Elastic budgeting

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conwy
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Elastic budgeting

Post by conwy »

Lately I've been learning about Reactive Programming, and finding some of the ideas interesting in relation to early retirement lifestyle and budgeting, particularly the concept of elasticity – the ability to scale resources up and down in response to circumstances.

During the accumulating phase, there are certain components that may necessarily need to be in my budget, simply as a result of going to work every day. These might include, say, the costs of maintaining a business registration, or transport costs that are almost unavoidable in certain cities.

Ideally the above costs would be reduced or eliminated, in order to maximise savings.

However, for those that can't be eliminated, I'd like to at least factor them into my budget in a way that clearly separates them from my hypothetical costs post-accumulation, when I no longer need to go to work every day.

So this leads to the idea of an "elastic budget" - one in which you allocate sufficient funds to cater for present demand (e.g. maintaining a business or transport), but which also shrinks as soon as that demand no longer exists.

By clearly identifying costs that would only exist while I have a job, I gain a much clearer picture of where I stand financially, how much longer it will take until I can retire and how much any given job would move me forward toward retirement, when salary vs. additional costs of holding that job are taken into account.

From these calculations, for example, I might end up identifying a job opportunity that would pay less than my current work, but which would also cost so much less (e.g. due to location, etc) that were I to take it, I would end up with higher net savings over the same time-period, and move toward early retirement much faster.

Keen to get people's thoughts. Thanks for reading!

7Wannabe5
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Re: Elastic budgeting

Post by 7Wannabe5 »

There is a calculation of True Hourly Wage, much like you are describing, in "Your Money or Your Life." I would note that there are also some costs that may increase after retirement.

jacob
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Re: Elastic budgeting

Post by jacob »

ERE book chapter 7 on wants and needs in a budget context.

Also note that some journals operate with a few different budgets, e.g. "bare bones", "city", and "luxury" depending on the level of wants.

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conwy
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Re: Elastic budgeting

Post by conwy »

Jacob, I’m only partway through the book but I might now pay special attention to Ch 7.

7Wannabe5, yes fair point too. I’m striving to live healthy but there’s a good chunk of medical issues that are environmental or genetic and outside one’s control.

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