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pjf (2464)

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I run Perl Training Australia [].

I help with Melbourne Perl Mongers.

I spend an awful lot of time talking about Perl, and have had my picture in the Australian newspapers with a camel. That's rather scary.

Journal of pjf (2464)

Tuesday July 27, 2004
05:01 AM

The cost of living

[ #20079 ]

Time is money, and money is time. I'm in the fortunate position of being able to convert between the two very easily. I have lots of contacts and work available, so I can easily turn time into money by working. However that work also tends be very flexible. If I want to, I can arrange to have lots of time by delaying work, or outsourcing parts of it to others.

I find that I never have enough time. My overall goal is to ensure that I accumulate enough money -- which I can then turn into time -- so I can spend my days happily doing the things which I enjoy. These include learning, writing, gardening, spending time with friends, and spending time underwater. I'm also partial to the occasional game or two.

What I find interesting is looking at the rates at which I can sell time (by working) or buy time (just by living). This lets me convert from using dollars (which I don't really care about), to days (which I do).

Based upon the 2003-04 financial year, and excluding weddings and funerals, the cost of living for Jacinta and myself with our current lifestyle is about $72/day, plus tax. That drops to about $57.50/day (plus tax) if diving-related expenses are excluded.

Using these figures, I can answer all sorts of interesting questions. How many days could I spend relaxing if I didn't buy this new toy? How many days can I spend relaxing if I choose to allow this asset to be exhausted? How many days of relaxation do I get for doing a particular job?

However, the most interesting question, "when can I retire?" is not one that can be easily answered. I can retire when my investment revenue exceeds my cost of living -- or when I have around 20 years in the bank. I could retire before then, but not without the risk of finding myself short in my old age.

This means that my "cost of living" figures aren't as useful as I'd like them to be, as they only tell me what I'd gain in time if I spent my savings, not what I'd gain by investing them. Assuming a real ROI of 5%, I'll need twenty times my daily cost of living to obtain the cost of a "perpetual day", which in this case is about $1440. Each "perpetual day" of savings represents one day each year that I don't have to work.

A perpetual day is a much more useful measure of time to money -- "If I don't buy this new toy worth $1440, I can have an extra day off work each and every year for the rest of my life."

If I actually use the perpetual days that I have saved to let me relax each year, then I'll have 365 perpetual days worth of savings in about eight and a half years, assuming my rate of saving remains constant. Put another way, in around four years I'll need to do only half as much work as I do now.

Obviously if I continue to work as hard as I am now, I'll reach the end goal significantly sooner than 8.5 years. The same applies if I can continue to increase the rate at which I can save money.

Well, that's something to look forward to. I better get back to my accounting now.

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