Author Topic: One more Penny  (Read 5659 times)

strider3700

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One more Penny
« on: May 12, 2014, 09:17:16 PM »
I use a spreadsheet to keep track of my stache.  On it I have a section where I work out how much I have in the markets, how much in Cash and how much in GIC's.  For each section I have the current interest rate. I use 4% for the stocks/bonds.   I then use the total and the interest rates for each section and work out how much they provide me yearly, monthly, weekly, daily and hourly.   

Today I received my tax return and that coupled with the next couple weeks worth of regular investment should be enough to push me 1 penny per hour higher that my money makes for itself.   1 tiny little penny.  We don't even have pennies in circulation here anymore.  It doesn't seem like much at all.   

It does however represent an amazing amount of work.  Each one of those penny's cost me an entire 80 hour paycheque before taxes.  They hardly seem worth it. 

This penny however was special.  It means that over 1 year all of my pennies will make as much as I do in 1 week.    I gained 5 whole days off or 50% more vacation time.  Or I could wait 2 years and those pennies will make enough to buy another entire penny all on their own.   Now these pennies seem worthwhile.  In all of my years of working I've been given raises but I've never managed to get more time off.   

I actually have change taped along the bottom of my monitor.  When work sucks and oh god does it ever suck lately, I take a breath, look at the change on the bottom of the screen and remember why I do this.   
I'm very proud to be adding 1 more penny to the row.

greenmimama

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Re: One more Penny
« Reply #1 on: May 13, 2014, 08:45:11 AM »
good way to look at it :)

HairyUpperLip

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Re: One more Penny
« Reply #2 on: May 13, 2014, 02:26:42 PM »
haha - good read. Congrats! Keep up the great work.

TexasBrit

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Re: One more Penny
« Reply #3 on: May 15, 2014, 01:52:07 PM »
Love it, congrats!

Peter

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Re: One more Penny
« Reply #4 on: May 15, 2014, 02:43:49 PM »
So $500 saved is about a penny an hour I think? Fun game.

We should post up a list of fun calculations/mind games that we use to justify our saving.

Pootie22

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Re: One more Penny
« Reply #5 on: May 15, 2014, 04:10:25 PM »
That's awesome and a great way to look at it.
It reminds of me of when i first started working full time and hated spending 9 hrs in an office (still do), i created a spreadsheet with a counter that would tell me real time how much money I was making for that day, made things a bit more bearable lol

strider3700

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Re: One more Penny
« Reply #6 on: May 15, 2014, 05:19:45 PM »
there is probably an app for that.   There is an app that lets you time how long you poop for and how much money you were paid to poop...

Peter - > nope at 4% earnings  1 penny per hour costs me $2190    my earnings are above 4% on the market but I like the 4% rule.   My cash and GIC component are maxed out for what I want to hold in them so although my spreadsheet is likely paying closer to 3% I'm content to say 4% earned.

CheapskateWife

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Re: One more Penny
« Reply #7 on: May 16, 2014, 08:43:06 AM »
It took me about 10 reads to understand what you were communicating here, so help me make sure I get this. 

You figure up your investment/net worth growth rate and then figure that into an hourly rate?

When there is a change, its tiny (for now) but it represents a huge amount of work on your part?

I did mine and now I'm curious...how much spare change do you have on your computer screen?  I have $2.47 

My pennies are not doing any better than that guy picking up aluminum cans on the side of the road :D

arebelspy

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Re: One more Penny
« Reply #8 on: May 16, 2014, 08:47:24 AM »
It took me about 10 reads to understand what you were communicating here, so help me make sure I get this. 

Glad I'm not the only one.

I read it twice, and then gave up.

Anyone who can help translate the OP (or if OP wants to explain)?  :)
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Cheddar Stacker

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Re: One more Penny
« Reply #9 on: May 16, 2014, 12:00:45 PM »
I think I get it - here's my explanation of how I understand the calculation:

 225,000     Savings    
         4%     SWR    
    9,000      yearly    
   750.00     monthly     12
  173.08      weekly     52
   24.66       daily       365
     1.03       hourly     8,760

So to earn $1/hr in retirement using a 4% SWR, you need to save $225K. Using that logic, to earn the minimum wage for 24 hours a day in retirement you need to save $1,687,500 ($225,000 * 7.50).

I don't actually know what the minimum wage is, but $7.50 is close right? I also assumed a 24 hour day, and no one works a 24 hour day, so YMMV.

strider3700

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Re: One more Penny
« Reply #10 on: May 16, 2014, 12:54:08 PM »
sorry about the writing style,    My intention wasn't to layout the math so much as discuss the motivation that it brings.   Cheddar basically nailed the math I believe. 

Cheapskate either does very very well picking up cans or did the math wrong.   2.46 in change on your monitor would mean you make 2.46/hour 24 hours a day 7 days a week or roughly $21550/year     for doing nothing. at 4%  that means you have about $540,000 in investments.

I have 1 dime 1 nickle and 1 penny on my monitor.   paying me $1366 per year or roughly 1 weeks work.

hybrid

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Re: One more Penny
« Reply #11 on: May 16, 2014, 01:03:42 PM »
I like different ways like that to look at numbers. For us the calculus is something like every day we get ahead by another $XXX give or take (investments can make that number jump all over the place). I keep a monthly spreadsheet and at this point I can get really excited about a good month and not sweat it when the market corrects. 

CheapskateWife

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Re: One more Penny
« Reply #12 on: May 16, 2014, 01:08:23 PM »
I see now...OK, my 2.46 doesn't represent the same thing you have reflected here, so its apples and oranges we are comparing.

But I do like the idea of creating a visual stimulus to reming you of your goals...

In another place in this forum, I mentioned a trick I play with my DH, which is putting our FI date on the Refrigerator...the FI date is the day he can walk away from the Army and we will be safe.  So when he wants to spend on something that isn't crucial, it opens us up to discuss whether its worth another month, or two, or 10 of his life handed over to Uncle Sam.  Quite often, it is not.

Congratulations on finding a way to stay the course!

Cheddar Stacker

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Re: One more Penny
« Reply #13 on: May 16, 2014, 01:19:22 PM »
I've never taken it to a level below annual (or maybe monthly) but I do have a 3% SWR and 4% SWR line on my net worth spreadsheet. I also track the PF score a forum member referenced a few months ago. A 25 PF score = FI at a 4% SWR. So if your annual expenses are $40K and your net worth is $800K, your PF score is 20 ($800K/$40K).

arebelspy

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Re: One more Penny
« Reply #14 on: May 16, 2014, 05:59:24 PM »
sorry about the writing style,    My intention wasn't to layout the math so much as discuss the motivation that it brings.   Cheddar basically nailed the math I believe. 

Cheapskate either does very very well picking up cans or did the math wrong.   2.46 in change on your monitor would mean you make 2.46/hour 24 hours a day 7 days a week or roughly $21550/year     for doing nothing. at 4%  that means you have about $540,000 in investments.

I have 1 dime 1 nickle and 1 penny on my monitor.   paying me $1366 per year or roughly 1 weeks work.

Okay, I get it now.

So the "one more penny" referenced in the thread title represents about $2,191.50 in your stache (0.01 x 24 hours/day x 365.25 days/yr. x 25 at a 4% SWR).  So every time you save ~2200, that adds one penny per hour to your passive income.

I like the concept.

Except for the 24 hours/day.  I'd rather figure my "working passive wage."  In other words, it feels silly to me to stretch it out over the night and weekend, because I wouldn't be working that time anyways.  Sure, it's fun to say "I make $XX every hour, even when I'm sleeping" but to compare it to minimum wage, or to what most people make per hour or whatever, you'd want to compare it to how many hours they work.  Making minimum wage every hour of the day translates to making what rate in an hourly sense for actual working hours.  Make sense?

So let's see...

As of August 2013, the average American works about 1700 hours/year.

So your stache x your SWR (typically 0.03 or 0.04) divided by 1700 gets you how much per "working hour" your hourly rate is.

OP's currently hourly rate, then, would be about $0.80/working hour.

To make a minimum wage of 7.50 per working hour, you'd need a stache of $318,750 at a 4% SWR.

In other words (tl;dr conclusion), if your stache is 320k or more, your passive income is like having a person working a full time, minimum wage job for you.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (occasionally) blog at AdventuringAlong.com.
You can also read my forum "Journal."

arebelspy

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Re: One more Penny
« Reply #15 on: May 16, 2014, 06:17:00 PM »
Created a separate post for the above idea: http://forum.mrmoneymustache.com/welcome-to-the-forum/what-are-your-soldiers-(dollars)-paid-per-hour/

Thanks for the idea strider3700!
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (occasionally) blog at AdventuringAlong.com.
You can also read my forum "Journal."