Meaning and Numbers

So, when I was in high school, we had two kinds of physics we could take: one which was math-heavy and targeted at better overall students, and one that was more "conceptual" and targeted at weaker students. It's a long story how this happened exactly, but I ended up taking both. I did much better in the supposedly harder class, because identifying the right time to use an equation and then doing the math, that I could do. Not a problem. Actually understanding the meaning behind all the numbers...that was difficult.

I was reading My Debt Emergency the other day, and she had a post with a link to a contest where you could win $10,000. She's got $118,000 in student loans, so I assume she'd use the $10,000 to make a big payment on that. I would have done the same, last year. (As long as we're at this, here's a link to enter the contest yourself. Heads up: if you use that link, I get some extra entries.)

But then I stopped and realized, you know, $10000 would have been more than half of my entire student loan debt. It would barely make a dent in MDE's. I know both those things, intellectually, and I realize our situations are very different. And yet: I can't really get my head around that difference. $10,000 is over 1/5 of my yearly salary. $10,000 is 1/12 of MDE's student loans. $10,000 is not quite 50% of my (now paid off) student loans. I could go on like this, but honestly, I don't really process $10,000 as anything but "a lot of money." Once you get me past $100 or so, it's all conceptual physics.

In thinking about this, though, I realized that there was a hack, something I could do that *does* make sense to me, that makes money seem "real" enough that I can actually understand it. I can think in terms of "expense months."

Take my retirement account. I've read a bunch of articles about having 8x your salary saved up, or drawing down at the rate of 4% a year, and so on, and I nod along, but they don't really mean much to me. What I can do, however, is look at my account and say "I think my living expenses will be about $3000 a month when I retire. Social Security should cover -- being very conservative here -- $1000 of that. So, if I have $2000, that is one month of retirement." A little envelope math showed me that, in the very optimistic scenario where I retire at 65 and die at 95, I need 360 "expense months." (240 is probably more accurate, but obviously it's better to be conservative and have a little something to leave to my nieces/nephews/godchildren.)

As of right now, I have three months' worth of retirement saved up. Well, three months down, 357 to go! And hey, if I win that contest, I'll suddenly have five more months in the bank.