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The kicker, for me, is the prioritisation between happiness now and happiness later. To give an example, I live fairly frugally life and stick ~20% of my salar
by edent 14y ago
The kicker, for me, is the prioritisation between happiness now and happiness later.
To give an example, I live fairly frugally life and stick ~20% of my salary into a pension. But a friend has invited me to their wedding across the Atlantic. That's a couple of thousand pounds right there.
Let's call it £5k after flights, food, hotel, etc.
£5k @ 5% interest for 25 years is ~£17k.
Is seeing a friend get married to the love of his life worth seventeen frickin' grand?
That's lens through which you have to view every financial decision when you're on a savings plan like this. Not how much it costs you now - but how much it will cost you in the long run.
(PS - the answer is unequivocally yes. Totally worth it for me. YMMV).
- vacri 14y agoThe question isn't "is seeing the wedding worth 17k", it's "Is having a notable life experience now worth 17k in 25 years time, given also that inflation isn't far behind that 5% interest". You have to pace your life experiences - you can't save them all up and have them 'at retirement'. If you do, you'll be a more boring person and will likely get less out of those experiences. And do you really want to risk waiting until retirement to think "by god, why did I wait until I was old and grey before I started seeing the world?"
- dualogy 14y agoAlso, the purchasing power of 17k in 25 years might be closer to today's 5k than today's 17k, so in this lens, also not much lost.
- orofino 14y agoHe's using 5% which I assume is the real (after inflation) growth rate.