ERE indicator

[nomadscientist]

Why not start a thread in the style of the SWR thread?

[jacob]

@AxelHeyst - As a member of the esteemed AHC (Acronym Haters' Club) I definitely want to punch you

+1 to starting a "Log-style"-thread to establish the name.

Call it Income Robustness Score or IR-score. Probably not IRS
Naming acronyms after oneself is corny.

[AxelHeyst]

IR-score, way better.

[jacob]

I've been thinking about how to expand the system to couples or even families w/o breaking it or making it gameable. This might require a second indicator. Lets call it the IR2-score.

I currently have an IR-score of 2.1. DW actually has an IR-score closer to 2.6. However, some of our sources are so high relative to our spending that not only can they cover ourselves, but also the other person.

The easy way to expand/generate the indicator would be to divide by 2x the spending to cover the couple. (If you want to cover 3, 4, ... N people, calculating IRN-scores should be trivial.)

So for IR2, we take the combined number of sources and we divide by 2x the personal spending for each item... (And so on for 3, 4, ... N people if applicable).

Calculating ERE HQ we get
My portfolio * 0.03 / spending / 2 > 1
ERE book sales / spending / 2 > 1
ERE blog income / spending / 2 = 0.05
DW's portfolio * 0.03 / spending / 2 > 1
DW's work / spending / 2 > 1
DW's side income / spending / 2 = 0.3

Total = 4.35

The problem is that the portfolios are correlated being investments in the same financial markets. Maybe correlated sources should be dropped. In that case, the score is 3.35. That seems to be the better way to do it. Doing it that way would also solve the issue people would encounter with joint accounts and expenses.

[7Wannabe5]

Calculating anything for household will fry my brains. The example of this problem I have encountered that makes it most obvious is when I was living with my millionaire next door “ex” who was providing majority of my financial support in exchange for domestic support, and his two teenage daughters, but my tax status was divorced/head of household, because I provided financial support for my youngest child who was in university and living in another state.

IOW, my take would be that although “those with whom you eat dinner/share roof space” is most organic definition of household, when it comes to any financial calculation default should be “those whose names you write on your tax forms” because otherwise boundaries of responsibility and authority don’t overlap enough.

OTOH, when you achieve Wheaton level equivalent to that described in Mollison’s “Retrosuburbia”, resource sharing through creation of complex “household” trumps financial flow metrics.

[Alphaville]

i measure nothing, therefore i am nothing?

i love it. very zen.

i need to stop measuring more.

[Qazwer]

Not my field but in network resiliency work I think there is a concept of redundancy vs resilience
But there is also the concept of where you draw the boundaries and how resilient each piece is to outside shocks. I can turn on a lamp attaching it to an outlet. That has a single point of failure.

I can build my own nuclear reactor, hand made natural gas generator and coal firing generator. That would be three points to provide energy. But their reliability is all correlated (I suck at building things). So although there are now three pathways, plugging the lamp in to an outlet provides more reliable light.

Portfolios can be all bitcoin. Or they might be owning 3 houses that you rent in a flood plain.

You could also have 2 income household in non-correlated fields where each income can cover expenses.

[liberty]

I'm all for building income streams beside stocks, and have started working a bit on this myself, but I don't think the IR Score makes sense. You will get a higher IR Score if you spread over different "accounts"/"categories" (or whatever to call them), but all investments are businesses, "stocks". If you rent out a room in your house, that's a "real estate business/stock", and it's not more separated from other income streams than a publicly traded real estate stock would be. If you write an app and sell monthly subscriptions, that's a software business, and not more separate from other income streams than a software stock would be. Stocks are all separated income streams, stocks can be any type of business/income stream.

[jacob]

I'm all for building income streams beside stocks, and have started working a bit on this myself, but I don't think the IR Score makes sense.

Any metric can be gamed. You have to use it in "good faith".

[Jean]

I'de max score coming from an other person to 1. Because as i see it, it's a single point of faillure.