How much runway someone should have (i.e. the shape of the “usefulness of runway” curve[3]) is confusing to me — I’d be interested in hearing what others think.
This scale attributes a weight to all members of the household:
1.0 to the first adult;
0.5 to the second and each subsequent person aged 14 and over;
0.3 to each child aged under 14.
The equivalent size is the sum of the weights of all the members of a given household.
For a household with 2 adults and 2 kids under 14, the effective size of the household would be 2.1 (= 1 + 0.5 + 2*0.3), which, for 2 adults earning money, suggests one would only have to multiply the runway respecting living solo by 1.05 (= 2.1/2).
I prefer to have more than the above suggests for caution, always considering a weight of 1 per person. My target runway is 6 times (= 2*(1 + 0.5)*2) the global real GDP per capita (in Portugal, 69.4 k€), which would allow me to live without any earnings for 2 years with 0.5 dependents with 2 times the global real GDP per capita per person per year. I have been donating (so far, about 20 % of my all-time income) as I build my runway up to that level, and plan to donate everything above that once I reach it.
I’m curious as to why you used the global real GDP per capita in your calculations. Given that the purpose of runway is to serve as a medium-term buffer, it seems like the level of expenses one would expect while using runway, or the median salary where one lives, might be used to calculate how much runway one had.
(Your donation level and plans are awesome, by the way—this is written as background to the broader readership, not a suggestion that you change your approach!)
2 times the global real GDP per capita is 35 k 2017-$ (= 2*17.5*10^3), which is quite similar to the 36 k 2017-$ respecting the real GDP per capita of Portugal (23.1 k€ at current prices in Portugal), where I live. I also think it makes sense to connect the runway to a global quantity, such that my position in the global income distribution is roughly fixed. 23.1 k€/year in Portugal means I am richer than 97.5 % of people. I find it hard to make a case that I need more, given my annual expenses so far have been much lower (like 1⁄3 of global real GDP per capita). The expenses would significantly increase if I did not live with family (working remotely), but I have also lived alone for 1 year in Stockholm spending around the global real GDP per capita (accounting for both my spending, and family support). On the other hand, maybe spending more will be helpful at some point, namely if I start a family, so 2 times the global real GDP per capita seems better.
(Your donation level and plans are awesome, by the way—this is written as background to the broader readership, not a suggestion that you change your approach!)
I think I misread “6 times (= 2*(1 + 0.5)*2) the global real GDP per capita (in Portugal, 69.4 k€).” You meant that the runway was 69.4k€; I applied the parenthetical to “the global real GDP per capita” and assumed a significantly higher runaway! These are the downsides of commenting on the Forum via phone while taking care of a toddler....
Thanks for the post, Lizka!
To account for kids, the concept of equivalised income can be useful:
For a household with 2 adults and 2 kids under 14, the effective size of the household would be 2.1 (= 1 + 0.5 + 2*0.3), which, for 2 adults earning money, suggests one would only have to multiply the runway respecting living solo by 1.05 (= 2.1/2).
I prefer to have more than the above suggests for caution, always considering a weight of 1 per person. My target runway is 6 times (= 2*(1 + 0.5)*2) the global real GDP per capita (in Portugal, 69.4 k€), which would allow me to live without any earnings for 2 years with 0.5 dependents with 2 times the global real GDP per capita per person per year. I have been donating (so far, about 20 % of my all-time income) as I build my runway up to that level, and plan to donate everything above that once I reach it.
I’m curious as to why you used the global real GDP per capita in your calculations. Given that the purpose of runway is to serve as a medium-term buffer, it seems like the level of expenses one would expect while using runway, or the median salary where one lives, might be used to calculate how much runway one had.
(Your donation level and plans are awesome, by the way—this is written as background to the broader readership, not a suggestion that you change your approach!)
Thanks for asking, Jason!
2 times the global real GDP per capita is 35 k 2017-$ (= 2*17.5*10^3), which is quite similar to the 36 k 2017-$ respecting the real GDP per capita of Portugal (23.1 k€ at current prices in Portugal), where I live. I also think it makes sense to connect the runway to a global quantity, such that my position in the global income distribution is roughly fixed. 23.1 k€/year in Portugal means I am richer than 97.5 % of people. I find it hard to make a case that I need more, given my annual expenses so far have been much lower (like 1⁄3 of global real GDP per capita). The expenses would significantly increase if I did not live with family (working remotely), but I have also lived alone for 1 year in Stockholm spending around the global real GDP per capita (accounting for both my spending, and family support). On the other hand, maybe spending more will be helpful at some point, namely if I start a family, so 2 times the global real GDP per capita seems better.
Thanks for the kind words!
I think I misread “6 times (= 2*(1 + 0.5)*2) the global real GDP per capita (in Portugal, 69.4 k€).” You meant that the runway was 69.4k€; I applied the parenthetical to “the global real GDP per capita” and assumed a significantly higher runaway! These are the downsides of commenting on the Forum via phone while taking care of a toddler....