 300 months (25 years) to save this amount (disregarding investment income on the savings, which is considerable). I am only using this calculation as an example for comparison, because investment income would increase the investment amount and reduce this time by quite a bit.
A coworker of our protagonist also earns $4,000 a month after taxes, but lives a lifestyle with $1,000 a month of expenses, putting away $3,000 a month in savings.
At $3,000 a month in savings, it would only take 200 months (16.6 years) to reach the $600,000 savings amount required by our protagonist. But wait, at an expense level of $1,000 per month, or $12,000 per year, the coworker only needs 25 x $12,000 = $300,000 investment amount to reach an investment that provides financial independence. At a savings rate of $3,000 per month, it would take 100 months (8.3 years) to achieve financial independence (disregarding investment income along the way).
The intent of this example is to show that learning to live a frugal lifestyle while maintaining quality of life can dramatically reduce the amount of time that one needs to work to save up an investment income which will provide financial freedom for the rest of one's life.
Frugality increases the amount that one can save for investment while working.
A frugal but satisfying lifestyle can reduce the investment amount needed to provide income for life.
These two aspects of frugality work together and enhance each other while working to save for an income producing investment.