Math that Shit Up

I think it was the ChooseFi podcast where a guest made the following comment:

Math that shit up.

This means running the numbers on a financial decision. For today’s post, I’m going to “math up” a couple expenditures our household is considering.

Temporal Premium Gym Membership

Yesterday, the wife and I were taking the poop factory out for a walk. She was contemplating upgrading to a better gym for a period of about four months. (The details of why just four months are boring and irrelevant.) It’s a question of spending $100 vs. $59 during that time period.

The difference is $164. And that isn’t going to move the needle. Having $164 extra dollars isn’t going to allow us to retire early. But what if we invested that $164?

10 years compounded at 5.5%  $      280.14
20 years compounded at 5.5%  $      478.51
30 years compounded at 5.5%  $      817.37

Meh. Again, if we decide to retire 10, 20, or 30 years from now, having an extra ~$800 won’t be the factor that will make or break our success rate.

Having mathed that shit up, the answer is “it doesn’t matter.” Go to the more expensive gym for four months. It’s not going to impact us.

The Big Three

In a previous post, I wrote about the big four expenses. For our household, it’s actually the Big Three:

  • Housing
  • Taxes
  • Vacation

These three expenses each are five digits long in our 2017 spending.

Vacation was over $13,000 in 2017. So, let’s math that shit up, shall we? What if we have a modest vacation budget of $1,000/year? That’s a difference of more than $12,000.

If you do that modest vacation budget for four years – and invest that difference, you’ll end up with over $50,000. You might sustainably draw on the $50,000 at the rate of $1,000/year (2% distribution rate) for the rest of your entire life. $1,000 extra dollars a year – forever – is real money.

Side note: I’ve baked inflation into this. So, it’s a $1,000 every year in today’s dollars. So, in 30 years, it’ll be “more” than $1,000, but it’ll still buy you what you can get today for $1,000.

The takeaway is to focus on the big stuff!

The Mindset

Of course, one could make the case:

Yeah, bro, but if you’re the type of person to spend an extra $41 on a gym membership – or even any money on a gym membership – you’re going to light money on fire in other categories of your life so you’ll keep workingforeveruntilyoudieyourlifewillsuck.

To which I respond, “maybe.” But, I know that – at least for now – I need to focus on the big stuff. And to me that makes sense. Because having “mathed that shit up,” I know that big stuff can make a big difference.