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All in all, I would have earned at least $1 million since then. And assuming Mrs. Money Mustache had kept working, she would have earned close to that amount as well. $2 million before tax, which would have gone straight to the bottom line and compounded since income from investments was already covering our expenses as of late 2005. In short, as we added that income to our existing savings, we would be ridiculously wealthy by this point.
But yet many of these coworkers, most of whom are older than me and were already working before my career, continued throughout my career, and are still doing it seven years and counting after my career, still somehow need to work, according to their own accounting. Some people in this situation are even living from paycheck to paycheck.
Quite accidentally, this group of coworkers has formed a nice control group for the study of Mustachianism. They have a wide variety of incomes, but all live in the same area, so the base cost of living and the tax rates are held constant. But one participant in the study tweaked only one variable while leaving the rest unchanged: the spending rate.
Somehow, Mr. Money Mustache maintained an outwardly-normal appearance among this peer group, showing up at work in acceptable clothing, achieving similar job performance, earning an average amount, and participating in all the usual social activities, yet adjusted his spending downwards enough to make a drastic difference in his financial outcome. How could it be?
A rule of thumb that I have heard is: plan to spend about 1% of the value of your home on repairs each year. Not saying one will do that every year, and some say if the money is not spent on repairs, do a small upgrade at the end of the year. Start saving for the next year to be prepared for repairs again.
So my plan is to take a run-down 1200SF house with a nice solar exposure, strip its interior to the bone, and rebuild it in liveable style. Huge South-facing windows, reclaimed wood and stone everywhere, a giant living room and kitchen, two medium bedrooms, two fancy but reasonably-sized bathrooms. Skylights and open beams everywhere.
I thought the same thing about clothes. Maybe if you have a baby and a three year old. Good luck with finding thrifted stuff for ten year old boys (that still have knees anyway) especially if you live in a place that is not super affluent to start with.
I agree with all of the items except for the groceries. Americans have been spending a smaller and smaller percentage of their disposable income on food every decade for the last 8+ decades, and it seems to be externalizing the cost to the environment and healthcare, probably many times over.
At our currently savings rates, our house will be fully paid off around Feb 2014, me and my wife will be the ripe old age of 32 and 33. Of course the MMM blog provided many tips and advice in order to enable us to save money from my paychecks to make any of this happen.
So to cut that service and bike to the library every time I need to log on would be pennywise, pound-foolish. And I kind of assume many Mustachians are in a similar place, maybe because of my own bias/blind spot.
Thanks Geek. I have contemplated getting rid of the car but it makes trips to see family/family events cheap and easy. A round trip train ticket to see them would cost $40.00 for one trip so I feel like the convenience here evens it out ($600 per year in car insurance is pretty cheap). Gas mileage is pretty good. I would have to do some detailed calculations to see if I would come out ahead without a car. My family lives approximately 50 miles away so biking would not be possible. I would say that I could stop visiting but my parent is a widower and I feel like that might be cruel.
For the other parts, I live about 30 miles from work and moving even 15 miles closer would double my rent, and as you get closer it gets even higher. As you can imagine, I live in the 2nd most expensive city in the world (I think). My rent would easily be $1300 a month to share a 3 bedroom to be within 5-10 miles of work plus higher expenses for laundry (I have laundry in my place right now) and food (items like orange juice cost $5-7 in the city while only $1-3 here). The other solution would be to move to an outer borough where my commute would be 50 minutes each way by train but only cost $103 per month for that transit pass. My rent there would be $950 to share a 2 bedroom. That is probably the cheapest but least palatable option since you get neither the convenience of being close nor the pretty scenic landscape I have now.
What other options besides moving and paying more in rent do I have? I am at the bare minimum of rent here. Most people pay $500-2000 more than me per month in rent in my area. I have a lucky situation. The only choice I have is to make more money.
@Liz, I think you are doing awesome. You are saving huge, have a budget, and shared it. Personally, visiting family is not an area I want to cut spending either.. My grandmother lives 45 miles away, and I am glad that I spend gas and money to visit. I recognize this as a luxury, and it works for me now. The differences that I see in budget come from location, single vs family and income. I am midwest, single, and a fraction of MMM income.
Pretty interesting to see how things are different compared to a emerging country, i live in Brazil. First, you guys are really luck to have good education from goverment. We dont have it and we pay a lot for good education or our kids. Also we pay way much more for utilities. Cars here cost at least 2x. We pay more for health care as well, even though if you are in company, probably you pay much less. I have been learning a lot with your concepts and ideas. I am probably 4years from financial independence. I save 80pc of my future spending, although much less compared to my income today. I plan to relocate to a less expensive place where I can cut my expenses roughly in half. And I only got these ideas after reading your blog. Thanks for that!
i thoroughly enjoyed this post as i have many friends that are in the same boat as the middle class MMM described in detail and have no idea how their consumption choices, ie wants, are adding years of employment to their life.
1) have i really separated my wants from my needs? no
2) do i really make the most frugal decisions possible or am i still mixing up wants with needs? not yet
3) am i fully aware of as many options as possible, desireable or not? heck no
The bottom line is, many $140k families REALLY DO spend all their cash and save even less than $15k per year, and it IS INDEED EASY to get by on a spending level the size of the right-hand column. Many people with two kids live on far less.
I say let you save for half, and let them pay for half in deffered loans to teach them financial responsibility. Even better if you invest in a triplex or rental home for them and others, and let your child/children manage it and collect rents, then sell it after 4 years. (this will help pay off their half).
Oh, I just found this whole post fascinating! I loved the clickable links. We are primarily a 1 income house hold ( 2 kids) that has not yet made over $60K. However we are 100% debt free with over $500K in assets. plus college $ for the kids. I found my new favorite blog! On a side not while reading and clicking your links I had to get up and promptly reprogram the thermostat!
His story is probably similar to Derek Knight, he went from 30 grand in assets to almost 700 grand in about 7 years (link below). Unlike most people he was a natural saver and much more importantly so was his wife. She graduated debt free with a bit of money in the bank
I actually do but it is as boring as watching paint dry! As far as how we did it goes we bought our first property young. We got a good deal and put every penny towards paying it off asap. We then sold when the value for the home and fsrm land doubled plus some and bought our current wonderful home with cash this year from a seller who needed out. The property appraised for over $50k more than we paid.
This is really the key I emphasis to everyone the need to get in the habit of saving, I know loads of very frugal people who have zero or next to zero in savings, they simply never got in the habit of saving.
I would be curious if you could add two columns how much time is spent him and you. But also calculate how much time is yours after you can retire early too. I have a philosophy of people spend time to save money, but it might makes more sense to spend money to save time. And you are kind of doing that so you could retire early.
Awesome chart! Thanks to what we have learned from you, our spending is now down to the kickass level (in less than a year) plus the cost of the remaining pets (which it appears we can afford, now and in retirement). The chart shows where we can make further improvements. My hope is to plump up the stash a little more to improve the safety margin and retire happy in 1.5 years.
Take a look around. If you think you are hardcore enough to handle Maximum Mustache, feel free to start at the first article and read your way up to the present using the links at the bottom of each article.
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