Author Topic: Please remind me of a formula  (Read 744 times)

LadyMaWhiskers

  • Stubble
  • **
  • Posts: 131
  • Location: SF Bay, peninsula
Please remind me of a formula
« on: February 03, 2019, 06:01:08 AM »
How do I translate a (letís say unessary) purchase into nest egg reuiqred to support it. Is that just purchase divided by 0.04?

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3207
  • Age: 37
  • Location: Texas
Re: Please remind me of a formula
« Reply #1 on: February 03, 2019, 06:41:09 AM »
Is your question how much do you have to save to afford xyz annual expense?

LadyMaWhiskers

  • Stubble
  • **
  • Posts: 131
  • Location: SF Bay, peninsula
Re: Please remind me of a formula
« Reply #2 on: February 03, 2019, 07:53:10 AM »
Is your question how much do you have to save to afford xyz annual expense?

No, more about a specific purchase. Same formula probably applies though.

Ynari

  • Pencil Stache
  • ****
  • Posts: 527
  • Age: 27
Re: Please remind me of a formula
« Reply #3 on: February 03, 2019, 08:19:04 AM »
One time purchase: Just that $$$, straight. Add it to your nest egg.

Recurring purchase or maintenance: Calculate the annual cost (for something that need to be purchased every 5 years, you'd take the purchase price and divide by 5.) That is then part of your expenses, subject to the 4% rule (you need 25 times the annual cost to support it.)

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3207
  • Age: 37
  • Location: Texas
Re: Please remind me of a formula
« Reply #4 on: February 03, 2019, 09:50:04 AM »
Yes, retirement number plus whatever the specific purchase is.

I know the market is getting frothy when my accounts grow to my specific number + 40k to buy a new to me land cruiser.  Its the least mustachian thing possible so I won't do it, but still is fun to think about.  The market volatility whacks me before I am tempted to actually do it

AMandM

  • Pencil Stache
  • ****
  • Posts: 915
Re: Please remind me of a formula
« Reply #5 on: February 04, 2019, 08:05:56 AM »
If the one-time purchase comes with maintenance costs, though, you have to add 25x the annual maintenance costs to your stache. E.g. a one-time cost of $15k to finish a basement might cause you to need $2k per year for increased property taxes, insurance, repairs, repainting, etc. So you'd need not only the $15k but also an additional $50k (at 4% WR) in the stache to support it.