How Long Does It Take To Save A 30-Day Buffer?

I was curious about how long it would take to save a 30-day buffer based on the percentage of income saved. Like, "How much better is it to save 10% vs. 5%" Turns out...

ALOT better!!!

Obviously, YNAB can calculate how long it'll take to reach a goal but I did it in a spreadsheet and discovered something super cool...

Saving falls on a power law curve ...which means... if you're only saving 1-5% of your income, it'll take a LONG time to save 30-days worth of buffer. At 1%, it's 100 months. 2% isn't much better at 50 months.

But at 6%, it speeds up drastically and the sweet spot ends up being in the 10-15% range that most financial experts recommend. 

Check it out here and feel free to copy the sheet to your drive so you can plug in your own income!

https://docs.google.com/spreadsheets/d/1twZNDxbxMq3E8kmUfTW-TJ2hyd7Z6J1RNM-64BbZcsA/edit?usp=sharing

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  • Chris Jacobie  Very cool and thanks for posting. The number you added for (what are presumably your) total monthly expenses at the top is pretty close to what mine are, so this is very helpful! 

    I am fortunate to have just gotten a pay raise which, if applied monthly to re-building my emergency fund, would build up to 30 days of expenses in just about 12 months - in the 8% range on your chart. Not super fast, but it's something. On one hand I would feel great doing that, but on the other hand I am so tempted to take the extra money and throw it at debt. Decisions, decisions. 

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    • Slate Blue Pilot definitely debt first in my humble (though certainly not accredited in anyway) opinion. I think Jesse has a podcast on it early on in the series.

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    • Chris Jacobie Interesting. Listened this morning. The interest rate of my debt is at slightly below 4%, so I do think about this occasionally. I've also read something along the lines of, "if you're not sure about the stock market, throw extra money at debt; that way you'll guarantee a return equal to your interest rate." 

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    • Slate Blue Pilot 4% sounds like a mortgage. Emergency fund is probably the right move if so. If we were talking credit card debt, definitely hit the debt first.

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  • Not sure what financial experts are saying 10%. It's 15-20%. Elizabeth Warren's book advocates 30%. And that's usually inclusive of long term (i.e. retirement) savings.

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    • nolesrule oh, interesting. I mean, the more the better! I think Dave Ramsey recommends 15% gross for retirement. Seems like an attainable starting point. 30% feels overwhelming to me right now haha.

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  • Not sure you need a spreadsheet. If you can save X% per month, then it will take 1/X months. For instance, saving 25% per month takes (1 / 0.25) = 4 months. Conversely, if you want to achieve that cushion in 6 months, it's going to take 1/6 = 0.16 == 16% per month. 

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    • dakinemaui you do when you’re mathematically challenged like I am. 😂 It did help me see the power law relationship which was helpful but, yeah, your method is way better!

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      • dakinemaui
      • dakinemaui
      • 11 mths ago
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      Chris Jacobie It's interesting to see the curve, but I think one should set a realistic goal for saving in light of all their other priorities. Where it falls on the curve is a bit immaterial.

      I grew my Income Loss category by 1 month per year. That meant contributions of 8.3% (1/12). I was able to juggle around other category scope and timelines (and therefore contributions) to allow that. I would have liked to grow at a rate of 2 months per year, but other demands prevented the required contributions.

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