4 ms·
Ratio is probably better, but also misleads if my income isn't close to the cost of maintaining my lifestyle. If I am able to save, and I move to make 2x in a
by dllthomas 10y ago
Ratio is probably better, but also misleads if my income isn't close to the cost of maintaining my lifestyle.
If I am able to save, and I move to make 2x in a place that costs 2x, I am saving 2x as much!
If I am stuck drawing down savings, and I make the opposite move, I have doubled my runway.
- spoonie 10y agoYeah what's probably best is some number closer to "monthly net after taxes, rent, insurance".
- closeparen 10y agoIf I take home $2500/mo and pay $1000/mo rent and $500/mo expenses, it takes 9 months to save a six month emergency fund. If I take home $5000, pay $3500/mo in rent, and spend $500 on everything else, it takes 24 months to save a six month emergency fund. Yet my monthly net is the same. Ratio matters a great deal. Maybe less so after you've established savings.
- dllthomas 10y agoTrue that ratio is more relevant to savings where your target scales with local COL. That's true for some things, not for others. Though I might argue, regarding an emergency fund in particular, that establishing and maintaining such would be something that should be accounted as an expense rather than savings.