ERE in the university
Posted: Sat Apr 05, 2014 8:25 am
I am a part time instructor at a local college, teaching a course on urban planning and sustainability.
I worked in a lesson on ERE as part of sustainability and lifestyles of people who are trying to conserve, reduce, reuse, recycle, etc. It was also presented as career advice to the students.
I first asked what was the minimum amount that a student could live on. There were a number of answers between $300 and $1,000.
I introduced the concept of safe withdrawal rate of 4% as a rule of thumb that has worked for many years with investments in the stock market, not always but a reasonable rule of thumb. Then I showed how a 4% swr is equivalent to an investment amount 25 times annual expenses, and likewise 300 times monthly expenses.
I then drew a table on the board with various monthly expense levels in one column, 500, 1000, 1500, 2000, 2500 and 3000. In the second column, I put the investment amount that would produce this amount: 150k, 300k, 450k, 600k, 750k, 900k. Some of the students were laughing with skepticism as to how anyone could get that much money.
I then explained that we were going to use an example salary of a little over 50,000 per year, that resulted in net income after taxes of 36,000, or 3,000 per month. This is a typical salary that urban planners might expect after a few years.
I then wrote another table with a column showing the monthly expense amounts, and a column with the difference between 3,000 in income and the monthly expense, calling that column the savings amount. We talked a little bit about 500 a month being difficult, although with no car, a shared housing arrangement and cooking at home, it is possible. 1,000 a month is easier, 1,500 is easy and anything above that is luxury. I also noted the surprisingly high amount of savings if your expenses are low.
I drew the final table on the board, with one column showing the monthly expense, a column with the investment amount needed to swr, a column showing the monthly savings amount, and then the shocker (the class got really quiet and a few students were trying to write it all down when we got to this point): a column showing the number of months it would take to achieve financial independence (investment amount divided by savings per month). I don't have all the numbers with me, but the 500 expense level was 60 months to FI. When I got to the 3,000 monthly expense level, I put a nice fat infinity symbol in the grid. There were some laughs (little do they know how many humans are at the infinity to FI level).
I made some comments about the uncertainties of working in a political environment, and how each new generation seems to try to push out the older generation, and strongly recommended that they try to prepare for early retirement.
One of the comments was, "so I need to make sure I don't die at my desk". Exactly.
I think some of the students got the message.
I worked in a lesson on ERE as part of sustainability and lifestyles of people who are trying to conserve, reduce, reuse, recycle, etc. It was also presented as career advice to the students.
I first asked what was the minimum amount that a student could live on. There were a number of answers between $300 and $1,000.
I introduced the concept of safe withdrawal rate of 4% as a rule of thumb that has worked for many years with investments in the stock market, not always but a reasonable rule of thumb. Then I showed how a 4% swr is equivalent to an investment amount 25 times annual expenses, and likewise 300 times monthly expenses.
I then drew a table on the board with various monthly expense levels in one column, 500, 1000, 1500, 2000, 2500 and 3000. In the second column, I put the investment amount that would produce this amount: 150k, 300k, 450k, 600k, 750k, 900k. Some of the students were laughing with skepticism as to how anyone could get that much money.
I then explained that we were going to use an example salary of a little over 50,000 per year, that resulted in net income after taxes of 36,000, or 3,000 per month. This is a typical salary that urban planners might expect after a few years.
I then wrote another table with a column showing the monthly expense amounts, and a column with the difference between 3,000 in income and the monthly expense, calling that column the savings amount. We talked a little bit about 500 a month being difficult, although with no car, a shared housing arrangement and cooking at home, it is possible. 1,000 a month is easier, 1,500 is easy and anything above that is luxury. I also noted the surprisingly high amount of savings if your expenses are low.
I drew the final table on the board, with one column showing the monthly expense, a column with the investment amount needed to swr, a column showing the monthly savings amount, and then the shocker (the class got really quiet and a few students were trying to write it all down when we got to this point): a column showing the number of months it would take to achieve financial independence (investment amount divided by savings per month). I don't have all the numbers with me, but the 500 expense level was 60 months to FI. When I got to the 3,000 monthly expense level, I put a nice fat infinity symbol in the grid. There were some laughs (little do they know how many humans are at the infinity to FI level).
I made some comments about the uncertainties of working in a political environment, and how each new generation seems to try to push out the older generation, and strongly recommended that they try to prepare for early retirement.
One of the comments was, "so I need to make sure I don't die at my desk". Exactly.
I think some of the students got the message.