What is Life Burn?
Life burn is the minimum amount of money one needs for their running costs per month without living modestly.
Knowing your ‘life burn’ figure is a brilliant financial tool that can be used to calculate how much money you really need to be making now, alongside what you’d need to be making in the near future to live your dream life.
Calculating life burn helps you set your financial goals and targets.
Let me give an example-
Meet Sara:
Sara spends :
- £200 per month on Groceries
- £150 per month on Meals out
- £100 on shopping
- £1500 on Rent and Bills a
- £100 on Subscriptions
- £100 Miscallaneous Purchases
This amounts to a total of- £2150 a month and £25800 per year
She likes travelling so will go on 3 trips to Europe costing £600 each ( £1800 total) and one Long Haul Trip that costs £2000- Leading to a total of £3800 on holidaying.
Her Grand total for her life burn per annum is £29600; and this doesn’t include the random financial eventualities that might occur, savings or investments.
By calculating life burn, Sara needs to make far above a £30000 base salary to sustain her lifestyle.
This will inform her choice of job , career path and the nature of ‘side gigs’ she chooses to get involved in.
I think ‘life burn’ puts things into perspective and is a very helpful financial tool to use when making financial decisions and negotiating salaries. It can even be used to account for luxury purchases such as handbags or car loan paybacks. I’d go as far as using life burn calculations to make projections on the money needed to run the private schooling of my future child.
I hope that by incorporating life burn calculations into your financial independence toolkit, you’d be able to make more holistic decisions.
Podcast of the week – Freakonomics Radio: Yuval Noah Harari Thinks Life is Meaningless and Amazing :
Harari is the author of a best selling book called Sapiens. In this episode, he talks about his surprise about the traction his novel received as well as his views towards life and purpose. I love listening to the thought processes of intellectuals, so I highly recommend.
Freakonomics touches on various topics from air travel to insurance- if you are inquisitive, there will always be something interesting for you.
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