(net worth) / (total expenses last 12 months) = burn rate
My goal is to have a burn rate of more than 20 years before I am 40 years old. At the moment my net worth is negative. Therefore my burn rate is also a negative number.
- As mentioned above, my burn rate is the time I would "survive" after all my debts first have been paid off. I could of course have "survived" a lot longer without paying off my debts first, but then I would be living on borrowed money.
- When I buy a house, my equity in that house will probably not be included in the calculation of my burn rate. This is because I can not live off the value of the house without selling it. Items such as cars, appliances, furniture etc. will also be held outside the equation for the same reasons. I will elaborate more on these and other details later.