The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: LadyMaWhiskers on February 03, 2019, 06:01:08 AM
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How do I translate a (let’s say unessary) purchase into nest egg reuiqred to support it. Is that just purchase divided by 0.04?
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Is your question how much do you have to save to afford xyz annual expense?
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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.
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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.)
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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
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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.