Challenge "two adults live as cheaply as 1.6"
I question the validity of "two adults live as cheaply as 1.6."
Consumption/Living standard define discretionary expenses which for us are: Automobile, Food, Utilities, Insurance, Recreation, Medical, Charity, and Gifts. ESPlanner accounts for all other expenses, taxes, housing. Looking at our discretionary expenses, only utilities and some of the recreation expenses offer a savings from sharing. We have 2 automobiles so that doesn't provide shared savings. Utilities account for about 15% of our "consumption" and about 4% of our total expenses per year. The portion of recreation, hotels, shared account for about 1% of total expenses. How would I calculate the savings? Seems like two adults could live as cheaply as about 1.9.
Thanks
James
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I actually don't know where the 1.6 number came from, it was in place when I came on board 3+ years ago. I suspect there is some research from which this number is derived.
I think you're missing a few shared expenses, e.g., presumably you're using the same housing, assuming you're married (I've seen any number of cases from you James, but I can't for the life of me remember if you're married or not) then there are some tax benefits, etc.
Larry can probably quote chapter and verse on the 1.6 number, but if you think the number should be 1.9, change it. You can do that in Assumptions->Economic Variables->Two can live as cheaply as one.
Clearly many folks don't share expenses as well as others which is why the number can be changed.
Best,
Dick Munroe
Hi Dick, Thanks for your information.
Diane & I are not "Legally married" for personal and tax reasons but own a home - no mortgage - jointly & share all our common expenses. We've been together for over 10 years.
I was trying to understand how to calculate what our shared number should be. I guessed at 1.9 but I'd appreciate if Larry could elaborate, not just for me but all users might benefit from this info.
Thanks so much!!
James Mavrogenis
Hi James, TVs, radios, utilities (as you mentioned), food (buying in bulk), clothing (passing down clothes), cars, which can be shared wrt usage, appliancees, lighting,furniture, and many more things are subject to eocnomies in shared living. I looked at the economics literature and felt that 1.6 was the best default value.
Hi ESPlanner Staff, Can you please explain how the 1.6 value was arrived at or calculated? Most of the expense items you mentioned are in the non-recurring catagory, i.e., we don't buy furniture or appliances, TV's every year. Nor do we pay for large ticket items out of the "consumption" amount. In fact, in 2008 we remodeled our home and used ESPlanner to determine what we could afford. (I would have never gone ahead with the remodel without ESPlanner's forecasting data. Thankyou for the tool.)
The remodel costs were model as special expenses. My understanding is that the 1.6 factor applies only to consumption. Am I correct?
In our specific case I'm sure that 1.6 is not accurate which is why I'd appreciate knowing how you arrive at this number.
Thanks,
James Mavrogenis
Of course you know that you can adjust the 1.6 to any number you like, right? If you change the number from 1.6 to 1, the consumption column in the annual report will have the same number as the per-adult living standard number. If you change it to 2, the amount will be double. So I guess you just have to estimate how saving there is discretionary spending (consumption) given that two people can share at least some of the things you buy.