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September 27, 2016


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I guess I have a slightly different take on this question. To me the objective is to reach financial independence as quickly as possible, so the target isn't a savings dollar amount, but rather the ratio of net investment value divided by annual expenses. Once this ratio hits 33x, you no longer depend on your paycheck. Your earned income affects only the numerator, but your expense rate affects both numerator and denominator. When you reduce expenses not only do you accumulate more seed capital, but also your needs also shrink, and both factors accelerate your journey to financial independence.

So while savings rate would see income and expenses as equally important, for time to financial independence, expenses are twice as important as income. In other words those frills that accumulate as your income rises over time are costing you more than you think.

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