Tuesday, December 6, 2011

The Things We Need...

I have been thinking a lot about the idea of debt as slavery.  It’s a common enough phrase, but one that has taken on a lot more meaning for me as I have slowly worked my way out of that form of prison.  It is really just the beginning though.  Everything that we need that costs money is a form of slavery in the sense that we must continue working to support that need.  The less we need, the less we need to work.

There is a calculator in Jacob Fisker’s book “Early Retirement Extreme” that really brings this point home.  It uses the “safe” withdrawal amount of 3% and calculates that a monthly $200 expense would require an additional $60,000 - $80,000 in savings.  If someone makes the U.S. median income of $26,364, the $200 habit is roughly equivalent to 2-3 years of work.  It really is no wonder that so few people are able to retire and live solely off of their investments. 

Thinking about my spending habits in this light really brings home the point that my nominal efforts so far are just a small step in the right direction.  I have to reduce expenses by taking a hard look at where my money goes.  Some major steps will have to wait for various reasons, such as my 12 month lease on my apartment, but the paring down can and should begin immediately.    

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