Comment by joeax
9 years ago
I've been reading his blog for a few years, and he does some have some insightful advice on shedding unnecessary expenses and living on a frugal spending diet. I've been able to get down to one car that is almost paid off, and double my savings and investment portfolio. My favorite article from him is living close enough to work to bike (although working from home is most ideal).
However, his blog comes with a bit of smug (calling himself a "cult", or "Good news, there's a recession coming"). His faithful mantra of "retiring at 30" is a pipe dream unless: (1) you have a big income i.e. $200k per year by the time you are 25, (2) have a software engineer wife that makes as much as you and have no kids, or (3) inherited a large sum to begin with. All of his case studies are about him and his wife who were pulling $100k before they "retired", or the lawyer who was pulling in $160k a year at 26. Kudos to them, but good luck trying to retire as a welder or car mechanic making $50k.
MMM is too smug and pushy for a good portion of the general public. His writing can awfully hostile, it could be toned down a bit and his message would get further - some of his advice is very sensible.
The problem with frugal blogs (in general) is they do one or more of the following; push penny pinching 24/7, "if you aren't eating lentils everyday and living in a cardboard box you're fucking up," they are too condescending, or they are only applicable to the already rich/privileged, like Mitt Romney's "just borrow 10s of thousands of dollars from your parents to start a business, easy!," and are out of touch with they "everyday man," or fail to recognize that people are different than them.
I think I could write a blog that is more accessible, I have experience being both very high income and very low income. It's such a saturated market though I doubt I'd get any readers. Maybe I'll do it just for myself some day to formulate some of the thoughts I have on the topic.
I think MMM knows his audience, it isn't for me but I can imagine many people do get something out of it.
Really the main problem is there just isn't much to say, spend less than you earn, invest the difference, develop some self-sufficiency.
I didn't know what "spend less than you earn, invest the difference, develop some self-sufficiency" meant 15-20 or so years ago though, they were just words. I didn't know what a 401(k) was, I didn't know what an IRA was, I didn't know what a brokerage account was, I didn't know what a mutual fund was, I didn't know what an ETF was, I didn't know what "equity" meant, I only had a vague idea of what investments were, I didn't even know what the stock market was other than "its something to do with money."
Plus that advise isn't applicable to everyone. A college student doesn't have the same finances as a dual income couple in their 30s with two kids. Someone with a $70k income has much different prorities than someone with a $30k income. I think finances is a journey, not a destination.
I think one of the first tenets of financial freedom/independence is figuring out life priorities, not everyone is going to have the same spending because everyone really enjoys different things. Oftentimes people don't even know what they really enjoy and where their spending brings them most life satisfaction so it requires a lot of self reflection and communication/negotiation with family members and maybe questioning cultural norms and expectations. I don't think that financial independence/frugality should about hording money so much as it should be about making your money work for you in the most optimal way possible.
There's also nuances to discussions about money like how it affects interpersonal relationships (and not just romantic ones) and the psychological aspects of money and spending.
You have a good point about him "know[ing] his audience" though, so thank you for pointing that out.
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I personally enjoy his style. MMM is clearly a character that he plays and is deliberately provocative. There are other more level headed financial independence blogs out there but I don't find any of them as entertaining as MMM.
> I have experience being both very high income and very low income.
See, I could do the same thing, but the blog would really boil down to a single post - "stop fucking around and just learn web dev." I really don't see a more accessible route to go low income to high income.
MMM does have this:
http://www.mrmoneymustache.com/2013/07/25/50-jobs-over-50000...
Web dev is great for a lot of people, perhaps not for everyone.
As for MMM is general, I personally love his style. I remember back in grad school, I stumbled upon his blog, I think from an HN comment. I was hooked. I read through years of blog posts in a few months. I probably factored heavily into my decision of not going for the PhD (stopped at MASc).
Although I still think he makes a lot of good points, my take on frugality and my personal finance goals are a bit more, um, nuanced these days. For anyone who'd be interested in a quick intro to his core ideas, I highly recommend this 28 min talk, it's a really fun watch:
https://vimeo.com/183016901
My comfort zone with regard to frugality is much less extreme than MMM's. Probably nearer Dave Ramsey's part of the spectrum.
I like the MMM blog because it's a good source of concepts/tips to try, but you don't have to treat it like gospel. For example, the DIY home maintenance and investing tips resonate with me, but the "rewards credit card" not so much.
Also, doesn't take into account healthcare costs and things like hurricanes and floods and disasters that afflict a lot of people.
> Also, doesn't take into account healthcare costs
See http://www.mrmoneymustache.com/2012/11/01/our-new-237-per-mo... and http://www.mrmoneymustache.com/2011/10/17/its-all-about-the-...
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It's hard to effectively criticize consumer culture without sounding hostile to consumers. It would be worse for his persuasiveness to err on the side of appeasing the dominant cultural sentiment.
He has several rentals and lives off other families. We can't all do that. It's not a real, scalable solution. It's not genuine.
He does have rentals. But he doesn't live off that money. He's done income reports (see this one from 2016[0]) that show where the money comes from and where it goes.
[0]: http://www.mrmoneymustache.com/2017/05/19/2016-spending/
Personally, I find rent-seeking landlords to be an unethical pursuit. I know that's not a mainstream thought, and is the underpinning of many people's income strategy ... but I can't support the idea of letting a family live in a property for decades, and then something happening, and they're on the street with nothing to show for the tens of thousands of dollars they have given in rent.
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I would assume that an important part of trying to retire early is to choose a career path that doesn't max out at $50k per year.
From what I've seen he suggests two things are necessary to retire early: 1. Save lots of money (which requires making money that you can save). 2. Don't spend lots of money. He seems to be pretty transparent in how he does both. If you want to save lots of money, but choose a career that leads to a $50k a year job, it is necessarily going to take you longer to retire than someone who chooses a career that leads to a $150,000 per year job. I'm not sure that makes it a pipe dream--just that if your time horizon is going to be different based on the decisions you make.
$50k earner and $150k could have the same retirement schedule if they have different lifestyles. If both can live comfortably on the same proportion of their income, then they can retire at the same time. If both had expenses that were 50% of their income, for example.
If both want to live a lifestyle where they spend $75k, then the lower earner will never retire.
>good luck trying to retire as a welder or car mechanic making $50k.
Maybe you don't feel the need to retire at 30 when you are a car mechanic.
I've worked in car shops (not as a licensed mechanic) and the mechanics I worked with seemed to have a lot more fun and more free time than us office jockeys despite our 'better jobs.'
And the pay wasn't half bad either.
I personally think this is the healthier way to live. I mean all power to somebody who can be in a financially beneficial position at the same time as doing what you love...
but one's place in society is not (or at least shouldn't be if the society is healthy) an isolated position. There's that old phrase "no man is an island". I understand I'm probably applying it outside of its original context, but it works just the same. Society is an interactive and interdisciplinary thing and I think we probably have need of more auto mechanics, welders, construction workers, rescue workers, firemen, pilots, etc than we do financial blog writers. Of course, I still appreciate a diversity of opinion and there's nothing stopping a financially-sound fireman write a financial-advice and good-living blog.
Ultimately the whole retiring at 30 thing just reminds me of a Trailer Park Boys beer/plotline: "Freedom 35" (its not great beer, by the way)[0]. They work so hard and so terribly to try and escape the need to do any work, and their lives are so much worse off for it. Of course, they're a poor example of the strategy to be sure. I've worked beside warehouse types who ended up working overtime for 30 years with successful investments and all with the same dream, but they still wound up working an average of 60 hours a week for 30 years...
And I really think there are more blindspots than are even mentioned here in those kinds of ideas, though I appreciate how many people have chimed in to that general aspect already.
[0] http://www.lcbo.com/lcbo/product/trailer-park-boys-freedom-3...
I understand what you are saying (i.e., don't assume to know what a mechanic wants) and you are right. I think his point was that most people don't actually have the freedom to make that choice (live frugally to retire early).
That's what almost every one of these success stories, blogs, etc. are. They're very heavily weighted toward survivor bias and elide much context around being born into relatively privileged circumstances.
Fuck that noise.
A lot of people are born into "privileged" circumstances in america. That is one factor. Not the only one.
To quote MMM:
"Sure, privilege does exist, and it might make it easier or harder to inherit a company or win a senate seat. But it can’t control your choice to ride a bike, buy less shit, or read library books in your spare time and I argue that frugality is the most powerful factor in earning your independence. After all, most of my equally-privileged engineering coworkers are still stuck in the office to this day." - http://www.mrmoneymustache.com/2015/04/01/impossible-dream/
Maybe other bloggers were "privileged", but MMM grew up in a family that didn't have a ton of money, and he payed for his own college via jobs he worked as a teenager. In short, he worked his ass off.
I worked my ass off to get where I am financially. I grew up with low income, abusive, mentally ill, and alcoholic parents. I wasn't taught hardly any life skills and I had no "connections" of which to speak. I worked hard to get where I am now (I save/invest 70% of my income a year) but I don't for a second discount luck as a big part of it. Someone making similar choices as I did can surely have a different outcome.
Plus the biggest increase in my financial status came from getting married to someone who makes just as much money as I do.
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Sure, he and his wife clearly worked for what they have. Doesn't mean there isn't survivor bias (luck) and privilege at work. For example, anybody who can pay for their own college from jobs they worked as a teenager is privileged.
Take a look at his own story: http://www.mrmoneymustache.com/2011/04/08/mr-money-mustaches...
He doesn't say he grew up in a family without a ton of money. He grew up in a frugal family. In Canada, with a number of social support systems that simply don't exist elsewhere. He could attend a local University on his teenager job savings and had a good job waiting for him upon graduation. He and his wife found a fixer-upper they could afford to fix up. And so on. These aren't things that happen to or for most people. The suggestion that his experience generalizes is terrible.
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What's worse is when one of these "how I became a millionaire before 35" stories gets posted somewhere like Reddit, legitimate comments such as this one are heavily criticized as "you're just being mean(!?)" and "its because you're jealous."
I'm going to extend my comment. I've been reading James Altucher's books like "Choose Yourself" and his blog. Altucher's philosophy is somewhat similar, except he focuses on tapping into your creative mind and finding unique ways to supplement your income to the point that you're not necessarily retired, but doing what you love.
The goal then is not necessarily to retire, but to just get to a point where you are working for yourself and supplementing that with existing savings + a frugal lifestyle. That's basically what MMM/Pete is doing now with his blog. That is, I believe, how a welder/car mechanic/McDonald's employee can retire early.
> tapping into your creative mind and finding unique ways to supplement your income
One of the things I do like about MMM is that there's none of this handwaviness - it's much more straightforward: get a good job and be frugal.
It's great if you can come up with a good alternative source of income, but it's not easy and not for everyone.
> but good luck trying to retire as a welder or car mechanic making $50k
Retiring at 30 while earning $50k would be difficult. But retiring at 40 or even 50 is still relatively easy on such a salary.
Really? In the U.S.? Case study? Without kids and if you don't really spend any money on recreation or vacations (before or after retirement), maybe. Or if you somehow have a job that will give you a pension (with health insurance?) at 50, sure!
I suggest just reading MMM. It's all about savings rate. As an example, I live in Brooklyn, NY (one of the most expensive places to live in the U.S.) In 2016, I spent $32k ($24k was rent!) Assuming a $50k income, that'd be a ~36% savings rate, which requires a 23 year career.
Assume someone making $50k lives in not NYC, I imagine this scenario could be a lot better.
For a more extreme version of MMM, read http://earlyretirementextreme.com/. This guy (Jacob, who MMM mentioned in this interview) never earned much money (never over $50k prior to becoming financially independent), and retired after working 5 years. With a little creativity, most people can retire far sooner than standard retirement age.
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That's an exaggeration, even for frugal people. Retiring at 50 means ~30 years of working life finished and ~30 years of retirement remaining. At $50k per year * 30, that's $1.5m. Spread out over 60 years that's $25k per year before tax. I wouldn't say it's "relatively easy" to save for retirement, pay for healthcare, live somewhere safe, have children, etc. on that, even with investment returns over that time frame.
You're ignoring investment income. I suggest reading MMM. It's a trove of great information.
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Assuming you decide to not to have kids ;)
And assuming there are no bad events in your life which drain your savings, like health issues
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That depends greatly on where you are living and on whether or not you have kids or student debt. In plenty of places a 40 or 50K salary would be burned up every month even if you never did anything crazy.
This is more important than a lot of people realize. "Just move somewhere cheaper!" is the battle cry which ignores "It's cheaper because there's no real jobs there."
Few industries are as flexible about working from home as the software development industry.
To apply MMM's ideas, on a 50K salary assuming monthly expenses of 1,250 (that's the hard part), if you put away 50% every year you can retire on a 375K nest egg (4% safe annual draw) after 15 years, or age 37. Roughly.
Assuming you only live to be 80, you'll have to stretch out that $375k nest egg for a whopping 43 years of inflation, rising healthcare costs, and unpredictable market conditions. And God forbid you reach 80, run out of money, and then... keep living, old and frail and weak with no job prospects. FIRECalc suggests a probability of about 20% of running out of money by age 80 with a 4% annual withdrawal rate (adjusted for inflation).
Plans like this just seem downright dangerous to me.
On a longer timeframe you'll need to have a lower withdrawal rate, but not a huge amount more. The 4% withdrawal rate is based on the Trinity Study [1] which was looking at 30 year time periods. (edit: added the link)
Per cFIREsim, with "success" defined as having more than 0 dollars at the end of the time period
375k -> 84.62% success 425k -> 96.15% success 450k -> 99.04% success
Additionally, the median portfolio value at the end went from 650k to 1.1M to 1.4M.
375k is definitely cutting things close. But at the same time...
* you're always going to have unpredictable market conditions
* you're likely to get at least some level of social security (which is unaccounted for in the above numbers)
* pulling back the expenses even a couple percent in the particularly bad years has a huge effect on success. This is admittedly difficult at 15k/year expenses, but padding the 375k by 5-10% would do a lot to mitigate that risk as well.
* If things start going downhill in terms of market returns, you retired young enough that you can reasonably go back to work for a short period of time. Even working at McDonald's at 7.25/hour would be approximately sufficient to cover the annual expenses.
[1] https://en.wikipedia.org/wiki/Trinity_study
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Or god forbid, you work a little bit to supplement your nest egg during those 43 years.
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>>Plans like this just seem downright dangerous to me.
Retirement doesn't mean one sleeps 15 hours a day. It generally means one doesn't care much about the day to day financial demands of life and does what he/she always wanted to do.
If you give these $50K/yr people $400K at the age of 37, these people will very likely go on to a lot of other important things which can help them make more money.
when you retire @ 37, you can start to do yoga/tai chi religiously, 1-2 hrs a day, so when your 80 years old your not old/frail. And IF you are tired of material existence, you have the means to end your life internally by simply controlling your energy, sending it up your spine into your brain ;)
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Where are you LIVING on that kind of money? Even in a small town you're looking at probably at least $750/month for a place that's not a roach motel.
Estimate is off. $500 if the town is small enough. Additionally, typically lower-income people aren't trying to pay the whole of it (family lives with them and contribute).
May or may not be relevant in the context of this discussion.
FWIW you can buy a lot more than you'd expect for a small amount in very rural areas. Homes and acreage for well under $100k, which gives you a pretty small mortgage. Much, much smaller than $750.
I paid $220/mo for a room in Tucson during 2012-2013. Nice and big one-bedroom houses are close to the university are like 400-500 nowadays. Obviously having kids changes things.
In a perfect universe. But along the way unintended expenses happen, hospital bills, car accident, getting sued, or just drifting away from your original goals. Bottom line though is just keep saving, and don't worry so much about a hard date.
The difficulty with the bike thing, is that the closer you are to cities the more housing costs.
The housing expense often costs more than owning a cheap car.
He touches on that in this post (with numbers): https://www.mrmoneymustache.com/2015/07/27/rent-vs-buy/
Those numbers dont really work in the uk.
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He owns and rents several properties. Rentier activity like this pushes up housing costs.
Try to quantify each commute kilometer, for example, each km costs 1,000 GBP in lost time, car expense, and psychological damage. Plug that into an equation then ask yourself if it is worth it to live closer to work or not.
His blog also nets him hundreds of thousands of dollars a year. I'm sure that helps him feel smug and safe in early retirement.
https://www.newyorker.com/magazine/2016/02/29/mr-money-musta...
>>good luck trying to retire as a welder or car mechanic making $50k
I know a few people here in India who as cooks and welders have retired early. You have to ruthlessly put your interests on the top. Things like frugality etc, are qualifying conditions. But the necessary conditions are keeping an endless watch on your income, learning new skills and to a degree being able to move on from your jobs to ones that pay well.
That also involves doing things like getting into renting, and squatting useful real estate by buying way in advance and having others pay for your investments later.
In short you need to consider your financial interests as the only things that matter, and do what it takes. More often than not, it will usually create a situation where you trample on others along the way.
Why are those criticisms?
The top 5% of households earn over $200,000. That is a large and wealthy audience, that is equally as interested in retiring early as people making 50k. In the United States alone, the top 5% of earners is a large audience, and again, the wealthy audience that any blog, or cult, or merchant is looking for.
The people making 50k have to figure out the irrelevance to their situation on their own.
The people making 150k don't, as they are a hop away from being in the top 5%, and a hop away from learning what is needed to cement their financial independence.
What avenue is there to retire at 30 if you make 200k by 25? I must be missing something massive.
I'm not a subscriber to this strategy, but the theory goes that if you save, in that scenario, 80% of your take home pay (annually saving ~$100k, spending ~$20k), you'll have, say, ~$500k invested in 5 years and can safely withdraw 4%/$20k per year indefinitely. Then you can quit your 200k job, 'retire', and enjoy the same lifestyle as you lived while employed.
Personally I agree with the message about the power of saving to offer financial stability and independence, but I prefer saving reasonably while also trying to find ways to do work that I enjoy instead of saving super aggressively in search of an early retirement from a job I hate.
I agree with your approach and that is what I have implemented so far as well. As much as I would love to have the 40-60 hours a week I work back to myself, it is just much too difficult for me to live off of only 20k or less per year. I am not interested in living like that anymore, I'm too familiar with it.
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That's pretty much most of us. I couldn't imagine sitting around at 30 with nothing to do.
Depends on what you mean by "retire." Having complete financial independence is unlikely.
However a person with no debts or children can live a nice middle-class life as a single person or partner/spouse even in the Bay Area and still save $50k/year or more. With conservative investments that $250k in savings over five years can easily be used to have a few thousand a month in income. It won't replace a $200k per year salary, but it'd be enough to live very frugally in an inexpensive place. It's much riskier than having a salary, health insurance, etc. and I wouldn't advise it.
I see, I hadn't considered the "lean fi/re" approach. I guess by that definition you can retire much much earlier than you would think normally. I can't imagine living off of only 20-25k per year during my retirment.
If I live on $30k/yr (I lived comfortably on a less for years--Austin, not SF) and pay 30% in taxes (again, Texas is an exception this way), that's $550k after five years without interest. If you can then earn 5%/yr on that $550, that gives you $27.5k/yr to live on--and you've already been making it on $30k/yr...
Basically, learn to be comfortable on a reasonably low income. In the interview, he talks about biking as an example.
I've always been confused by single people struggling on much more than I lived comfortably on, and I recently realized part of it is that the average cost of car ownership in the US is something like $8k/yr[0]. (My first two years in Austin, I was in Americorps, so that would have been over 70% of my income.) That's just one example of a major expense we just treat as a necessity.
Maybe you don't want to live without a car. Maybe you want to go out to eat twice a week. Maybe you want a bigger apartment. Those are all fine--but those are also all choices that will raise your cost of living, which will likely push out your retirement age.
Personally, I don't mind working past age 30, but if you want to retire early, it will probably require arranging your life to live without things that might seem like necessities right now.
Again, totally your choice, and it might not be for you, but let me anecdotally provide that it's very possible to live a great life without a car, an expensive phone and phone plan, etc.
I'd recommend breaking down all your spending and looking at what you want to live without and what you don't. With things you can easily turn on/off (Netflix is easy to cancel for a few months, or biking to work for a couple weeks if you have a bike--car ownership or apartment size/location, not so much), experiment on living without and see how you feel. You might miss it and you might not.
Don't rely on my experiences, but don't rely on your guesses on how much you like the status quo either. (I guess that also means I should try renting a car and driving to work for a few weeks to see if I like it better than biking.)
[0] https://www.nerdwallet.com/blog/loans/total-cost-owning-car/
Yeah, I live in Houston and can totally see what you mean. I think I could reasonably get down to 30k and be pretty comfortable. I let lifestyle inflation hit me harder than it should have and that's what I'm dealing with now. I make better decisions than most, but not optimal decisions. (eg. I bought a car for 14k on an almost 0% interest loan, but the optimal choice is to not buy a car at all. The average choice is probably buy a more expensive car with a bigger interest rate loan) As I get older I realize the compounding sub-optimal choices really make a huge difference. I'm going to take your advice and really break down what my goal is and what my spending habits must be in order to hit that goal. It's definitely closer to FI at 40 than RE at 30, but at this point I'm not even sure I'll hit that.
> average cost of car ownership in the US is something like $8k/yr
The number you've quoted is about new cars. For used cars it could be 10 times less.
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He has good ideas but I agree with your arguments.
Also, is he retired? How much time does the blog consume? How much income does it generate?
You can read his blog yourself, but the basic idea is that he chooses to run the blog, he's not forced to for financial reasons.
He has enough income from invested savings that he is not required to have more income to maintain his lifestyle.
He had the money to retire before the blog got big, but yes he and his wife still work, but only when they want to.
Sadly, these days good luck trying to retire EVER making $50K.
its about living within your means... you can't afford new cards, $1000 cell phones, AND retire on 50k, but you can pare that back... Life is about choices.