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The article seems a bit all over the place WRT inflation. If you're inflation adjusting, then you're not socking $100 a month away, because towards the end of
by esotericn 8y ago
The article seems a bit all over the place WRT inflation.
If you're inflation adjusting, then you're not socking $100 a month away, because towards the end of that 40 years coffee will cost way more than that.
As others have said though, it's not really about the $5 coffee. It's about whether you save or not.
If you have $50K a year after expenses, then yeah, a $5 coffee probably is irrelevant.
If you have $5K or $10K, then a significant percentage of your discretionary expenditure has gone on a hot liquid.
Ultimately though this just comes down to saving enough, which I think is intuitively obvious to anyone who sits down and thinks about it without invoking some sort of "magic beans" lens.
If you have a 40 year working life, and 20 years in retirement, saving 33% of your income and investing it in something that tracks inflation should be enough for you to maintain your average standard of living.
I don't think that 33% is a hard bar to hit for most people that aren't on minimum wage. I also don't think most people actually consider it that way, they think of pensions or other schemes as wizardry that will return them vastly in excess of inflation.
- lostmsu 8y ago$5 coffee for 300 days is $1500/y, which, IMO, is not insignificant even compared to $50K
- esotericn 8y agoI don't drink fancy takeaway coffee, so I'd agree with you there. I do have a daily entertainment budget which is more than $5, though, so I've just shuffled that into other things.
- opportune 8y agoPersonally I think if you have $50k/y discretionary spending it's not unreasonable to spend $10k-20k of that on things you enjoy. Personally I save more, because most of the things I enjoy are free and I want to take advantage of compound interest while I'm young, but that's a personal choice. But if there are things aside from investments that you do want to spend your money on while you have such a significant (compared to the rest of the world) amount of disposable income, why deprive yourself just so you can retire with 25% more money? Your life would not be much different retiring with $2mm vs. $2.5mm, or really any two numbers over $1mm or so.
- lostmsu 8y agoHow about retiring 25% earlier?
- fwip 8y ago33% is a hard bar to hit for a whole lot of people.
- esotericn 8y agoIf you take the average person, the situation they find themselves in at the present time, including locked in expenditure such as lease agreements/mortgages/car loans, I agree. They have already committed to spending more than 66%. Choosing to intentionally limit your expenditure to 66% is different. In the limiting case it simply means living like you earn minimum wage whilst earning more than it. Of course, if you are at the absolute bottom of the income spectrum and have no means to change that, you are buggered. We should probably fix that.