"According to me, retirement means you no longer have to work for money. You then proceed to do whatever you like, without regard for whether or not it earns you money."
According to me, retirement means you no longer have to work
for money. You then proceed to do whatever you like, without
regard for whether or not it earns you money.
You could be retired and have a 9 - 5, as long as you're doing it for fun and not the money, according to MMM's definition.
I think I'd like to get to the point of being able to retire, but not necessarily to stop working (though being able to be more flexible would be nice).
For me, I think my satisfaction with life jumps dramatically the more I feel like I have control (shocking, I know).
I got laid off a few years ago an had two months severance. I floated on it, but I think I did more coding and reading, and generally had more productive time than when I was at work.
I'm by no means in the MMM league, but I've had jobs where I couldn't quit if I wanted to, and I hate that. The psychological freedom that comes from knowing I could up and quit if I needed to, even on principle, is so much more satisfying to me than what I could buy with the money I save.
I can imagine knowing I could up and quit... forever.. would be pretty awesome.
"More recently, even my hobby of writing the blog has started producing some cash, which I hope to reinvest and snowball into a big charitable operation as well as funding interesting projects related to the blog."
Obviously everyone's health situation differs, but my health insurance experiences have been similar to MMM's. For an 'average' person/family, health insurance shouldn't be breaking the bank (e.g. $200-300 per month).
I've heard of some realistic pre-existing health conditions that required $600+/month for specialty meds, but if that $7000+ per year is enough to make the difference in your 'retirement', it wouldn't be too bad to get a part time job to cover your cost.
Decent health insurance for a healthy person in New York is at least $600. My aunt, a cancer survivor in Middland Texas, pays several thousand per month for an individual plan.
A modest HMO that covers a family cannot be had for less than $1k/month sticker price. If you don't want co-insurance it's at least $1200. At least in Massachusetts. Family of 3, no pre-existings. Good plans with a $25 co-pay on popular corporate providers (tufts/Harvard pilgrim) are nearly $1500/month, blue cross is close to $1800.
I live in Maine and have 4 kids. We pay $535 a month. The key is setting your deductible high and forgoing co-pays. As long as you have some savings in place (which is easier to do when you pay less) and be smart about visits, it works really well and yet your covered for anything serious.
Because it features $10,000 per person deductibles (and then you still have to pay a portion up to $3k). If his kid breaks his leg riding his bike to school in the snow the family income could be cut nearly in half. Better than nothing, but definitely not great. That's a symptom of the US more than it is his lifestyle though.
No, the point is he has $600K+ in the bank as self-insurance. If he has to pay $10K in one year for medical expenses, he would do something like reduce the amount that his family draws by $1K a year for the next ten years, not cut the draw rate in half for one year. The self-insurance bet is that he won't have to do that more than once every ten years on average. Given their healthy lifestyle, he's probably going to win that bet.
I have a plan for two people (wife and I), includes $20 office co-pays, $50 specialist co-pays, and $10-50 prescriptions. Max out of pocket per year is $5k/person. $200/month total.
> For an 'average' person/family, health insurance shouldn't be breaking the bank (e.g. $200-300 per month).
Let's play dueling anecdotes.
$300 a month was right around the cost of my COBRA premium for a group plan covering myself only, circa 2006.
$150 a month was what I paid as for an individual plan in my mid 20s circa 1998, and that was for a plan with relatively spare coverage and high deductibles. Perfectly healthy (arguably above average), living in a community that was also arguably above national averages for health statistics and below national average living costs.
I'm very skeptical of the truth of any claim that one could cover a family at $300 a month. Especially in 2013.
Heck, I'm somewhat skeptical that there are people out there nowadays who've been able to buy reasonable coverage on the individual market at all. I know people who don't have to worry much about money but who've still found it a hassle to get insured.
You can, but it's going to be a high deductible plan. I just did a quick search on e-healthinsurance, for a family of 4 with 2 kids I could get coverage for $265 a month. Of course, the catch is that has a $7500 deductible and then 30% co-insurance after that... At $400 a month I could get a plan with a $10,000 deductible and then no co-insurance after that.
Yeah but I think it is silly to suggest he has retired on a 25k a year pension. I mean have homeless people retired? Have people on food stamps retired?
One of his themes is to maximize frugality/stinginess. He claims to have no debt. He has some assets, has some income. Still, I doubt it's as easy as he makes it sound. But OTOH, there are a lot of optimizations I know I could make, yet have tended to ignore.
In San Francisco, I think the most a family of three could get a year (GA + CalFresh) is $10,416. Maintaining GA for any length of time is almost impossible, though, and you need to do eight hours of "workfare" a week to remain qualified (so no retirement).
Not to mention that you need to somehow figure out how to rent an apartment for three in SF for less then $300 a month.
Shocking that someone giving financial advice online is not entirely upfront... (Though it is interesting in this case because the sales pitch is pretty universally unappealing.)
"More recently, even my hobby of writing the blog has started producing some cash"
So technically the blog money was somewhat covered in the article, though in a way that I agree is likely very misleading.
As a "living frugal guru" you can't exactly come right out and say "Also, I'm making a bunch of money by selling advertising to you all", though it is almost certainly the truth.
You would need to know the value of their house to fully judge their situation. If we assume they live in a reasonable house that would cost $1,500 per month to rent / mortgage and we assume they save $750 per month on the costs of working (commuting, baby sitting, eating out) they have an effective income of... $52,000. The median household income in the U.S is $51,000 and that's for households that will often have debt too and not be very good at spending little money.
The value of their home factors into their annual income when comparing to other household incomes. The grandparent said that $25,000 is a level of income someone would expect on welfare, however MMM does not have costs that people on welfare have. For example I spend $18,000 per year on my rent, I would need to earn $25,000 + $18,000 to have the same effective income as MMM. For most households housing costs are one of the largest (if not the largest) ongoing cost, when comparing MMM and others (as the grandparent did) you need to take that into account.
I'll just chip in here. I don't know where the guy lives, but in some places, living is inexpensive. The rent you quoted (1500$/month) is the entirety of my living expenses where I am.
I pay ~600$/month to have a 4 1/2 apartment close to a big-chain supermarket and all necessary amenities. This includes the Hydro bill, the fridge and oven-stove. I have an interior pool. Yes, at that price. Food is about 500$ a month. Internet a further 60$, for a 30/8 Cable pipe.
I'm about 200km from Montreal, close to a university.
He says he lives in a four bedroom four bathroom house. And he says he lives in what he believes to be one of the nicest neighborhoods in Longmont. His wife also states that the house has around 2600 square feet. That means the house is worth at least $200k. I would suggest that it would be worth at least $300k if it was older. You could get a little bit bigger house for $400k though. I wouldn't say that Longmont is an expensive place to live, it is definitely a lot cheaper than its neighbor Boulder, but I would say there are a lot of cheaper places to live.
True, but fewer places as naturally beautiful or outdoor-friendly that Boulder Valley. There's a reason that Colorado has the lowest obesity rate in the country. There's just so many great athletic activites.
I agree, Boulder is an amazing place to be. World class outdoor activities like climbing and skiing are close by. Plus CU-Boulder is there, so you get the benefits of a big University. Richard Dawkins and Brian Greene both gave talks this year. And housing is reasonable once you get outside of the city of Boulder.
That's only what he spends, not what he's earning. All his income from his investments get reinvested because he doesn't need to tap into that for expenses.
I'm curious about this as well. I'm sure he knows what he's doing better than I in this matter, but I can't help think I would have picked a different country to retire in when attempting to get by minimally.
He rides his bike to school, even when it’s 20 degrees
outside. He prefers making his own toys with me in my
workshop to buying them in the store, because he is
rarely exposed to TV ads. So his piggy bank tends to
accumulate in an uninterrupted fashion.
Interesting article, and it would do well for most people to consider increasing wealth through investments.
From the article:
Our bread-and-butter living expenses are paid for by a single rental house we own, which generates about $25,000 per year after expenses.
One nit, perhaps, on that - is the rental house completely managed by someone else? If not, I assume there is at least some minimal amount of work associated with being a landlord... so I would hesitate to call him fully retired, such that he does not need to do any work for money.
The other thing I always think when I read articles such as this - if everyone took such advice and eschewed purchases (cars, lattes, drive-throughs, etc..), I would imagine unemployment would increase dramatically. However, it is safe to give such advice, because it is enough of a sacrifice / delayed satisfaction that it is unlikely to get enough people following the advice to negatively impact the economy. But someone needs to buy the stuff that is made, for the makers to have jobs!
Lets be fair, I'm 28 y/o, and fairly rich, I love to work, and I live to work, and maybe it's the only thing I may do ever in my life.
I could sell all of my bussiness, I could lease the buildings, and retire. But doing nothing is the hardest work I've ever do. I took a sabatic year after I graduated from college, traveled around the world, fucked some really beautiful girls, and after livining a dream-life, my life became quite frustrating.
This guy wont last too long retired, because, after all, he will just grow tired of playing golf, and doing nothing.
1. He said that he doesn't consider retirement to mean no longer working, he considers retirement to be a lack of reliance on work to live. He has the option to never work again.
2. He (MMM) is 39 now, he's been retired for almost a decade. The article addresses "doing nothing", he does lots of things.
I born on a middle class family. From the day I born, I already had a pretty decent way of life.
Started developing web pages just for fun, took control of the family bussiness at a very early age, and today I'm what most people could call a rich guy, way more up on the social ladder than 10 years ago.
Retiring as this guy has been an option since the day I born, I just born in a "goldend cradle".
When I graduated from College / Grad School (I'm from Mexico, things work somewhat different here), I had been developing web pages and software for about 9 years, and I was tired of dealing with customers, providers, and programming at all.
I tried very hard to retire. I traveled around the world, meet some wonderful people, then I returned to my home town, played tennis, frontenis, golf, I went party all night every day I could. And it was one of the most tedious works I've ever done.
After about 15 months, I was tired of my "great life", and I started working on the family bussiness.
It's been the best thing on my life.
I'm still single (almost 29 right now), I've already purchased my own house, the company is growing every day more, I feel so happy I can't even explain it.
I could sell all the machinery, lease the buildings, and go back to doing nothing, but, really, working, is one of the biggest pleasures of life.
EDIT: On your definition "retirement to be a lack of reliance on work to live." I've been retired since the day I born.
"I really like Great American road trips, where we bring tents and mountain bikes and stay in a bunch of beautiful places, riding the wilderness trails in each. In big cities, we’ll still get a hotel in a nice spot and bike around to explore the city, but the real joy for me comes whenever I get a chance to put some effort into the vacation — either physical or mental, like figuring out how to make blackened fish tacos on a camp stove."
I think he probably does more than play golf and do nothing
Hey mate - not everyone has to be like you you know....
Enjoy your own successes and whatever makes you happy, but don't take the success of others away just because they take joy in different things to yourself.
If it was about guys, written by a female poster, would you have downvoted it too ?
If it was about guys, written by a make poster, would you have downvoted it too ?
Where exactly is the crass sexist drivel ? the "fuck" word ?
Upvoted both you guys to compensate. Context is important.
Here the poster only said he was intimate with members of the oppositive sex, who were attractive. Nonthing crass, just fact contributing to the discussions and saying why he recommends against that.
The crassness is, I presume, in the fact that he even mentioned it. He might have used different verbs: met, spent time with, dated. I'm not sure _why_ that's impolite to speak of, but it certainly seems to be that way in most peoples' books.
Also it sounds like he leads a pretty lonely life IMO, and he sounds like he has some ego issues. If he is truly happy though, fair play, but I don't really believe that is the case...
If everyone took such advice, they'd all be working for only ten or fifteen out of their 80 years of life, instead of 40 or 45. So you'd only need a third as many total jobs to provide full employment. And those jobs would be focused on things that actually benefit their consumers.
The person renting has to make their money from somewhere - it can't be rental properties all the way down the heap.
Oh there's something to be said for living within your means, certainly. People seem to waste a lot of money on things that don't really make them happy. But it seems to me that people with relatively high areas of local utility probably shouldn't start talking about how everyone can act - their solution may not scale well.
True enough. You can't have everyone owning two full-time-occupied houses; the mean number of full-time-occupied houses owned per capita by the population has to be 1, modulo things like abandonment and cohousing. But you probably could have 90% of the adult population living off investments. With AI it could be 100%.
I think if economic activity was reorganized around fundamental necessities (to a higher degree, I don't mean to a strict 100% extent) in aggregate this country would benefit by having investment and resources directed towards more productive ends. Certainly there would be short term friction associated with any type of restructuring like that, but better in the long run. Related to that he mentions the idea of income taxes replaced with sales taxes which I think is a great idea, incentivizing investment and savings over consumption.
I have a hard time seeing the appeal of intentionally living long term with a near poverty level income. I could never be content watching my son bike to school in 20 degrees because I don't want to work. Let alone spend years bragging about it.
I bike to school and work in 20 degrees because my dad wants me to learn the value of a dollar before I'm in the "real world" (he also started me investing pretty early). I have 0 resentment and complete respect for him because of it.
That's a false dichotomy. I was never forced to bike to school in freezing temperatures, and yet I've managed to learn the value of a dollar quite well, if I do say so myself.
I think it's questionable what knowing what a dollar is worth if you orient your life in a way to make as little of them as possible. I think you should value a dollar, but also work hard and apply yourself.
It's a strange combination... He got the investment income is the secret part, but then seemingly stopped at the earliest opportunity. It just seems lazy. I agree with him that spending more than you make is irresponsible, but I also think there's a happy medium where you can both have a coffee and a retirement account. You're not taking any of it with you anyways, might as well enjoy a few moments of it.
I completely agree with this. My grandfather is a millionaire...apparantly. I never would have guessed it. He drives a near-broken-down 1980-something honda. He takes frugality to the extreme. I love talking to him and hearing his investing advice, but it gets irritating hearing about how he saved $0.50 on a book or hitch-hiked to Colorado for a family event. I don't see him much, but I've hardly ever seen him smile.
I think we have to be very careful in a society that promotes living in such excess. It's a hard balance to find between casting off all expenses to the point that it becomes frugality for the sake of being frugal, and frivolous-spending yourself into debt.
My grandfather was a millionaire, on a high school teacher's salary When he died at the ripe old age of 95, he had a 35 year old car with 70k miles on it. His idea of diversification was CDs in a bunch of different banks, in case one failed. He did not spend money on himself. There was a big fight over spending money on a cordless phone for him at one point, because he had a corded one that was good enough. It was better for everyone if he could have a phone in the walker or next to him, rather than tethered to the wall on the other side of the room.
I think the great depression and the shortages of WW2 were hard on him in ways that I just can't know.
I think being extremely frugal is about as bad as frivolous spending (the frugal folks will hate me for this...). They're just two sides of the same coin, and the really frugal people tend to be VERY obsessive about it and stressed out from trying to not spend money. Case in point, this blog post:
Does being stressed out and anxious over driving a few miles and spending some money on ice cream really sound like a happy life? If you take spending to the extreme and don't live within your means, you'll be stressed about how to make ends meet and pay your bills. But at the same time, if you take frugality to the extreme, you're just trading that for being stressed over spending too much money.
Life is short. Be smart, keep a good balance and enjoy yourself.
He's not actually working though, so not really a big difference. Technically I could move to a third world country tomorrow and be "retired", but that doesn't fit my goals.
He is working. He works hard on bizdev for his blog ,doing his own PR to get submarine press in WaPo. I "retired" from blogging, now I code for fun and some money to pay my entertainment bills.
Poverty-level income is in the eye of the beholder. He and his family sound quite happy at that amount; if they're happy, is it really poverty? If they're happy with that amount, why can't we be too? The "starving children in Africa" perspective is trite, but to an extent true--this guy's quality of life would be envied by 70% of the world, and yet we call it "poverty-level".
I biked to work in Seattle every day including freezing 35 degree rain in winter and enjoyed it. Half an hour biking in such a weather made me feel like I achieved something before work day starts. And biking was totally optional - I had a car.
But people are different and I get what you want to say.
I'm in Tulsa, OK. I choose to bike to work everyday also. Wind, rain, snow, temperature, I bike to work and back.
My car was stolen once and I went about 2 months without using it. I had insurance and they gave me a rental, but I ended up never going to pick it up. The police found my car eventually, undamaged.
The city has recently built an abundance of biking and walking trails for this reason and is very friendly to bikers, even on the main roads.
While I agree with you, it sounds like he doesn't pay a mortgage any longer which makes that poverty level income go much further. For most of us that would be the biggest single expense. I'm not sure how that figures into the income calculation but it probably counts for something.
Although, note that not having a mortgage to pay is not the same as housing being free. Once my mortgage is paid off, I'll still be paying something like $5K per year in taxes and insurance. (I'm guessing taxes are higher in Massachusetts than Colorado though.) And probably add at least another $1K or two to cover upkeep/maintenance/tools to do maintenance even if he does most or all of the work himself. So a paid for house is probably still going to cost something like $500/month.
He isn't living in poverty, not even close. His family's 2012 spending was just under 26k but that doesn't include income taxes, his mortgage is paid off, and he isn't saving in a retirement account any more. For any normal working person those thee things would likely account for nearly 60% of costs. His life style is probably equivalent to a still working person who is making 75k.
I thought that harping on riding a bike was a bit disingenuous. I used to do do it daily, but after a close brush with death (got doored by a car stopped at a red light) I've come to think the risks are high enough that continuing it would be irresponsible for a family man.
Note that his family isn't dependent on his income or earning potential anymore, so it's not like he'd be leaving then destitute if he got killed. Purely financially, they'd be better off.
That said, everyone has to choose their own acceptable level of risk.
Edit: Plus you can argue that biking all over the place decreases his risk of dying of heart disease or similar later in life, which may balance out or outweigh the risk of dying in a vehicle collision.
I think the point is being missed here, to some degree. This is not necessarily the best way to live. But it's worth considering: what would you do if you weren't tied to a corporation for 8 hours a day in order to feed and house your family? My immediate instinct is not quite "Let's commute for an hour a day and grind out code for some project I don't really care about." Your life may vary, but while he's at an extreme, it sounds like one that's less sucky than that.
I think he'd agree that the particulars of his situation are hardly prescriptive.
But it's also hard to argue with the reality that, if you eschew stupid expenses and live frugally, you can very rapidly build up a very healthy savings. Given that, it's trivially easy to retire by 50 or even 40 for most people; for a software developer (like MMM), it's quite possible to do it by 30.
Honestly, though, I would argue that his plan gives him a sense of false security: no one knows what the economy will look like in ten years, let alone twenty or thirty, and building his retirement on the assumption nothing drastic will change in it or his personal life is folly.
And he spent the first... seven or so years of his working life in some soul-sucking corporation. That's a shit load of time wasted. So his problem?
I'd say it's that he retired too late.
If you take his definition of retirement as "having enough money that you can do what you want to do," all you probably actually have to do is save up 100k-200k, plus or minus a bit. That's because most people want to have some integration into the economy; they just want it on their terms. And integration into the economy means you're getting paid some amount. Given a fluid nest egg to last you a frugal decade or so really gives you all the financial security you need. (Of course, shit can happen, but any shit that can burn through that kind of nest egg is likely to ruin whatever plans you have anyways.)
If you have $200k saved up at this point and no real commitments but have grand plans for how you'll retire sometime in the next five to ten years and then do what you really want to do--teaching, or open source projects that interest you, or traveling around the world as a photographer/blogger--more likely than not you can do it now, within a year. You should. Money will come to you, and there's no reason to put off your dreams.
Your plan needs the nest egg + house paid off. I will have 150k USD(100k GBP) by the time I'm 26 but no house. so i doubt I could survive a decade on it.
As you're alluding, half the battle with knowing when it is "safe" to hop off the treadmill is having a very good idea of your expenses. About 10 years ago, I spent a year or so recording how I spent my money to the cent. I found that it delivered a lot of freedom, even if I didn't live frugally, since it allowed me to know exactly how much money I would need going forward, and plan accordingly.
Since then. my life has changed a lot, to the point where the confidence in predicting my expenditure is wearing off. I'd describe it as a slightly panicked feeling of having to work harder, since I'm trying to cover the worst possible situation that my mind can invent. I probably should invest the time to collect another set of hard data...
Have you considered joining Mint, using plastic for your purchases, and considering cash as "already spent" expenses? (Stay out of debt, mind you -- use the cards as a way to ensure that it's accounted automatically.)
While I do think there is value in aggressively saving and reducing unnecessary expenses (avoiding excessive 'lifestyle inflation'), I can't help but feel that MMM has taken it too far to the extreme. There are tons of interesting and worthwhile experiences out there that you're going to miss out on if you intentionally constrain your budget to $25k/year for the entirety of your life.[1]
There are folks here who have achieved true financial independence by building and selling companies or producing 'lifestyle' businesses that continue to churn out cash without much daily involvement. I find stories of their experiences much more valuable (and educational) than someone who has simply moved the goalposts closer.
[1] Not to mention that doesn't leave a lot of breathing room if you run into an unexpected, expensive emergency situation (e.g. medical expenses).
It all depends on where you live. I doubt where he lives (Longmont CO) is that expensive. There are plenty of places in the USA where 25k will go a long way. Remember he has no mortgage and other debts. If he has relatively low property taxes and doesn't care about having a new car every 5 years etc., then 25k a year is more than enough. It certainly isn't poverty level or anything.
I don't get why people on here are so negative about it. Don't be bitter because you live in the valley and spend 2k+ a month just for a crappy apartment. It just sounds like this guy values his time more than money. He might not be spoiling his kids with tons of toys or free college, but at least he is there for them. I'll warrant many of the entrepreneurs hackernewsers look up to don't spend nearly as much time with their family as this guy. Their too busy making money as a way to keep score in their "life." This guys just living his life.
I agree he sounds happy, but it's important to remember that happy means different things to different people. Life is short and you only get one shot at it, so if you get a lot of enjoyment out of a new car every 5 years, hell, go for it. Be smart about it, make sure it's something you really enjoy and not just a temporary distraction, but do it if it brings you lasting enjoyment.
Some people, in my experience, really enjoy being frugal. Having a wad of cash in the bank is what makes them feel secure and happy. Others, not so much. To each their own.
One nice thing, being able to live reasonably happily on $25k is nice to see if nothing else than that's probably what a lot of today's middle classers are likely to get in SS benefits down the road. And given the dismal savings rates, that's a fine thing. The trick is to pull it off you need to have a paid for home and live in a relatively affordable location.
Of course that's another thought, retiring at 30 means your SS benefits are going to be small or non-existent. If this guys rental properly burned down and his investments tanked, that could turn into a pretty bad situation someday. As much as I hate to rely on SS for retirement it's the closest thing to a guaranteed income many of us are going to get, and retiring early means opting out of that.
> It all depends on where you live. I doubt where he lives (Longmont CO) is that expensive. There are plenty of places in the USA where 25k will go a long way.
Yeah, but that's one of the constraints I'm talking about. There are many worthwhile places to live on the planet that would be out of that range.
> I don't get why people on here are so negative about it. Don't be bitter because you live in the valley and spend 2k+ a month just for a crappy apartment.
I'm not and I don't. :) He just happens to be espousing a (rather extreme) philosophy that I disagree with, and I think people might want to think twice before following in his footsteps.
I agree with you that people that spend so much time at work that they don't have time to spend with their family should probably think twice about that too. Just because I said I disagree with one extreme doesn't mean I agree with the other extreme!
The first thing I thought of when I saw the $25k/yr figure was...do they have health insurance? How did the pay for the delivery of their child? What happens when medical and other emergencies happen?
I assume they have savings for that, but it doesn't sound like they have any bandwidth for saving. Does it all depend on the market?
On the one hand, I agree with most everything MMM says. On the other hand, a life of consumerism is its own reward -- and who is to say it is not earned?
I am nomadic. I have no dependents, and a severe case of wanderlust. My impression, after many conversations on the matter, is that this is a mild form of insanity. I think that I have my lifestyle more or less sorted out at the moment, but I have in the past been more or less willing to trade stability and an income above the poverty line for the freedom to search for a place that perhaps I want to live. I'm from Alaska originally, and don't particularly enjoy or identify with the rest of the US, so hopefully this is at least somewhat understandable.
I digress. I know exactly the kind of perspective from which $25k per annum is considered wealth. I also know the freedom that comes from not being owned by possessions -- and I hope that MMM does as well. You can still practice accumulation on a budget, but it's hard to see that as a healthy motivation. Being rich is not dying with the most toys. Although I don't believe the majority the HN community would agree with that sentiment.
To be a nomad, you are forced to make a very deliberate choice about every possession. Each one adds a burden that must be carried to each new place -- quite literally carried, in my income bracket. There is the temptation to transform this practicality into a moral virtue, but there are many other reasons besides.
On the other hand, there are many virtues in accumulation. Besides the advantages conveyed by a visible display of wealth, owning many things serves as a buffer against misfortune. Consumer goods provide pleasure, and capital assets can be themselves a source of profit.
I feel like I should be the most fervent disciple of MMM, and yet I would say instead: neglect not your comforts, nor your consumerism. The trades you may make in pursuit of a purer life, are at the least uncomfortable, and at worst dangerous. Poverty may be virtuous, and while you may yet find that virtue, seek it not for its own sake. If your charity compels you to be poor, accept that with good heart, and do not be miserly no matter how much you own. If, alternately, you are not compelled towards sainthood, at the least enjoy your comforts in the knowledge that you are living a blessed life, which may like as not never come again.
You described everything very well what I am like and what I think of the subject. It is nice to know that I am not alone.
I am also nomadic, although yet a university student, still making it eventually possible working in an industry capable of earning over $100k per annum. Nothing would change if it was not as prosper.
I was able to save more: $5,000 into the retirement account, $3,000 into an employee stock purchase plan, and $10,000 in cash. Year 2 'stash: $23,000 ($13k cash/shares, $10k retirement).
Year 3: This was late 1999, and both the job and stock markets were on fire. I cashed out the stock purchase plan shares from Year 2, which were now worth $10k
The investment gains on stocks started accumulating, adding about $10k to our earnings this year. So we still ended up increasing the savings by close to $100k after tax. Year 5 'stash: $250k.
Investment gains on the existing savings contributed another $20k. It is complicated to remember what portion of income was taxable salary, and what was nontaxable gains inside of retirement accounts and such. But a reasonable estimate of the total is Year 6 'stash: $365k.
Year 7: No increases in salary, but similar amazing earnings and moderate spending, combined with $30k of investment gains. Year 7 'stash: $490k.
I've read his analysis before and I had the same issue. It's quite easy to retire early if you have a high income and live frugally. Unfortunately a lot of people have to live frugally just to get by. Your average middle class family couldn't even dream of putting away $490k in 7 years even if they lived frugally and got lucky on stocks.
I read another blog, I think it was a different guy, who talked about how he did this by living on 30% of his income and putting away the other 70% and then went on and on about how anyone could do this. Of course, he made about $300k a year. He talked about how even if you make way less than this you can still do it, you just have to be willing to live on 30% of your income. That's easy to say when 30% of your income is more than 100% of most people's income...
Seconded, yes. I've known some people recently with multiple kids (4 and 6, respectively), trying to get by on odd-jobs and $10/hour full-time jobs. Even slogging away night and day, floating a family of 8 (two parents, 6 kids) on $30k/year, and trying to do that on "30% of your income" - it's just not possible.
These people had/have income issues, not spending/frugality issues. In one case, one family moved to get a better job and is now at something like $45-$50k - still tight, but doable.
This is the part I feel needs to be highlighted. He got an early influx of money through stock plans, the dot com boom, and quick house appreciation. A lot of people have to make do without any of those things.
I feel with those conditions, his "advice" for retiring early has a huge asterisk.
I have given a lot of thought on this subject as well. I think the first few months will go nicely, putting money into savings and spending wisely. But I have a feeling that keeping up with the lifestyle is hard for most of the people. Your pace is frustratingly slow, and you really need to trust that the lifestyle you are living will pay off someday.
Just to scratch my own itch, I've built a finance independence calculator for my daydreaming needs
Cool little app. However, I'd like to see you raise the artificially low maximums you've put in place for the "Initial Investment" and "Monthly Investment" inputs. If you did, I'd be able to make use of it. (I'm 38 and definitely not "starting out".) It appears that you're making the assumption that the "Returns per Year" percentage input should also be used when figuring monthly income. I disagree with that. I'm comfortable guessing at a relatively high (7 or 8%) annual return on investment while building my savings, which would be derived from a combination of dividend income and capital gains. But, when it comes to living on a fixed income, I'm tempted to guess at a lower annual return (4% - dividend income only) because the negative consequences of being wrong are fairly high. My two cents.
I always recommend the following two posts to anyone who has discovered MMM, as I think they best sum up his context, history, mindset, goals and living situation - all of which are good to understand before you start taking what he writes as guidance:
It's important to keep in mind that his goal was to end his reliance on a full time job for income as quickly as possible, full stop. He did pretty much everything in his power to reach that goal, and it's clear that he's very dedicated.
For anyone who glances at this interview or at his blog and thinks, "I'd like to do that," make sure you read the two posts above first. If your idea of retirement is fuck-you money, a yacht and a summer home in the Hamptons, his advice isn't going to work for you - although his blog provides a good opportunity to gain some perspective on how people not like yourself treat money and what they consider the ideal retirement to be.
I can see where you're coming from - but I think they would say they don't need to be spending money to enjoy the company of their friends or family. The end goal should be to spend quality time with people you care about, and unfortunately in our culture, that almost always revolves around spending lots of money and doing wasteful things. They acknowledge that they don't mind going out and spending money once in a while for a good night out, but overall, they've developed a sort of gag reflex to it since it's not necessary for them to be happy.
This happened to me back in California where my 'friends' would stop inviting me out or contacting me because I am frugal and they're not. Even somewhat new (to the country) immigrant friends adopted this behavior.
Then I moved to Brazil where there's plenty of cheap or free things to do and I went from going out almost never to going out up to 4x per week. Now I'm living in Portugal and, strangely, it's the same as Brazil. Plenty of ways to go out and spend $15 or under. On the flip side, of course, there are plenty of ways to spend way more per night out.
They actually made a big point about the fact that they had fun going out to dinner so it didn't ruin their enjoyment of the night. They juts also (not unreasonably) noted that $30 for a beer and a salad is sort of ludicrous unless there's something really special about it.
He's also willing to move far from family to have his dream life. He did choose wisely in moving to Longmont, CO, the much cheaper suburb of Boulder, CO. Were I looking for a place to live with no family or other external considerations in the selection, the Boulder valley/Front Range of Colorado would be #1. To get a reasonably priced home you can't be directly in Boulder, but there's lots of land in the Front Range plains, and thus, plenty of homes.
Iirc, MMM's savings were buoyed significantly by being a part of the boom years of both the stock market and real estate market. Whether his financial standing can be replicated by someone following his exact footsteps today remains to be seen.
The returns on your investments may certainly vary under lots of circumstances. But if you're able to living on under 50% of your income, then we're simply talking about how good the outcome will be — not whether it'll be good or not.
I don't like how judgmental he is about lifestyle choices alternative to the ones he's made. I, personally, enjoy going out to eat, I enjoy the "$100 happy hours," I'm in Turks and Caicos right now on a stretch of the most beautiful beach I've ever seen and I enjoy that, too. Oh, and I don't particularly dislike working. I'm a well paid highly skilled engineer building cool things for a fantastic .com that takes care of its people.
I get it, he has options and choices and that is an ideal. If I wanted to retire right this very second, I couldn't. But you know if my wife wanted to give birth right this second she couldn't. It requires about 11 months of planning and prep work and the fact she hasn't put that time in already is in no way a bad thing or a disadvantage for her. She LIKES splitting a bottle of wine with me at dinner and eating seared tuna and ice cream desserts and coffee and dirty martinis. So, not yet, for us.
I just wish he could be a better advocate for his extreme frugality and savings lifestyle without building it on criticizing the alternative with every other breath. (And even if some things aren't strictly criticism they are de facto criticism by painting them in a less then gracious light.)
It was. Since JD left, its been much less personal and more corporate. Few of the writers resonate with me, and many of them come across as "here's the standard personal finance solution to X, described plainly".
But why? Seriously, why can't he come to his own conclusion about said lifestyle choices? You don't have to agree with him, but why can't he judge certain lifestyle choices as better or worse? Just as you have done for yourself. I think if he doesn't clearly define what he thinks is better and why, then what advice is he really providing? People can choose to agree or not, without taking it as a personal insult.
Your parent is judging that his lifestyle choices are better for him while the subject of the interview is judging that his lifestyle choices are better for everyone. I'm not saying who is right or wrong, but let's not conflate the two different points being made.
You're definitely right there is a distinction. I accept that, but still would argue why is it bad to make prescriptive suggestions for others lifestyles? He feels strongly that his choices are the right way (and is fighting against the notion that happiness and lower consumption, materialism, consumerism are mutually exclusive). Perhaps it is right for many people, and by making his judgements public, it will provide helpful information for others to be exposed to. Why is upsetting certain people by telling them that he disagrees with their lifestyle choices a bad thing, such that he should refrain from making these judgements public? OP seems to be saying, your judgements of my lifestyle hurt my feelings, and made me self conscious of my choices and that's bad... regardless of the positive effects of strongly and clearly stating his value judgements so as to cause people to critically examine their assumptions and choices. I think the OP's reaction is just the effect MMM would like to cause people to have, if it results in positive changes. If it rubs some people the wrong way, that's a side effect that's worth it. If people are confident in their choices they shouldn't care what this guy or anyone else says about them.
It's not really the same. If I pick a lifestyle for myself, that's not a judgment on other people's lifestyles. If I pick a lifestyle then start calling other people wasteful, that is a judgment on others. Be it true or not, that rubs some people the wrong way.
Personally I don't care if he judges me. He's living within a few tens of percent above the poverty line (based on his comments in this article). Of course the lifestyle of someone spending even $40k a year is going to seem wasteful to him.
> Be it true or not, that rubs some people the wrong way.
Huh? If it is true and it rubs some people the wrong way, is that bad?
> He's living within a few tens of percent above the poverty line
I'm not sure what living a few tens of percents above the poverty-line really means, unless you mean tenths of percents? Still, that is not what poverty is. There are more than enough people in the US living in actual poverty but I'm pretty sure this guy has it pretty good. This is because, and that is part of his message, that how good you have it in life is only in so far dependant on how much money you have to spend. It depends on all sorts of factors of relative wealth, of which he has collected a great amount in various ways.
> Huh? If it is true and it rubs some people the wrong way, is that bad?
Do you go around telling ugly people they are ugly? Fat people they are fat? Dummies they are dumb? Why not? Is it because it rubs them the wrong way, despite it being true? Is it wrong for them to feel that way, even if you are right? IMO it is neither wrong nor right to feel that way. It is just how you feel.
> Tens of percent
I meant tens of percent. According to the numbers he posted he's something like 20-30% above the poverty line. That's a few (3ish) tens of percent.
Is he indiscriminately leveling criticisms? Of characteristics people have no control over (ugly)? Or is he perhaps criticizing choices and behavior, of which people can change and pick and choose themselves? Hmm? Not a valid analogy you made there. Do people make value judgments about diet and exercise so as to help so called fat people get into better shape? All the time they do, yes. If I care about someone, and think they are making choices that are detrimental to themselves, I'll tell them. If you don't, because it may hurt their feelings, are you doing them a favor?
Fortunately, despite your apparent wishes, you do not yet live in an authoritarian regime where the meaning of words is defined by the government. I recommend you switch to using the definition used by other speakers of English so you can participate productively in conversations about the issue.
Income is only a part of the picture when it comes to poverty. Assets count too. Not having to pay rent or a mortgage because you own your house outright makes a significant difference, for example. Most people could have higher disposable income on a much lower salary if they didn't have to meet rent/mortgage, make car payments, service historic debts, etc.
Well, it's an article, and it's not like he's berating you personally. A less judgmental person would have made a less interesting subject. Besides, your lifestyle is promoted by the press 10x more than the frugal lifestyle is.
I don't believe he is going out of his way to criticize.
First of all, the question of retiring is somewhat problematic. Ask the typical person if they could retire right now, what would they do? Doing leisure activities, going on trips, relaxing, etc. can only take one so far. As human beings we need to be productive (no matter how that is defined) for us to lead a healthy life.
I believe the bigger issue is freedom. MMM's approach is very extreme and works for him. I do believe he lives on much more than 25K and works very hard. To him, the work he does might not classify as work. This is freedom for him. He is building a brand and knows how to market his brand.
The big difference I would suggest is that he is absolutely debt-free. American consumerism and lifestyle, to some extent, is driven by credit. Getting a credit card has become a rite of passage.
I like to follow the Dave Ramsey (http://www.daveramsey.com) philosophy (I don't agree with all his advice but most of it is pretty sound). I've just come across Dave over the past year and I find his message and life story inspiring. His message is simple:
1) Get out of debt (goal is to be entirely out of debt - including house). Only acceptable debt is mortgage debt.
2) Cut-up your credit cards (I don't. Having self-control with this is a big part of it)
3) Save 3-6 months emergency fund
4) Invest 15% every year for retirement
5) Save a percentage for Kid's college
5) Buy a house that is within 25-30% of your monthly income
6) Buy cars, boats, etc (ie. toys) that is no more than half of your total income (at most)
7) Invest your money (He's a big believer in mutual funds which I believe ETFs are now a better choice)
8) Most importantly, stay out of debt.
In this way, if you are making 100K a year or more going out for a $200 dinner or a $10K trip is fine since you are out of debt and all the major priorities are covered.
In some sense, MMM's message is the same as Dave's but the difference is that Dave is a multi-millionaire and works just as hard as he did when he wasn't. He has no qualms about going out for dinner and spending $1000 as this puts no dent in his net worth.
His point to not to stop working, but stop being dependent of work.
There are plenty of ways to stay productive, even make some money, but when the money is just a bonus and not necessary for mortgage payment it makes a big difference.
I agree that he does not put us spenders in a very gracious light, but the main point he is making is that all those socially accepted (and desired) things have a cost, and if you sum them up you will see that you are spending more than you thought you were.
I'm in Turks and Caicos right now on a stretch of the most beautiful beach I've ever seen
Hello my friend! Care to share where?
I'd like to meet with fellow Caribbean entrepreneurs. I'm from Martinique, FWI. We do some good stuff too, yet I thought most of the scene was in T&T or Jamaica. T&C - why no!
How he worded it, I believe he's there on vacation.
Nice to see some people from the Caribbean here though. I'm from St. Maarten but I currently live in Canada. Do you know of any places where I can read more about the tech scene in the Caribbean?
Try linkedin - many groups are announced there. Most are "empty" (as in just full of spam), but some can provide you with links to an existing scene.
As usual, the odds are higher where you have a bigger population. From SXM I'd recommend you get in touch with groups in Guadeloupe. There's a good lug, and quite active wifi/HAM style project.
Get in touch by email (in my profile) if you want more details.
I think the reason his messaging is effecting is because he's being judgmental. Maybe he does it naturally, maybe it's on purpose, but I think if he used wishy-washy language, nuancing his points to tell people that some of their consumerism is okay, that it would hurt his ability to deliver his message.
I think there is a side-effect to this, where people see what MMM is doing and take his advise to the extremes, failing to full think through their own personal situation. These sort of teachings tend to build some cult-ish/guru-type followings, but I think for the vast majority of people, the messages resonate on some level that allows them to either think about their spending choices more, or cut back.
I see what he ultimately advocates as more of a "think about how you're spending your money" rather than "don't spend money".
You criticise him for being judgmental ... by being judgmental about him. Practice reading without taking things personally, it'll stand you in good stead.
It's part of his online persona, and it's the reason so many people are listening to him. That tone of disbelief is effective at making people look at their spending from a perspective many have never considered. That it irritates people who disagree probably doesn't bother or affect him much.
I'm sometimes surprised at comments like this that fail to appreciate that people can (and should!) have an opinion on things. People can be "judgmental" -- it's called having an opinion and it is not a bad thing.
Requiring everyone to water down their opinions in order not to offend anyone (usually code for people with mainstream views) is truly offensive. In civil society we can all hold opinions and are able to express them. This is why democracies work so well -- at least better than all the alternatives!
I'm a bit older than the average reader here, so perhaps I'm biased. It seems to me that many people raised in the toxic and simplistic battles between left and right in the US media don't seem to have much of an intuitive sense of civil debate. I think the lack of good examples may be one reason.
In short: People have different opinions. If you don't agree, feel free to speak, but be civil.
I suspect profligacy and indebtedness are criticized on the basis that many people who practice them come to regret it later, no matter how much of a good idea it seemed at the time, when they end up in poverty. A bit like how smoking cigarettes and/or eating an unhealthy diet and/or not taking exercise can lead to health problems.
He's not judgmental about you as long as you don't complain about never having money to do things and never being able to save up money and not being able to earn enough/working too much/etc. etc. etc.
He's judgmental about people who want to retire, wish they could save up money, have boatloads of debt, and complain incessantly about how unfair life is when they keep taking on piles of debt making luxury purchases and mismanaging their lives. That's all.
As long as you're happy with your lifestyle choices and either 1. Make enough to be able to retire comfortably when you want to or 2. Won't complain when you're broke and impoverished in the future, then good for you!
Retired? He is a hard working self-promoting blogger, and also does handyman work. By his tortured definition, most middle class people are retired, as they could survive without work if they have to.
Love it when two sites I love, like MMM and HN cross paths.
I'm disappointed, but not surprised, by the animosity here. Too many HN posters seem to be obsessed by hitting it big monetarily, instead of developing exciting projects. Is it that mysterious to value freedom from monetary worries so you can focus completely on the projects you think are important, for whatever reason? Seems to me that is exactly what MMM is doing.
In the Scandinavian countries (or at least Denmark) it's possible to "retire" early (or at least cheat the system and do this), but I would not really wish anyone this. Working on what you love to do is important, especially in the modern society. And in Denmark your kids can still get into the best schools and you can get free healthcare without having a job. This said, being on welfare and "retiring" early is not something most Danish people dream about and I doubt most of these people that retire "early" are that happy about their life.
Interesting read, but I have to disagree with one of the tenets of the article. At one point he suggests that people should almost inevitably relocate at some point to a less-expensive area of the country in order to save for retirement.
Wealth is relative. You can increase your own in only one of two ways- either earn more or spend less. Obviously his advice is the latter, but if you fall into the former category (and let's face it, if you're a frequent visitor to this site you almost certainly are) then that is probably terrible advice.
I happen to live in D.C. and I can tell you that things are very good here. The job market is one of the hottest in the nation, real estate prices are astronomical and ever-growing, and most people you interact with around the city are above-average wage earners compared to the rest of the country.
Yes it is expensive to live here, but a rising tide lifts all boats. If you want to prosper, it helps to sell in a market that is ripe with people who have the means to buy what you are selling. That could be your skills if you are looking for work or a product or service if you are trying to get something started. All things being equal, a strong economy helps all participants. If you move to the middle of Kansas, chances are you'll spend a lot less, but you'll probably earn a lot less too.
The wages in DC, although higher than the national average, are not astronomically so. The Mean anual wage in DC is ~$60k, while the national average is roughly $45k. This likely doesn't equate to a distinctly higher quality of life. Moreover, poverty is far more pervasive in DC than in the rest of the country, and, crime rates in DC vary, depending on the type of crime, generally between two and five times the national average.
Moreover, poverty is far more pervasive in DC than in the rest of the country, and, crime rates in DC vary, depending on the type of crime, generally between two and five times the national average.
From somebody who lives in D.C. now and has lived in several other places to compare by, I can tell you that for all practical purposes, that just isn't true. The statistics you cite, while perhaps factually correct are basically meaningless. D.C. is not a very diverse city from a socioeconomic standpoint. There are basically two sides to D.C.- a metro area where everything looks new and clean, people are well-heeled, and housing is expensive. Ballston, Arlington, Georgetown, DuPont, Bethesda. They are all just expensive variations on the same theme- one community after another of well-paid, highly-educated people.
Outside D.C. on the eastern and southern edges just inside Maryland is the D.C. that brings those averages into the territory you are citing. They add no practical value to a discussion of the city's economic health for those fortunate enough to not have any exposure to that side of the city. To consider that relevant to the discussion is like saying the average pay in a Fortune-500 company is $50k to counter the point that C-level execs of a Fortune-500 company are overpaid. While it may be statistically accurate, it is for all intents and purposes a meaningless data point in the discussion. What a first-year business analyst earns has absolutely fuck-all to do with what the CEO earns.
The assumption I'm making is that a person who has above-average skill will do exceptionally well in an economically-strong area like D.C. when compared to a city with a small or sluggish economy.
I think his formulas are based off of assumptions that don't fit reality for people. A good example is lifetime stock market average. I did a study recently where I tracked the date and cash amount of every retirement contribution I've ever made, and pretended I simply bought an S&P-500 index fund on each of those dates. I then calculated my lifetime APY, and it was nowhere near the averages that the magazines claim. I've been a pretty consistent retirement saver but the point is that my savings past tracks what is probably true for most people - I've had more to save in years where times were good (and the stock market was higher), and less to save in years where times were bad (and the stock market was lower). When you take the same formulas that he claims as gospel and plug in more reasonable "stock market average performance" each year, you get vastly different conclusions.
The standard figures are definitely optimistic, but when you check your returns make sure to include dividends reinvested. In recent years, they're good for about 2%/yr if you buy something like the S&P 500.
I find it somewhat baffling how many financial tools ignore the effects of dividends when calculating returns.
It is a good point - first time I ran the numbers I realized I was missing them, but now my numbers use the "adjusted close" from yahoo which take dividends into account. As of today, my all-time APY would be 6.02% - lower if you take inflation into account. And it's worth noting that almost all of the time before now would have had a lower APY than that.
Using the adjusted close assumes that you put your dividend receipts into a mattress so it's still slightly low, but I doubt that's more than .1% or .2% for a typical portfolio over a moderate timeframe.
I wholeheartedly agree with you that it's dangerous to bet your retirement on a level of return that many won't achieve.
Actually, can you explain that more? Since yahoo adjusted close says it takes dividends into account, I took that to be the same as immediately reinvesting your dividends in the same holding. You're saying that instead, it's the same as issuing the dividends as cash and then forgetting about it?
If so, then how do people actually backtest long term holdings to assume reinvested dividends? As far as free historical data sources, I thought it was basically yahoo or nothing.
Nice article, since it's very similar to what I did. However, I had to work 11 years longer for it. I guess I wasn't as well paid, or not as efficient. Also, after 6 years of retirement, I don't know yet if my situation is completely stable. Low interest rates and continuing inflation may take a toll. Real estate investment just isn't a sensible option where I live, so I rent.
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[ 3.3 ms ] story [ 252 ms ] threadFor me, I think my satisfaction with life jumps dramatically the more I feel like I have control (shocking, I know).
I got laid off a few years ago an had two months severance. I floated on it, but I think I did more coding and reading, and generally had more productive time than when I was at work.
I'm by no means in the MMM league, but I've had jobs where I couldn't quit if I wanted to, and I hate that. The psychological freedom that comes from knowing I could up and quit if I needed to, even on principle, is so much more satisfying to me than what I could buy with the money I save.
I can imagine knowing I could up and quit... forever.. would be pretty awesome.
I am glad that about half of HN doesn't fall for this guy's Rich Dad Poor Dad schtick. The other half, though...
http://www.mrmoneymustache.com/2012/11/01/our-new-237-per-mo...
http://www.mrmoneymustache.com/2011/09/21/i-can-never-retire...
I've heard of some realistic pre-existing health conditions that required $600+/month for specialty meds, but if that $7000+ per year is enough to make the difference in your 'retirement', it wouldn't be too bad to get a part time job to cover your cost.
Expensive. No way around it.
It seems low, but not that low, at least relative to how much I pay as a 20-something guy scaled to three people.
Let's play dueling anecdotes.
$300 a month was right around the cost of my COBRA premium for a group plan covering myself only, circa 2006.
$150 a month was what I paid as for an individual plan in my mid 20s circa 1998, and that was for a plan with relatively spare coverage and high deductibles. Perfectly healthy (arguably above average), living in a community that was also arguably above national averages for health statistics and below national average living costs.
I'm very skeptical of the truth of any claim that one could cover a family at $300 a month. Especially in 2013.
Heck, I'm somewhat skeptical that there are people out there nowadays who've been able to buy reasonable coverage on the individual market at all. I know people who don't have to worry much about money but who've still found it a hassle to get insured.
Not to mention that you need to somehow figure out how to rent an apartment for three in SF for less then $300 a month.
[1] http://www.mrmoneymustache.com/2012/06/21/i-just-gave-up-400...
So technically the blog money was somewhat covered in the article, though in a way that I agree is likely very misleading.
As a "living frugal guru" you can't exactly come right out and say "Also, I'm making a bunch of money by selling advertising to you all", though it is almost certainly the truth.
I pay ~600$/month to have a 4 1/2 apartment close to a big-chain supermarket and all necessary amenities. This includes the Hydro bill, the fridge and oven-stove. I have an interior pool. Yes, at that price. Food is about 500$ a month. Internet a further 60$, for a 30/8 Cable pipe.
I'm about 200km from Montreal, close to a university.
He says he lives in a four bedroom four bathroom house. And he says he lives in what he believes to be one of the nicest neighborhoods in Longmont. His wife also states that the house has around 2600 square feet. That means the house is worth at least $200k. I would suggest that it would be worth at least $300k if it was older. You could get a little bit bigger house for $400k though. I wouldn't say that Longmont is an expensive place to live, it is definitely a lot cheaper than its neighbor Boulder, but I would say there are a lot of cheaper places to live.
http://www.mrmoneymustache.com/2011/05/11/the-elephant-in-th...
From the article: Our bread-and-butter living expenses are paid for by a single rental house we own, which generates about $25,000 per year after expenses.
One nit, perhaps, on that - is the rental house completely managed by someone else? If not, I assume there is at least some minimal amount of work associated with being a landlord... so I would hesitate to call him fully retired, such that he does not need to do any work for money.
The other thing I always think when I read articles such as this - if everyone took such advice and eschewed purchases (cars, lattes, drive-throughs, etc..), I would imagine unemployment would increase dramatically. However, it is safe to give such advice, because it is enough of a sacrifice / delayed satisfaction that it is unlikely to get enough people following the advice to negatively impact the economy. But someone needs to buy the stuff that is made, for the makers to have jobs!
I could sell all of my bussiness, I could lease the buildings, and retire. But doing nothing is the hardest work I've ever do. I took a sabatic year after I graduated from college, traveled around the world, fucked some really beautiful girls, and after livining a dream-life, my life became quite frustrating.
This guy wont last too long retired, because, after all, he will just grow tired of playing golf, and doing nothing.
2. He (MMM) is 39 now, he's been retired for almost a decade. The article addresses "doing nothing", he does lots of things.
Started developing web pages just for fun, took control of the family bussiness at a very early age, and today I'm what most people could call a rich guy, way more up on the social ladder than 10 years ago.
Retiring as this guy has been an option since the day I born, I just born in a "goldend cradle".
When I graduated from College / Grad School (I'm from Mexico, things work somewhat different here), I had been developing web pages and software for about 9 years, and I was tired of dealing with customers, providers, and programming at all.
I tried very hard to retire. I traveled around the world, meet some wonderful people, then I returned to my home town, played tennis, frontenis, golf, I went party all night every day I could. And it was one of the most tedious works I've ever done.
After about 15 months, I was tired of my "great life", and I started working on the family bussiness.
It's been the best thing on my life.
I'm still single (almost 29 right now), I've already purchased my own house, the company is growing every day more, I feel so happy I can't even explain it.
I could sell all the machinery, lease the buildings, and go back to doing nothing, but, really, working, is one of the biggest pleasures of life.
EDIT: On your definition "retirement to be a lack of reliance on work to live." I've been retired since the day I born.
I think he probably does more than play golf and do nothing
Enjoy your own successes and whatever makes you happy, but don't take the success of others away just because they take joy in different things to yourself.
I downvoted you for this crass sexist drivel that drags down the level of discourse.
If it was about guys, written by a make poster, would you have downvoted it too ?
Where exactly is the crass sexist drivel ? the "fuck" word ? Upvoted both you guys to compensate. Context is important.
Here the poster only said he was intimate with members of the oppositive sex, who were attractive. Nonthing crass, just fact contributing to the discussions and saying why he recommends against that.
Also it sounds like he leads a pretty lonely life IMO, and he sounds like he has some ego issues. If he is truly happy though, fair play, but I don't really believe that is the case...
Oh there's something to be said for living within your means, certainly. People seem to waste a lot of money on things that don't really make them happy. But it seems to me that people with relatively high areas of local utility probably shouldn't start talking about how everyone can act - their solution may not scale well.
It's not full time work, but it can take up quite a bit of time in spurts -- especially if you do maintenance and repair work yourself.
It's a strange combination... He got the investment income is the secret part, but then seemingly stopped at the earliest opportunity. It just seems lazy. I agree with him that spending more than you make is irresponsible, but I also think there's a happy medium where you can both have a coffee and a retirement account. You're not taking any of it with you anyways, might as well enjoy a few moments of it.
I think we have to be very careful in a society that promotes living in such excess. It's a hard balance to find between casting off all expenses to the point that it becomes frugality for the sake of being frugal, and frivolous-spending yourself into debt.
I think the great depression and the shortages of WW2 were hard on him in ways that I just can't know.
http://www.mrmoneymustache.com/2012/07/27/youll-never-be-nor...
Does being stressed out and anxious over driving a few miles and spending some money on ice cream really sound like a happy life? If you take spending to the extreme and don't live within your means, you'll be stressed about how to make ends meet and pay your bills. But at the same time, if you take frugality to the extreme, you're just trading that for being stressed over spending too much money.
Life is short. Be smart, keep a good balance and enjoy yourself.
But people are different and I get what you want to say.
My car was stolen once and I went about 2 months without using it. I had insurance and they gave me a rental, but I ended up never going to pick it up. The police found my car eventually, undamaged.
The city has recently built an abundance of biking and walking trails for this reason and is very friendly to bikers, even on the main roads.
http://www.mrmoneymustache.com/2013/01/21/exposed-the-mmm-fa...
That said, everyone has to choose their own acceptable level of risk.
Edit: Plus you can argue that biking all over the place decreases his risk of dying of heart disease or similar later in life, which may balance out or outweigh the risk of dying in a vehicle collision.
Obviously, if you do plenty of exercise already, this may be more of a moot point, but if you are even slightly overweight or unfit, get on your bike.
But it's also hard to argue with the reality that, if you eschew stupid expenses and live frugally, you can very rapidly build up a very healthy savings. Given that, it's trivially easy to retire by 50 or even 40 for most people; for a software developer (like MMM), it's quite possible to do it by 30.
Honestly, though, I would argue that his plan gives him a sense of false security: no one knows what the economy will look like in ten years, let alone twenty or thirty, and building his retirement on the assumption nothing drastic will change in it or his personal life is folly.
And he spent the first... seven or so years of his working life in some soul-sucking corporation. That's a shit load of time wasted. So his problem?
I'd say it's that he retired too late.
If you take his definition of retirement as "having enough money that you can do what you want to do," all you probably actually have to do is save up 100k-200k, plus or minus a bit. That's because most people want to have some integration into the economy; they just want it on their terms. And integration into the economy means you're getting paid some amount. Given a fluid nest egg to last you a frugal decade or so really gives you all the financial security you need. (Of course, shit can happen, but any shit that can burn through that kind of nest egg is likely to ruin whatever plans you have anyways.)
If you have $200k saved up at this point and no real commitments but have grand plans for how you'll retire sometime in the next five to ten years and then do what you really want to do--teaching, or open source projects that interest you, or traveling around the world as a photographer/blogger--more likely than not you can do it now, within a year. You should. Money will come to you, and there's no reason to put off your dreams.
It probably does mean having housemates and being careful about where you choose to live, but it's imminently doable.
Since then. my life has changed a lot, to the point where the confidence in predicting my expenditure is wearing off. I'd describe it as a slightly panicked feeling of having to work harder, since I'm trying to cover the worst possible situation that my mind can invent. I probably should invest the time to collect another set of hard data...
There are folks here who have achieved true financial independence by building and selling companies or producing 'lifestyle' businesses that continue to churn out cash without much daily involvement. I find stories of their experiences much more valuable (and educational) than someone who has simply moved the goalposts closer.
[1] Not to mention that doesn't leave a lot of breathing room if you run into an unexpected, expensive emergency situation (e.g. medical expenses).
But it sounds like he's got emergency cover. Plus with his blog he's adding new revenue.
I don't get why people on here are so negative about it. Don't be bitter because you live in the valley and spend 2k+ a month just for a crappy apartment. It just sounds like this guy values his time more than money. He might not be spoiling his kids with tons of toys or free college, but at least he is there for them. I'll warrant many of the entrepreneurs hackernewsers look up to don't spend nearly as much time with their family as this guy. Their too busy making money as a way to keep score in their "life." This guys just living his life.
Some people, in my experience, really enjoy being frugal. Having a wad of cash in the bank is what makes them feel secure and happy. Others, not so much. To each their own.
One nice thing, being able to live reasonably happily on $25k is nice to see if nothing else than that's probably what a lot of today's middle classers are likely to get in SS benefits down the road. And given the dismal savings rates, that's a fine thing. The trick is to pull it off you need to have a paid for home and live in a relatively affordable location.
Of course that's another thought, retiring at 30 means your SS benefits are going to be small or non-existent. If this guys rental properly burned down and his investments tanked, that could turn into a pretty bad situation someday. As much as I hate to rely on SS for retirement it's the closest thing to a guaranteed income many of us are going to get, and retiring early means opting out of that.
Yeah, but that's one of the constraints I'm talking about. There are many worthwhile places to live on the planet that would be out of that range.
> I don't get why people on here are so negative about it. Don't be bitter because you live in the valley and spend 2k+ a month just for a crappy apartment.
I'm not and I don't. :) He just happens to be espousing a (rather extreme) philosophy that I disagree with, and I think people might want to think twice before following in his footsteps.
I agree with you that people that spend so much time at work that they don't have time to spend with their family should probably think twice about that too. Just because I said I disagree with one extreme doesn't mean I agree with the other extreme!
I assume they have savings for that, but it doesn't sound like they have any bandwidth for saving. Does it all depend on the market?
Anyway, too risky for me, but good for them.
I am nomadic. I have no dependents, and a severe case of wanderlust. My impression, after many conversations on the matter, is that this is a mild form of insanity. I think that I have my lifestyle more or less sorted out at the moment, but I have in the past been more or less willing to trade stability and an income above the poverty line for the freedom to search for a place that perhaps I want to live. I'm from Alaska originally, and don't particularly enjoy or identify with the rest of the US, so hopefully this is at least somewhat understandable.
I digress. I know exactly the kind of perspective from which $25k per annum is considered wealth. I also know the freedom that comes from not being owned by possessions -- and I hope that MMM does as well. You can still practice accumulation on a budget, but it's hard to see that as a healthy motivation. Being rich is not dying with the most toys. Although I don't believe the majority the HN community would agree with that sentiment.
To be a nomad, you are forced to make a very deliberate choice about every possession. Each one adds a burden that must be carried to each new place -- quite literally carried, in my income bracket. There is the temptation to transform this practicality into a moral virtue, but there are many other reasons besides.
On the other hand, there are many virtues in accumulation. Besides the advantages conveyed by a visible display of wealth, owning many things serves as a buffer against misfortune. Consumer goods provide pleasure, and capital assets can be themselves a source of profit.
I feel like I should be the most fervent disciple of MMM, and yet I would say instead: neglect not your comforts, nor your consumerism. The trades you may make in pursuit of a purer life, are at the least uncomfortable, and at worst dangerous. Poverty may be virtuous, and while you may yet find that virtue, seek it not for its own sake. If your charity compels you to be poor, accept that with good heart, and do not be miserly no matter how much you own. If, alternately, you are not compelled towards sainthood, at the least enjoy your comforts in the knowledge that you are living a blessed life, which may like as not never come again.
I am also nomadic, although yet a university student, still making it eventually possible working in an industry capable of earning over $100k per annum. Nothing would change if it was not as prosper.
Right. It also happens to those who get lucky in the stock market, and chose the right job at the right time.
http://money.msn.com/retirement/article.aspx?post=dd544488-f...
I was able to save more: $5,000 into the retirement account, $3,000 into an employee stock purchase plan, and $10,000 in cash. Year 2 'stash: $23,000 ($13k cash/shares, $10k retirement).
Year 3: This was late 1999, and both the job and stock markets were on fire. I cashed out the stock purchase plan shares from Year 2, which were now worth $10k
The investment gains on stocks started accumulating, adding about $10k to our earnings this year. So we still ended up increasing the savings by close to $100k after tax. Year 5 'stash: $250k.
Investment gains on the existing savings contributed another $20k. It is complicated to remember what portion of income was taxable salary, and what was nontaxable gains inside of retirement accounts and such. But a reasonable estimate of the total is Year 6 'stash: $365k.
Year 7: No increases in salary, but similar amazing earnings and moderate spending, combined with $30k of investment gains. Year 7 'stash: $490k.
I wonder why more people don't do this.
I read another blog, I think it was a different guy, who talked about how he did this by living on 30% of his income and putting away the other 70% and then went on and on about how anyone could do this. Of course, he made about $300k a year. He talked about how even if you make way less than this you can still do it, you just have to be willing to live on 30% of your income. That's easy to say when 30% of your income is more than 100% of most people's income...
These people had/have income issues, not spending/frugality issues. In one case, one family moved to get a better job and is now at something like $45-$50k - still tight, but doable.
I feel with those conditions, his "advice" for retiring early has a huge asterisk.
Just to scratch my own itch, I've built a finance independence calculator for my daydreaming needs
http://yourdream.io
It's also worth noting that he didn't do this as a single person. A few years in the combined salaries of him and his wife were approaching $200,000.
Even if he had $0 in investment gains he would of been able to do this at 33-35 instead of 30.
http://www.mrmoneymustache.com/2011/09/15/a-brief-history-of...
http://www.mrmoneymustache.com/2012/06/01/raising-a-family-o...
It's important to keep in mind that his goal was to end his reliance on a full time job for income as quickly as possible, full stop. He did pretty much everything in his power to reach that goal, and it's clear that he's very dedicated.
For anyone who glances at this interview or at his blog and thinks, "I'd like to do that," make sure you read the two posts above first. If your idea of retirement is fuck-you money, a yacht and a summer home in the Hamptons, his advice isn't going to work for you - although his blog provides a good opportunity to gain some perspective on how people not like yourself treat money and what they consider the ideal retirement to be.
http://www.mrmoneymustache.com/2012/07/27/youll-never-be-nor...
http://www.mrmoneymustache.com/2012/07/22/protecting-your-mo...
It seems as if the lifestyle has colored their ability to enjoy things like going out for ice cream, or dinner with friends.
Then I moved to Brazil where there's plenty of cheap or free things to do and I went from going out almost never to going out up to 4x per week. Now I'm living in Portugal and, strangely, it's the same as Brazil. Plenty of ways to go out and spend $15 or under. On the flip side, of course, there are plenty of ways to spend way more per night out.
I get it, he has options and choices and that is an ideal. If I wanted to retire right this very second, I couldn't. But you know if my wife wanted to give birth right this second she couldn't. It requires about 11 months of planning and prep work and the fact she hasn't put that time in already is in no way a bad thing or a disadvantage for her. She LIKES splitting a bottle of wine with me at dinner and eating seared tuna and ice cream desserts and coffee and dirty martinis. So, not yet, for us.
I just wish he could be a better advocate for his extreme frugality and savings lifestyle without building it on criticizing the alternative with every other breath. (And even if some things aren't strictly criticism they are de facto criticism by painting them in a less then gracious light.)
Personally I don't care if he judges me. He's living within a few tens of percent above the poverty line (based on his comments in this article). Of course the lifestyle of someone spending even $40k a year is going to seem wasteful to him.
Huh? If it is true and it rubs some people the wrong way, is that bad?
> He's living within a few tens of percent above the poverty line
I'm not sure what living a few tens of percents above the poverty-line really means, unless you mean tenths of percents? Still, that is not what poverty is. There are more than enough people in the US living in actual poverty but I'm pretty sure this guy has it pretty good. This is because, and that is part of his message, that how good you have it in life is only in so far dependant on how much money you have to spend. It depends on all sorts of factors of relative wealth, of which he has collected a great amount in various ways.
Do you go around telling ugly people they are ugly? Fat people they are fat? Dummies they are dumb? Why not? Is it because it rubs them the wrong way, despite it being true? Is it wrong for them to feel that way, even if you are right? IMO it is neither wrong nor right to feel that way. It is just how you feel.
> Tens of percent
I meant tens of percent. According to the numbers he posted he's something like 20-30% above the poverty line. That's a few (3ish) tens of percent.
First of all, the question of retiring is somewhat problematic. Ask the typical person if they could retire right now, what would they do? Doing leisure activities, going on trips, relaxing, etc. can only take one so far. As human beings we need to be productive (no matter how that is defined) for us to lead a healthy life.
I believe the bigger issue is freedom. MMM's approach is very extreme and works for him. I do believe he lives on much more than 25K and works very hard. To him, the work he does might not classify as work. This is freedom for him. He is building a brand and knows how to market his brand.
The big difference I would suggest is that he is absolutely debt-free. American consumerism and lifestyle, to some extent, is driven by credit. Getting a credit card has become a rite of passage.
I like to follow the Dave Ramsey (http://www.daveramsey.com) philosophy (I don't agree with all his advice but most of it is pretty sound). I've just come across Dave over the past year and I find his message and life story inspiring. His message is simple:
1) Get out of debt (goal is to be entirely out of debt - including house). Only acceptable debt is mortgage debt. 2) Cut-up your credit cards (I don't. Having self-control with this is a big part of it) 3) Save 3-6 months emergency fund 4) Invest 15% every year for retirement 5) Save a percentage for Kid's college 5) Buy a house that is within 25-30% of your monthly income 6) Buy cars, boats, etc (ie. toys) that is no more than half of your total income (at most) 7) Invest your money (He's a big believer in mutual funds which I believe ETFs are now a better choice) 8) Most importantly, stay out of debt.
In this way, if you are making 100K a year or more going out for a $200 dinner or a $10K trip is fine since you are out of debt and all the major priorities are covered.
In some sense, MMM's message is the same as Dave's but the difference is that Dave is a multi-millionaire and works just as hard as he did when he wasn't. He has no qualms about going out for dinner and spending $1000 as this puts no dent in his net worth.
There are plenty of ways to stay productive, even make some money, but when the money is just a bonus and not necessary for mortgage payment it makes a big difference.
Hello my friend! Care to share where?
I'd like to meet with fellow Caribbean entrepreneurs. I'm from Martinique, FWI. We do some good stuff too, yet I thought most of the scene was in T&T or Jamaica. T&C - why no!
Nice to see some people from the Caribbean here though. I'm from St. Maarten but I currently live in Canada. Do you know of any places where I can read more about the tech scene in the Caribbean?
Try linkedin - many groups are announced there. Most are "empty" (as in just full of spam), but some can provide you with links to an existing scene.
As usual, the odds are higher where you have a bigger population. From SXM I'd recommend you get in touch with groups in Guadeloupe. There's a good lug, and quite active wifi/HAM style project.
Get in touch by email (in my profile) if you want more details.
I think there is a side-effect to this, where people see what MMM is doing and take his advise to the extremes, failing to full think through their own personal situation. These sort of teachings tend to build some cult-ish/guru-type followings, but I think for the vast majority of people, the messages resonate on some level that allows them to either think about their spending choices more, or cut back.
I see what he ultimately advocates as more of a "think about how you're spending your money" rather than "don't spend money".
Requiring everyone to water down their opinions in order not to offend anyone (usually code for people with mainstream views) is truly offensive. In civil society we can all hold opinions and are able to express them. This is why democracies work so well -- at least better than all the alternatives!
I'm a bit older than the average reader here, so perhaps I'm biased. It seems to me that many people raised in the toxic and simplistic battles between left and right in the US media don't seem to have much of an intuitive sense of civil debate. I think the lack of good examples may be one reason.
In short: People have different opinions. If you don't agree, feel free to speak, but be civil.
He's judgmental about people who want to retire, wish they could save up money, have boatloads of debt, and complain incessantly about how unfair life is when they keep taking on piles of debt making luxury purchases and mismanaging their lives. That's all.
As long as you're happy with your lifestyle choices and either 1. Make enough to be able to retire comfortably when you want to or 2. Won't complain when you're broke and impoverished in the future, then good for you!
I'm disappointed, but not surprised, by the animosity here. Too many HN posters seem to be obsessed by hitting it big monetarily, instead of developing exciting projects. Is it that mysterious to value freedom from monetary worries so you can focus completely on the projects you think are important, for whatever reason? Seems to me that is exactly what MMM is doing.
Wealth is relative. You can increase your own in only one of two ways- either earn more or spend less. Obviously his advice is the latter, but if you fall into the former category (and let's face it, if you're a frequent visitor to this site you almost certainly are) then that is probably terrible advice.
I happen to live in D.C. and I can tell you that things are very good here. The job market is one of the hottest in the nation, real estate prices are astronomical and ever-growing, and most people you interact with around the city are above-average wage earners compared to the rest of the country.
Yes it is expensive to live here, but a rising tide lifts all boats. If you want to prosper, it helps to sell in a market that is ripe with people who have the means to buy what you are selling. That could be your skills if you are looking for work or a product or service if you are trying to get something started. All things being equal, a strong economy helps all participants. If you move to the middle of Kansas, chances are you'll spend a lot less, but you'll probably earn a lot less too.
From somebody who lives in D.C. now and has lived in several other places to compare by, I can tell you that for all practical purposes, that just isn't true. The statistics you cite, while perhaps factually correct are basically meaningless. D.C. is not a very diverse city from a socioeconomic standpoint. There are basically two sides to D.C.- a metro area where everything looks new and clean, people are well-heeled, and housing is expensive. Ballston, Arlington, Georgetown, DuPont, Bethesda. They are all just expensive variations on the same theme- one community after another of well-paid, highly-educated people.
Outside D.C. on the eastern and southern edges just inside Maryland is the D.C. that brings those averages into the territory you are citing. They add no practical value to a discussion of the city's economic health for those fortunate enough to not have any exposure to that side of the city. To consider that relevant to the discussion is like saying the average pay in a Fortune-500 company is $50k to counter the point that C-level execs of a Fortune-500 company are overpaid. While it may be statistically accurate, it is for all intents and purposes a meaningless data point in the discussion. What a first-year business analyst earns has absolutely fuck-all to do with what the CEO earns.
The assumption I'm making is that a person who has above-average skill will do exceptionally well in an economically-strong area like D.C. when compared to a city with a small or sluggish economy.
I find it somewhat baffling how many financial tools ignore the effects of dividends when calculating returns.
I wholeheartedly agree with you that it's dangerous to bet your retirement on a level of return that many won't achieve.
If so, then how do people actually backtest long term holdings to assume reinvested dividends? As far as free historical data sources, I thought it was basically yahoo or nothing.
My apologies for the confusion.