This is a way I sometimes think about saving: I think about saving a certain amount of money in terms of which expenses this is enough to cover for the rest of my life.

## Explanation

Step one is to have an idea of how much money you need to have saved/invested to be financially independent of a certain expense. For example, how much money would I need to invest now to make a sort of “trust fund” to cover my shampoo expenses for life?

The rule I use (and it’s not perfect) is the 4% rule. Basically, if you have a certain amount of money invested in US index funds and only use 4% of it per year, the investment gains will probably cover the withdrawals indefinitely, even factoring in inflation. Read more about it in this MMM article.

What this means is that for any annual expense, multiply it by 25 and that’s how much you need to have saved to cover it indefinitely. 12 * 25x = 300x for monthly expenses.

Step two is to apply this calculation to various recurring expenses and use these as progressive savings goals.

So suppose I spend $10 on shampoo every 2 months (I don’t know how much I actually spend). That’s $60 a year, and so once I’ve saved 25 * $60 = $1500 I’ve covered shampoo expenses for life.

Another example: Netflix costs $10 / month. Netflix for life: $3000.

This makes savings goals more concrete. Rather than thinking about reaching a total savings of $4500, think about reaching a total savings of Netflix and shampoo for life. Once you reach this amount, you can rest easy knowing you’ll always have clean hair and plenty to watch, no matter whether you choose to have a job or not.

And once you’ve done this for all of your recurring expenses, you don’t have to work anymore if you don’t want to.