Interesting how so many of the top comments thus far fall into a few categories:
"He did this at a time when the market was going up"... therefore it's impossible and I don't need to try doing this and it's OK to just keep doing what I'm doing.
"He could only do this by living in poverty"... which would totally suck, so I'm better off not doing this and just continuing the way I am.
"He can only pull this off because he's renting his house, which is totally still work and therefore he's not really retired"... so this is all made up and therefore not something I need to think about or potentially emulate.
How about instead, we look at some of the things he talks about: Live as cheap as you're comfortable with, save as much as you can, build a stack early on and get to a point where you don't need to have a full-time job just to pay the bills.
That's all very doable, and it will pay off very much like the author describes. I followed the same path (a few years ahead of the author), and ended up in a similar place in my 30s.
Rather than dismissing this as impossible, the critics here might all be better served by taking a bit of it on board.
While many of the examples are silly, I agree very much with all the advice to travel a lot. That takes money. Actually most of the things on that list go way beyond "live cheaply", and I agree with that.
Anyway, as my economics professor said in college. There are those people who plan out how much they must save for an early retirement, and there are those who live.
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.)
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.
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".
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.
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.
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!
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.
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 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 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.
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!
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 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.
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.
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!
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.
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
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).
His advice is solid, but you have to consider how much of his personal success was due to being born at the right time: graduating with an engineering degree in the low-unemployment mid-90s (prior to globalization putting heavy pressure on wages), then buying a house (actually, several) before the debt-fueled housing bubble made shelter a massive % expense for everyone under 30 living with fewer than 3 roommates. And also being lucky enough to enter adulthood in a period of low taxes, oil & commodity prices, when companies were still willing to hire & train non-senior engineers. etc.
Given the current state of the world - it seems quite unlikely that the average 21 year old US SW engineer graduating today will be able to replicate his results (~$500k within 7 years).
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.
For me, the most interesting part was: "Back in the day, I would just empty out my bank account after each paycheck and distribute it into my investments of choice: Vanguard's S&P 500 index fund, their small-cap value index fund, a bit went into paying off my mortgage early as well."
While he could have diversified further by including international stocks, this simple investment strategy was surprisingly sound. This is the real takeaway---not his philosophy of extreme frugality. If you follow a low-cost, diversified index investment strategy, you'll likely end up much further ahead than if you put it all in the bank.
And once you get past all the bad advice out there, sound investing is actually quite straightforward:
He gets a nod from me just because he isnt one of these financial self-help gurus who primarily makes his living by selling financial self-help products/services. I'm always staggered to see how blatantly chicken-egg some of these people talk about their financial freedom.
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.
A bit meta here, but I feel like its rude to link to a websites print feature. Sure its easier to read, has less ads etc. But those ads are the way the washington post is paying to write the content you're consuming. The thousand hits they just got from you are now purely a cost, instead of potentially revenue generating. The end result is that sites will either stop providing a print feature, or will start placing ads in them.
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.
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.
[+] [-] jasonkester|13 years ago|reply
"He did this at a time when the market was going up"... therefore it's impossible and I don't need to try doing this and it's OK to just keep doing what I'm doing.
"He could only do this by living in poverty"... which would totally suck, so I'm better off not doing this and just continuing the way I am.
"He can only pull this off because he's renting his house, which is totally still work and therefore he's not really retired"... so this is all made up and therefore not something I need to think about or potentially emulate.
How about instead, we look at some of the things he talks about: Live as cheap as you're comfortable with, save as much as you can, build a stack early on and get to a point where you don't need to have a full-time job just to pay the bills.
That's all very doable, and it will pay off very much like the author describes. I followed the same path (a few years ahead of the author), and ended up in a similar place in my 30s.
Rather than dismissing this as impossible, the critics here might all be better served by taking a bit of it on board.
[+] [-] Swizec|13 years ago|reply
While many of the examples are silly, I agree very much with all the advice to travel a lot. That takes money. Actually most of the things on that list go way beyond "live cheaply", and I agree with that.
Anyway, as my economics professor said in college. There are those people who plan out how much they must save for an early retirement, and there are those who live.
[+] [-] ChuckMcM|13 years ago|reply
[+] [-] encoderer|13 years ago|reply
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.)
[+] [-] avenger123|13 years ago|reply
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.
[+] [-] ssharp|13 years ago|reply
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".
[+] [-] PKop|13 years ago|reply
[+] [-] fnordfnordfnord|13 years ago|reply
[+] [-] wildgift|13 years ago|reply
[+] [-] intenex|13 years ago|reply
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!
[+] [-] jgmjgm|13 years ago|reply
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.
[+] [-] epo|13 years ago|reply
[+] [-] jckt|13 years ago|reply
[+] [-] nevinera|13 years ago|reply
[+] [-] Madrigal|13 years ago|reply
[+] [-] to3m|13 years ago|reply
[+] [-] guylhem|13 years ago|reply
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!
[+] [-] Evbn|13 years ago|reply
[+] [-] nlawalker|13 years ago|reply
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.
[+] [-] georgecmu|13 years ago|reply
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.
[+] [-] sethrin|13 years ago|reply
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.
[+] [-] palebluedot|13 years ago|reply
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!
[+] [-] kragen|13 years ago|reply
[+] [-] PKop|13 years ago|reply
[+] [-] jasonhanley|13 years ago|reply
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.
[+] [-] sebastianavina|13 years ago|reply
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.
[+] [-] jonknee|13 years ago|reply
[+] [-] acabal|13 years ago|reply
[+] [-] firefoxman1|13 years ago|reply
[+] [-] smm2000|13 years ago|reply
But people are different and I get what you want to say.
[+] [-] pmorici|13 years ago|reply
http://www.mrmoneymustache.com/2013/01/21/exposed-the-mmm-fa...
[+] [-] chris11|13 years ago|reply
[+] [-] jethro_tell|13 years ago|reply
[+] [-] dustinupdyke|13 years ago|reply
[+] [-] ctbeiser|13 years ago|reply
[+] [-] bittercynic|13 years ago|reply
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.
[+] [-] stevenwei|13 years ago|reply
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).
[+] [-] hyperbovine|13 years ago|reply
[+] [-] jonemo|13 years ago|reply
[+] [-] rphlx|13 years ago|reply
Given the current state of the world - it seems quite unlikely that the average 21 year old US SW engineer graduating today will be able to replicate his results (~$500k within 7 years).
[+] [-] dkrich|13 years ago|reply
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.
[+] [-] grosskur|13 years ago|reply
While he could have diversified further by including international stocks, this simple investment strategy was surprisingly sound. This is the real takeaway---not his philosophy of extreme frugality. If you follow a low-cost, diversified index investment strategy, you'll likely end up much further ahead than if you put it all in the bank.
And once you get past all the bad advice out there, sound investing is actually quite straightforward:
http://www.longtermreturns.com/2012/03/selecting-investment-...
[+] [-] AlexDanger|13 years ago|reply
[+] [-] foobarian|13 years ago|reply
[+] [-] dnr|13 years ago|reply
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.
[+] [-] salvadors|13 years ago|reply
[+] [-] lupatus|13 years ago|reply
[+] [-] swalsh|13 years ago|reply
[+] [-] diminoten|13 years ago|reply
[+] [-] amix|13 years ago|reply