A couple of days ago, I wrote a post on how to pay for vacations with Hive or CRO. Last night, I wrote a post about lessons I learned from the Ca$hflow game by Robert Kiyosaki. Finally, this morning, @scottcbusiness made a video about saving 65% of his income. We jumble this all together with my increasing desire to have a beer. What do we get? We get an insidious plan for a Lifetime Beer Endowment.
Let me start by saying that your circumstances will be different. You may have a more powerful liver than I, requiring a bigger beer budget. However, the principles and the mechanics are roughly the same. Also, I am not a financial advisor. I think you can recognize that I'm leading you down the path of wanton finance. Today, we are talking about beer. But, it could be cigarette money, dispensary money (if you live in a state like Colorado), or some other vice. Your bad habit doesn't have to make you go broke. That takes us to the why of all of this.
Why A Beer Endowment?
Well, why not? If you are saving for stupid things like college, how much of that college savings will be spent on drinking? It may seem frivolous to you to save up for a bad habit. However, having an endowment gives your drinking some structure. If your endowment has $20 for beer, you can limit yourself to $20. What we are trying to develop here is a discipline with money, even if we can't discipline your drinking.
The important thing here is that this can be beer, coffee, groceries, health insurance, or any other expense that you must regularly pay. If you can have an endowment that pays for all of these recurring expenses, how much further will your paycheck go? How much further will your retirement income go if your basic needs are covered by your personal endowment? I think one of the biggest problems with retirement money is that it all goes into one giant retirement fund. The trouble with this is that when you spend your retirement savings, you spend it from a general fund rather than from a specific account for that purpose. Without a specific budget for spending, this leads to trouble.
1. Set a budget
First, let's start out with an annual beer budget. This is important for a couple of reasons. First is that most interest or return rates are in annual terms, so it makes the maths easy. Second, it's important to know how much money you are pissing away every year, after it filters through your kidneys.
Using my own personal numbers, it costs me about $3.25 for a couple of pints of beer. In a week, I'll drink perhaps 6 pints at the most. Usually it's less. So, if we run the numbers 3 x $3.25 = $9.75. Let's round that off to $10/wk for fudge factor.
Annualized, we have $10/wk x 52 weeks = $520/year. Let's add another $300/yr because Mrs. TWM and I will go out on dates and she orders the fruity drinks. So, that gives us a total of $820/yr. That's our beer budget for the year.
2. Calculate The Required Beer Endowment
OK, so here's where you have to be careful. Most people are terrible at percentages. Because I care about you, I'm going to make this as simple as possible. First, let's discuss what type of investment you will need for this project. In the post about saving for a vacation, I used Hive and CRO as places to store your money for 16% returns. It is certainly possible for you to use CRO or Hive for beer money. However, let me caution you that the price of Hive and CRO will fluctuate. Beer money is serious business. A fluctuating endowment just won't do. I would suggest a stablecoin earning 12% p.a. for your beer money. This way you can depend on your earnings to remain stable. Currently, Crypto.com is paying 12% on stablecoins.
With that out of the way, let's focus on the maths. We are looking at 12% p.a. and a required annual return of $820. Therefore, we come up with the following:
Required return divided by percentage rate equals required investment
Thus, 820 / .12 = $6,833.33
We can round up to $6850. If we were using Hive for beer money, using leases for income, then we would only need $5,125 in Hive with the caveat that a price dump could cause problems. Still, I hope you get the gist of what we are doing here.
3. Saving Up Your Lifetime Beer Endowment
This is where saving 65% of your income could become handy. Of course, most of us rely on nearly all our income to get through the month. Yet, if you only have 5%, it's a good start. As you save up and establish a fund, you'll find that your beer habit is no longer an out of pocket expense. Suddenly, that 5% is 8% (I'm making up these numbers). Then, let's say you get a bit more aggressive and create a grocery fund, then you could free up another 40% of your income. As you can see, each successful endowment can help you save more and more money until at some point all your regular expenses are paid and your paycheck can be saved 100%. You can start with something small like a Netflix Endowment or a Spotify Endowment.
The point is, saving can start off with something as foolish as a beer endowment. In my case, $800/yr is still significant. If I can pay for that out of investment income rather than out of paycheck income, it allows me to more easily save up for the next thing. If I can set up these endowments now, then by the time I reach retirement, I won't have to rely on my retirement accounts to pay for things.
The point is, you have to start somewhere. And, you want to achieve something that can give you momentum for the next thing. This is why I chose a Beer Endowment. It's a small, discrete, and achievable result. If you have the discipline to get this done, you'll have the discipline to do the next. Imagine a Grocery Endowment that will keep you fed for the rest of your life. Imagine having an endowment that pays for your health insurance premiums. Success builds on success. You need one small success to build upon. It might as well be a fun one.