"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.
Not at all. If you talk to a few dozen people who "traveled a lot" before they turned 30 (including me, the person to whom you're replying), the single most common thread in all those stories will be how cheaply they did it.
Life on the road costs ~$500/month. Life in an apartment costs ~$2000/month. One of the simplest ways to save money when you're not working is to ditch all your possessions at home and go find a nice cheap tropical beach to park it on.
Having "retired at 30", using the author's definition and a similar methodology, you'd be surprised at how much living I did along the way and have done since.
And I probably spend $500/month just on food and caffeine.
Hell, the basic government fees (insurance, pension etc.) to keep my sole proprietorship running costs me 300 euro/month. I really don't see how you could live on the road on $500/month, you're making stuff up.
There's a lot of world out there beyond Europe. For the vast majority of it, $500 goes a long way.
Try to keep in mind that there are lots of things that are possible that you don't yet know how to do. It sounds like you're just now learning that you can travel cheaply on the road (from people who have actually done so, no foolin'). Rather than accuse us of lying to you, you might be better served taking some of it on board.
Then book a flight out here. I'll use 1/1000th of my monthly budget to buy you a beer!
SE Asia is cheap, but its not as cheap as people think it is.
I do speak the language, but that only helped with finding a cheap (i.e. Thai-priced) place to rent.
There you go. Things develop at light speed down here in SE Asia!
That being said, GP's version of Vietnam living is perhaps like my Phnom Penh version: "costing as I would in Europe, but get way more bang for the buck" (to qualify---not that kind of bang, thank you very much..)
So down here I can get a furnished condo thingy with pool/gym/view/flatscreen/balcony for the same bucks that would get me an unfurnished hole without all of these in say Berlin, to not even mention other parts of Europe.
BUT, it's still a multiple of $120. If I were harder-pressed financially, indeed $120 would also rent me .. "something".
Even though it didn't really fit in to how he wanted to live his life, he ended up getting a local housekeeper. She'd basically just do all of his shopping (groceries, clothing, whatever) and pay the local price, rather than the tourist price. With the money he saved, he paid her above market rates and still managed to save money on the whole deal.
Most 20-something backpackers choose to travel to places like SE Asia precisely because it is cheaper.
It's nice to be able to do a mix of both though, there are definitely interesting and worthwhile places to visit that are also unfortunately more expensive (Japan comes to mind!).
I'm from Europe (NL) and some friends of mine did pretty much that, during college. I don't know exactly how they did it, sorry, travelling's not for me so I didn't pay attention to all the details, but they did pull off travels for very cheap.
One trick is, there's a lot more to trains and public transport (also busses--yes it may not always be comfortable) than first meets the eye. Check out local and national train company websites, ask around at the station where they sell (sometimes you get a really nice person behind the desk, and they'll help you out way beyond expectations, pay attention to what they do and what it's called, so you can order that ticket again). There's probably a bunch of Internet forums sharing tricks as well. I've booked 17h return train trips to Vienna for about 70 euros.
Another trick is sharing rides, if you need to get around in Germany (to and/or from neighbouring countries), try mitfahrgelegenheit.de, it's a carpooling website. At first I thought it'd be crazy unsafe, but I've met the coolest people on those trips.
Yes, and that's about $100 :) Well okay, it's $91.
Anyway you're right about carpooling. I've noticed that when you're traveling in a group of more than 2 and less than 5, a car is always the best and cheapest option.
Part of this affordable "life on the road" concept might also be the fact that gas prices in the US are about 2.5x as cheap as they are in Europe.
(this is always a fun conversion: https://www.google.com/search?q=1.70+euro+per+liter+in+dolla... not sure if that's the most recent gas price here, but it should be about right. This gives $8.36/gallon, and a quick google for gas prices in New York tells me they pay $3.60/gallon)
I've talked to a New Yorker visiting Ljubljana, he was extremely excited about getting a flat for 1700eur/month because that was about half his NYC rent. It was probably one of the ten most expensive flats you can get in Ljubljana. And we have exorbitant rent prices compared to the rest of my home country.
So yeah, I can easily see how an american would think living on the road is super cheap compared to staying home.
If you hitchhike, walk, or bicycle, you can avoid the trains. Even if you take a train every three weeks, that's only US$130 out of your US$500 budget.
> Hell, the basic government fees (insurance, pension etc.) to keep my sole proprietorship running costs me 300 euro/month.
Typically backpackers pay very little in taxes because they aren't making any money, or if they are, they're doing it under the table.
> I really don't see how you could live on the road on $500/month, you're making stuff up.
No, there are a lot of people who do this. You should meet some of them. Sign up with Couchsurfing and host them.
Also, American's wouldn't be spending 300 euro / month on insurance / etc. (Presuming this because the figure was quoted in dollars).
I really liked the link though. I think I've done almost everything on that list.
It fluctuates :)
We did meet people on the road that helped us out too...but most of the time is was from walking around in the remote parts of a town or area and looking lost or walking up to a Bedouin tent.
Traveling can cost significantly less than most people expect when you use points / miles and avoid hotels.
And he is one of those that optimises for enjoying his life - I think you have _completely_ twisted what he says. They travelled enjoyably without wasting dosh: http://www.mrmoneymustache.com/2013/01/15/a-tale-of-two-vaca...
E.g. travel: "As twentysomethings, my wife and I saw a bit of the world including Australia, New Zealand, Italy, Hawaii, Mexico, and of course Canada and a great amount of the US. Now that we’re parents to a six-year-old, we keep things a bit more tame by staying mostly within North America. But that doesn’t mean sitting at home at all times. Even at this age, our son has been to four countries and about 20 US states. We spend about 3 months traveling each year and plan to do more as he gets older."
I traveled in relative luxury for more than two years in Italy, Asia and Argentina for less then my previous monthly cost. Depending on your profession it might be harder to earn money while traveling though.
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 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".
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.
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!
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.
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.
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.
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.
Right. It also happens to those who get lucky in the stock market, and chose the right job at the right time.
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.
Even if he had $0 in investment gains he would of been able to do this at 33-35 instead of 30.
Just to scratch my own itch, I've built a finance independence calculator for my daydreaming needs
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.
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.
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!
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.
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
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...
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.
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.
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.
I think the great depression and the shortages of WW2 were hard on him in ways that I just can't know.
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.
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...
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.
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.
 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).
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.
But it sounds like he's got emergency cover. Plus with his blog he's adding new revenue.
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.
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.
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.
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 $400k though. I wouldn't say that Longmont is an expensive place to live, it is definitely a lot cheaper than its neighbor Boulder, but I would say there are a lot of cheaper places to live.
I pay ~600$/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.
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.
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.
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).
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.
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:
There is a rating service that independently tracks the profits of 180 stock newsletters and has done so since 1980. It's called the Hulbert's Financial Digest. From this you can pick one with a good track record, and then invest directly in stocks.
This allows you to plan your taxes much better (sell the losers for a similar company in the same industry and keep the winners). I'm up over 70% in unrealized, and therefore untaxable, gains this way.
According to The Bogleheads' Guide to Investing, the January 2001 issue of The Hulbert Financial Digest stated: "Among the 160 or so newsletters the HFD monitors, the market-timing recommendations of only 10 have beaten the stock market over the last decade on a risk-adjusted basis."
So statistically there are very few newsletters with a good track record. And assuming you pick one of the few that beat the market over the past decade, you have no guarantee it will continue to do so. Past performance is not an indicator of future returns.
I'd much sooner use ETFs than individual stocks to achieve tax efficiency. VT holds 4871 stocks worldwide in capitalization-weighted proportions. It would be too unwieldy to get this same diversification by holding individual stocks. And I'd argue that you really do want this much diversification. See The 15-Stock Diversification Myth:
What you describe with selling the losers and buying similar stocks to replace them is known as tax-loss harvesting and is possible to achieve with ETFs as well. For example, you can hold VTI+VEA+VWO instead of VT, and tax-loss harvest into SCHB+SCHF+IEMG. It may not be as effective as with individual stocks. But I'd argue you it's hard to find a direct substitute for an individual company, so you take on more risk that way, whereas it's easy to find a nearly-perfect substitute for a broad ETF.
Overall, your strategy of holding individual stocks may work out very well for you. I just think you're taking on disproportionately more risk for the amount of gain you hope to get compared to an ETF-based indexing strategy. Also, I'm not sure how long you've held your portfolio, but we've had a strong bull market for the past four years and even VT has gained ~45% in that time:
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.
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.
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.
There are plenty of routes you can take that don't involve giving up on life.
To me, this article exemplifies how empty making more money can make you feel. The author just sounds sad.
Go do something that makes you happy each day, earn some money, then go home and do something else.
There are countless other examples. It annoys me greatly when people in the US state how the "cannot live on less than $100k per year". And these same people have no money saved in the bank. So they earn a very high salary and are still living month to month. Incredible.
I have a healthy rate of savings, but still decided to buy a new car and finance part of it. I'm happier and safer than I was in my old car, and the rates are pretty good. My V8 gets the same mileage my old 4-cylinder did, and hopefully I helped create some work by buying a model designed & built in Detroit.
So, stop conflating living month to month with having debt. There is a happiness component that doesn't show up in your spreadsheet.
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.
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.
This line really resonated with me as the real success he discovered.
Time invested in saving money is not always worth it. If you're making the equivalent of $50 an hour, an hour spent agonizing over how to save $25 is a net loss for you. You are not maximizing your utility.
Saving money will never be an end in itself. It is only a means. Who is more admirable: the guy who saves obsesses over spending the minimum amount of money and lives in a cabin Montana, or the guy who goes deep into debt to get a PhD, become a doctor, and save lives? I think we all know the answer to that. I'm not saying that everyone needs to get a PhD or that you shouldn't go off in a cabin if that's what you want, but don't put yourself on a pedestal for your self-indulgence.
Only if you would have spent that hour working instead, and if you would actually earn an extra $50 (net) for working that hour (many people wouldn't), and if that potential hour's work is now lost to you.
It's pretty rare for all three of those things to be full, and most of the people I've ever met who have been in that scenario have learned pretty quickly that working every hour possible isn't really a fun way to spend your life.
I am glad that about half of HN doesn't fall for this guy's Rich Dad Poor Dad schtick. The other half, though...