3 ms·

Something missing from these discussions is velocity of money. Big income may not mean much if you're burning thru it fast with little to show; reversed, I've k

Something missing from these discussions is velocity of money. Big income may not mean much if you're burning thru it fast with little to show; reversed, I've known people to amass small fortunes from paltry incomes because they were frugal. I haven't thought thru it much nor come to conclusions, but do think one's "velocity of money" needs far more consideration.

saalweachter 13y ago
What if you considered the income : outflow (non-investment) ratio? How many years of living expenses do you earn each year?
anovikov 13y ago
But this is behavioral difference, it has nothing to do with oligarchy or social order. Also, if there is little you can do to get sizable income form assets, why accumulating assets? Burning through big income is fun.
e12e 13y ago
It's not just that. As there is a (fluent, but still) correlation between money and material goods, it's not the same to be able to save 5% of 20K a year, and 5% of 200K. One way I like to look at it, is how long would you have to save up to have 20xmedian (net) yearly income in your area in the bank? That is, after subtracting whatever reasonable living expenses, how long would you have to save all that's left to have 20 yearly incomes in savings? Because at that point, barring financial crisis -- you should be able to live off the interests -- at roughly median income. It's actually a pretty small number -- the point at which you could reasonably retire just on your own savings pretty much indefinitely. But it's something that is generally impossible to do unless you are "well off" -- and not at the bottom of the pile, so to speak. On the other hand, as soon as you start making "real" money (say 1.2x median income) it becomes almost trivial if you deem it to be a goal worth trying for.

3 ms·

Something missing from these discussions is velocity of money. Big income may not mean much if you're burning thru it fast with little to show; reversed, I've k

by ctdonath 13y ago

saalweachter 13y ago
What if you considered the income : outflow (non-investment) ratio? How many years of living expenses do you earn each year?
anovikov 13y ago
But this is behavioral difference, it has nothing to do with oligarchy or social order. Also, if there is little you can do to get sizable income form assets, why accumulating assets? Burning through big income is fun.
e12e 13y ago
It's not just that. As there is a (fluent, but still) correlation between money and material goods, it's not the same to be able to save 5% of 20K a year, and 5% of 200K. One way I like to look at it, is how long would you have to save up to have 20xmedian (net) yearly income in your area in the bank? That is, after subtracting whatever reasonable living expenses, how long would you have to save all that's left to have 20 yearly incomes in savings? Because at that point, barring financial crisis -- you should be able to live off the interests -- at roughly median income. It's actually a pretty small number -- the point at which you could reasonably retire just on your own savings pretty much indefinitely. But it's something that is generally impossible to do unless you are "well off" -- and not at the bottom of the pile, so to speak. On the other hand, as soon as you start making "real" money (say 1.2x median income) it becomes almost trivial if you deem it to be a goal worth trying for.