Thursday, May 10, 2018

Burn

When we think of inequality, we often mean difference in income. Normally within a particularly Nation State, ignoring the rest of the world. This hides all manner of evils, and (as is the case with all numbers) is a better question than it is an answer. On top of your Income, how much you earn each month, there are a few other useful ideas. Your Burn is how much you spend each month. Your Buffer is if you have enough invested to stop earning for a bit. If you aren't living hand to mouth. Buffer/Burn gives a rough number of months breathing space. A Buffer becomes an Engine when your investments sustainably earn more than your Income and your Burn.

Someone with a very large Income may have an even higher Burn which is debt-financed. This is the opposite of an Engine - the debt means they have to work to pay the interest! Any (poorly designed) estimates of wealth inequality would say they are in poverty. Except, normally to borrow money, you need to prove you don't need it. Debt just keeps people working.

A Swami living in an Ashram with no Income and a very small Burn may have a modest Engine that makes this life both sustainable and fulfilling. The Swami doesn't have to do anything.

In some ways, people with a very low Burn are best positioned for Financial Independence. Cutting back is emotionally difficult. 

Burn
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