Comments on: A Beautifully Simple Formula for Achieving Financial Independence http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/ Tips for living frugal while still having a life Fri, 19 Mar 2010 14:12:02 -0500 http://wordpress.org/?v=2.8.5 hourly 1 By: George http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/comment-page-1/#comment-24201 George Sun, 10 May 2009 03:10:10 +0000 http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/#comment-24201 David - Your math is really impractical. For instance, if something costs $108 per year and inflates at 3% per year, then you only need $5,948.41 NOW, buried in a can in your backyard, to pay for 33 years without considering any return on investment. If you managed a 1% real return on investment of that $5,948.41, then it would last 38 years. 38 years might be problematic if you're only 30 years old, but that's not a bad number if you're 50 :-) $10,800 will last you 55 years. David -

Your math is really impractical. For instance, if something costs $108 per year and inflates at 3% per year, then you only need $5,948.41 NOW, buried in a can in your backyard, to pay for 33 years without considering any return on investment.

If you managed a 1% real return on investment of that $5,948.41, then it would last 38 years. 38 years might be problematic if you’re only 30 years old, but that’s not a bad number if you’re 50 :-)

$10,800 will last you 55 years.

]]> By: Living Off The Grid Daydreams | Frugal Dad http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/comment-page-1/#comment-22200 Living Off The Grid Daydreams | Frugal Dad Sun, 05 Apr 2009 14:45:20 +0000 http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/#comment-22200 [...] but how much of a nest egg would be required just to cover those expenses?  I mentioned the multiply by 25 concept in a previous post.  The idea is that you can estimate how much of your nest egg would be required [...] [...] but how much of a nest egg would be required just to cover those expenses?  I mentioned the multiply by 25 concept in a previous post.  The idea is that you can estimate how much of your nest egg would be required [...]

]]> By: Amrul http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/comment-page-1/#comment-19300 Amrul Tue, 03 Mar 2009 10:10:13 +0000 http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/#comment-19300 I fail to understand why the numerator has to be 100? Is that the assumption for our age ? Can anyone help me on this? Shouldn't the numerator vary in accordance to our age? Thanks I fail to understand why the numerator has to be 100? Is that the assumption for our age ? Can anyone help me on this? Shouldn’t the numerator vary in accordance to our age? Thanks

]]> By: David http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/comment-page-1/#comment-11030 David Tue, 04 Nov 2008 05:29:17 +0000 http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/#comment-11030 Want to figure out how much you need if you want to index it for inflation? All you have to do is subtract inflation (3% average) from your return and then just use your formula w/ the new number. Example: 4% - 3% = 1% 1% is now your new interest rate. So to pay $108 indexed for inflation and you get a 4% return on your money, you need $10,800. Ouch now that is expensive. *Note, if you are getting 3% or less, you will never have enough to pay for it when you index it for inflation. This is more of an argument to put your money in the stock market and not the bank! Want to figure out how much you need if you want to index it for inflation?

All you have to do is subtract inflation (3% average) from your return and then just use your formula w/ the new number.

Example:
4% – 3% = 1%
1% is now your new interest rate.
So to pay $108 indexed for inflation and you get a 4% return on your money, you need $10,800. Ouch now that is expensive.
*Note, if you are getting 3% or less, you will never have enough to pay for it when you index it for inflation. This is more of an argument to put your money in the stock market and not the bank!

]]> By: To cable or not to cable? « Treading Softly http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/comment-page-1/#comment-10487 To cable or not to cable? « Treading Softly Mon, 27 Oct 2008 15:50:38 +0000 http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/#comment-10487 [...] in the week, Frugal Dad posted about saving for retirement.  He included an interesting formula for estimating how much you would have to save to pay for a [...] [...] in the week, Frugal Dad posted about saving for retirement.  He included an interesting formula for estimating how much you would have to save to pay for a [...]

]]> By: On Simplicity » Blog Archive » Weekly Links: Fresh Books Edition http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/comment-page-1/#comment-10447 On Simplicity » Blog Archive » Weekly Links: Fresh Books Edition Mon, 27 Oct 2008 09:01:09 +0000 http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/#comment-10447 [...] a similar note, Frugal Dad put together a Beautifully Simple Formula for Achieving Financial Independence.  The discussion in the comments is also interesting.  The formula he provides isn’t a set [...] [...] a similar note, Frugal Dad put together a Beautifully Simple Formula for Achieving Financial Independence.  The discussion in the comments is also interesting.  The formula he provides isn’t a set [...]

]]> By: Diane http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/comment-page-1/#comment-10232 Diane Sat, 25 Oct 2008 11:53:00 +0000 http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/#comment-10232 This works - we're in our 70's, and I figured this out 45 years ago. Right now savings and CD's are paying between 3% on the savings, and 4.75% on the CD's - combining the 2 (plus our social security), life is good - we don't do anything terribly 'fancy', but we eat; sleep - relax, and enjoy regular forms of entertainment and recreation. As to Netflix? I wouldn't have one thing in my house that requires me 'sitting and watching' - the trick is never become a slave to the television; to the computer - to the You Tube; to Hulu - we took out our senior annual park pass today ($15/year), and spend our time enjoying nature (free); walking (good for your health) - reading the free pick-up newspapers in our town, and listening to the radio (free) while we drive to our favorite points of interest. We pay for minimum cable and I-net services; use the web (for free), and limit our time 'watching and sitting' to only viewing helpful web-sites (like this one), and doing nothing but LEARNING... We would never 'rent a video' - nothing on the 'screen' is real, and it requires you to 'sit and stare' - that is not living (frugal or otherwise) This works – we’re in our 70’s, and I figured this out 45 years ago.

Right now savings and CD’s are paying between 3% on the savings, and 4.75% on the CD’s – combining the 2 (plus our social security), life is good – we don’t do anything terribly ‘fancy’, but we eat; sleep – relax, and enjoy regular forms of entertainment and recreation.

As to Netflix? I wouldn’t have one thing in my house that requires me ’sitting and watching’ – the trick is never become a slave to the television; to the computer – to the You Tube; to Hulu – we took out our senior annual park pass today ($15/year), and spend our time enjoying nature (free); walking (good for your health) – reading the free pick-up newspapers in our town, and listening to the radio (free) while we drive to our favorite points of interest.

We pay for minimum cable and I-net services; use the web (for free), and limit our time ‘watching and sitting’ to only viewing helpful web-sites (like this one), and doing nothing but LEARNING…

We would never ‘rent a video’ – nothing on the ’screen’ is real, and it requires you to ’sit and stare’ – that is not living (frugal or otherwise)

]]> By: Link Roundup: Wallet returned edition | Mighty Bargain Hunter http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/comment-page-1/#comment-10217 Link Roundup: Wallet returned edition | Mighty Bargain Hunter Sat, 25 Oct 2008 07:12:18 +0000 http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/#comment-10217 [...] Frugal Dad discusses the 25 rule. [...] [...] Frugal Dad discusses the 25 rule. [...]

]]> By: Sara at On Simplicity http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/comment-page-1/#comment-9964 Sara at On Simplicity Wed, 22 Oct 2008 04:52:48 +0000 http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/#comment-9964 I like this not for its accuracy, but for the perspective it provides. Dog toys that get destroyed in a few days and DVDs I'll only watch two or three times are two things that fail this test! I like this not for its accuracy, but for the perspective it provides. Dog toys that get destroyed in a few days and DVDs I’ll only watch two or three times are two things that fail this test!

]]> By: marci http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/comment-page-1/#comment-9937 marci Tue, 21 Oct 2008 22:56:37 +0000 http://frugaldad.com/2008/10/21/simple-formula-for-achieving-financial-independence/#comment-9937 My 2nd rig (1974 Datsun pickup) - insurance costs me $87/yr on it. By your figures that would be $2175. The tags are $20/yr, or $500. However, by using the truck to get free firewood, worth way more than $107/yr, my electric bill stays under $45 all winter long. So If you are actually getting a benefit from the use of something, does that negate the 25X rule? My 2nd rig (1974 Datsun pickup) – insurance costs me $87/yr on it. By your figures that would be $2175. The tags are $20/yr, or $500. However, by using the truck to get free firewood, worth way more than $107/yr, my electric bill stays under $45 all winter long.

So If you are actually getting a benefit from the use of something, does that negate the 25X rule?

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