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Frugality is non-linear

scattered-thoughts.net · 808 words · saved by 1 readers

Most people have a mental model of budgeting which is roughly linear. If you spend half as much money, your money will last twice as long. As you approach zero spending, your runway goes up to infinity.

Most people have a mental model of budgeting which is roughly linear. If you spend half as much money, your money will last twice as long. As you approach zero spending, your runway goes up to infinity. In this model, the space of options looks like this: [I am an interactive graph made of javascript!] Return on investment = This model is wrong. It's wrong because your savings grow over time. If you change the return rate above to 5%, you can see that someone who has 500k in savings and spends 75k per year has a runway of 7 years. At 50k per year that extends to 13 years. But if they can cut t

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