Exponential FI

In 2008 you could famously buy a foot-long sub for $5. In 2020, that same sub costs $6.75. As we look at generating enough passive income to cover our future expenses, we must not just think of how many dollars we will have, but how many sandwiches those dollars can buy! The difference between those two prices is the difference between a nominal price and a real price. Similarly, if we hide $100 under the mattress today, a decade from now we will still have $100 nominal dollars, but will have fewer real dollars, because we can buy less sandwiches with the same money. The green line shows the average price of sandwiches rising over time, with the shaded area projecting 30 years into the future based on the same growth rate. The blue line shows how the number of sandwiches we can buy for the same nominal money decreases as a result. While sandwiches are an illustrative example, this effect touches all goods and services and is known as inflation. In the US, Consumer Pri...