Then, with 4% interest on my $160k yearly, it would take me about 5.5 years to accumulate that million dollars, or 11000 hours.
So over 5.5 years, you theoretically earned $1,220,000. A million in savings plus $40k living expenses for 5.5 years. Effective hourly wage is $110.90.
At an effective hourly wage of $110 your expected lottery ticket return is 1.0 hours, not 1.1
Ah, but now you are neglecting the additional value of having the million dollars now, instead of 5.5 years from now. At 4% interest this neatly cancels out the additional $220k.
I don’t believe so, but maybe someone smarter than me can explain this. The magic 4% of a million = 40k value indeed should factor in, but it shouldn’t dominate the expected value to the degree that you’re making it.
I am reasonably convinced that I did not do so; when I said “roughly 5.5 years to accumulate a million”, I was taking compound interest into account.
Let’s try a different angle:
So over 5.5 years, you theoretically earned $1,220,000. A million in savings plus $40k living expenses for 5.5 years. Effective hourly wage is $110.90.
At an effective hourly wage of $110 your expected lottery ticket return is 1.0 hours, not 1.1
Ah, but now you are neglecting the additional value of having the million dollars now, instead of 5.5 years from now. At 4% interest this neatly cancels out the additional $220k.
I don’t believe so, but maybe someone smarter than me can explain this. The magic 4% of a million = 40k value indeed should factor in, but it shouldn’t dominate the expected value to the degree that you’re making it.