This is one for the history nerds because this is actually the very first blog post I wrote on the ERE blog back on December 4th, 2007. As you can see, I started out presuming the correctness of the 4% rule. By the time I published the ERE book in 2010, I had become more cognizant of its limitations. It’s still useful as a rule of thumb though.

Financial planners generally agree that a 4 percent retirement withdrawal rate (a study has been done!) is safe for the long-term as it takes into account inflation, economic growth, and so on.

This means that you need 25 times (1.00/0.04 = 25) your annual expenditures invested in income generating assets such as stocks, bonds, CDs, and real estate to retire safely. Note that the home equity of your own house doesn’t count towards this goal as your house does not generate income!

Here’s an easy and fun way to figure out your annual expenditure

Day 1 5.50 5.50 5.50 2008
Day 2 45.00 50.50 25.25 9216
Day 3 0.00 50.50 16.83 6144
Day 4 …

Here the first column is all the expenditures you’ve had that day. For instance, on day 1 I spent 5.50 to see X-Men III. On day 2, I spent $45 on groceries and on day 3, I did not spend anything.

The second column is the cumulative expenditure. So on day 3, I had spent 5.50+45.00+0.00=50.50 in total.

The next column is the average daily expenditure. You find this number by dividing the cumulative expenditure by the number of days, so 50.50/3=$16.83 per day.

The final column is the average daily expenditure multiplied by 365 which thus becomes an estimate of my annual expenditure.

The more days you include in the table, the better your estimate of your average daily expenditures becomes. For an accurate estimate you need to carry out this exercise for a couple of months but even a few weeks would yield a reasonable estimate.

Needless to say, if your annual expenditure exceeds your annual after-tax income, you got a BIG PROBLEM.

Now, suppose your annual expenditures converge to about $7000. With annual expenditures of $7000 per year, you need 25*$7000 in savings to retire i.e. $175000.

So what is your number? Do you plan to increase your savings or decrease your expenses to meet it?

Originally posted 2007-12-04 02:06:00.

The lack of activity is a a core measure for intelligent design. Unfortunately, very few, myself included, are behaving very intelligently these days.

Which would be the more intelligent way to feed yourself? To go outside and pluck an apple or shoot something wild and eat it, or to plant seeds every year, harvest, and till? (*) It is certainly clear that the latter ranks high in terms of the sacred “productivity” we worship these days—I guess maybe we still haven’t left the 80s, when being busy and stressed was a badge of honor.

Do less useless things!

(*) See chapter 7 of the ERE book for more thoughts on this.

More accurately, do less things of marginal utility. Spending 20% more effort on becoming 1% better does not make you more than 1% better, even if you rake in 20% more dough. Only insofar that

relative improvement > relative increase in effort,

that is, d ln I / d ln E > 1, are you doing well without stressing out the engine. But maybe it’s just me who thinks in terms of efficiency rather than effectiveness. In most places, it is certainly hard to swing a dead cat without hitting some guru going off about how to be more productive in an almost Tayloristic fashion.

Stop and think about profits for a moment! If you increase effectiveness without increasing efficiency, where are the profits going? Not to you, that’s for sure. If all you’re thinking about is how to become more effective, you’re shooting yourself in the foot. But hey, isn’t that the rational thing to do if everybody else is doing it?

Recommended reading: The Importance of Living by Lin Yan Tang

Originally posted 2011-02-04 23:58:38.

Kudos to the marketing people of Kimberly-Clark, the company that makes Kleenex. They somehow managed to convince all of us (by which I mean you guys, not me) that blowing your nose in a disposable piece of paper rather than a handkerchief is the proper way to dispose of snot.

Of course this provides a steady source of income for the company and a steady sink of expenses for everybody who haven’t learned the art of the snot rocket or consider snot rockets a breach of etiquette in a corporate environment, well, I guess that goes for all of us. Therefore I use a handkerchief. A handkerchief is, in case you don’t know it, a piece of cloth that is approximately 10 by 10 inches. For further details ask any old person over the age of 60.

Handkerchiefs are convenient and fit nicely in a pocket unlike boxes of kleenex which are somewhat uncomfortable and unsightly when stuffed into a front pocket. In addition I can easily blow through a kleenex whereas I have yet to perform the same demonstration of nostril directed lung power on a handkerchief. Another consideration is that the use of kleenex necessitates access to a trash can. Otherwise the snot soaked kleenex has to go into the pocket and fishing them out again in their semi soaked state is not nearly as pleasant as fishing out a used but dry handkerchief.

Getting around to costs. Handkerchiefs lasts a long time. The reason is that they can be reused – what a concept – and washed whereas the same is not the case for kleenex. This fact apparently escapes DW as she still leaves kleenex in her jeans pockets presumably for me to wash from time to time, hmm 🙂

The goods news is that unlike cleats, which make your shoe soles last longer, it is still possible to buy handkerchiefs in stores. I prefer my handkerchiefs to be white/light, solid and non-embroidered. Embroidery irritates the nose and does not absorb well and colors don’t do well when washed on warm or hot.

Originally posted 2007-12-19 02:22:00.