Wednesday, March 18, 2020


It's a free extra $100 a year. Sure, I'll take it.

Especially if I don't have to think or do too much for it.

It represents the difference between eraning 1.8 % on a 20,000 emergency fund, and earning 2.3%.

But the reason I don't get too excited about things like that is this.
Let me make a banal example.

If I'm buying 40 jars of honey per year at $10 each, that's $400.

Now, I can look around production circles and see what it might cost if I got it by the bucket. 

Since I already know I consume 40 jars per year, I find out that a bucket holds 20 jars.

So two buckets of honey equals one year of honey consumption. And if I can get 2 buckets of honey for $100 each, beause I am buing quantity, then I will have saved 50% or $200.

$200 is half of $400, but another way to look at it is that $400 is 100% higher than $200, meaning that I have made a 100% return on my money.

So I am saving 50% but I am also getting 100% return on my $200.

This discussion is not about honey. It's about ROI.

I'll take 100% over half a percent any day of the week, although I did have to put some effort into it.

Going further, it would take $2500 invested at 8% annual return to give me that $200. I won't mention the taxes on the return because some of you won't owe any.

And the calculator says that you would have to earn $3500 depending on your tax bracket to net that $2500 that you would have invested at 8% to get the $200 extra into your budget. 

For some of you that is a whole month's worth of work and for some of you its one week. 

In conclusion, I can avoid a month's or a week's worth of work per year according to the above example, and still consume 40 jars of honey per year. 

Although I would still have to part with $200 to do it, even if it is 50% less than the $400 used in this example.

And let's not forget that we have no control over the ROI we get from institutions.

 If the bank lowers the interest rate, there's nothing you can really do about it except for spend time shopping around again.

But it would mean that I would be able to F.I.R.E. earlier, regardless of whether its from index funds, real estate or micro business.

And don't forget that there are no taxes on the 100% return on my honey deal, whereas your $100 extra you get by shopping around for better interest returns gets taxed, so its not really $100 in your pocket.

So a fat FIRE person might say, I don't have time for this, while working longer piling up more so he can afford the honey at $400.

And the lean FIRE guy might say, well I don't need honey, I will go without and use cheaper white sugar or maybe I'll try growing my own stevia.

To each his own, as long as you're happy that's all that counts.
What are your thoughts? Examples? Ideas?

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