Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The Simple Math Behind Early Retirement

mrmoneymustache.com

Post reply on HN
Print view View original

81–90 of 246 posts

Re: The Simple Math Behind Early Retirement

#81

Post by hudibras »

liber8 wrote: post #52

MMM has a philosophy that is mathematically sound, and might even work for some people. Unfortunately, it's proven to fail for just about everyone (the spend less, save more advice has been around since the industrial revolution, and it isn't working to well: the average American has $16k in credit card debt). The reason it fails is because it ignores basic psychology. The key quote in this article is: >>But simply c…

It's a little long but MMM has an article that addresses this exact thing (down to the expensive latte example): http://www.mrmoneymustache.com/2011/06/21/frugality-as-a-mus...

The short version is that it's a "misconception that buying things makes you happier, and not buying things makes your life suck."

Like I mentioned, it's a cult, what can I say?

Re: The Simple Math Behind Early Retirement

#82

Post by CletusTSJY »

hudibras wrote: post #38

It's always embarrassing to admit that you're a part of a cult, but I'm a huge fan of MMM and his spiritual godfather Jacob (earlyretirementextreme.com) and I'm currently on track to retire in 4 years in my early forties. Few points to remember as you browse the site: 1. Retiring early means that your post-retirement life could very well be 50 years long. Over that timeframe, 5-7% return on investments is a reasonabl…

There's something to "live like no one else so later you can live like no one else" though. This is pretty much "live like no one else for the rest of your life". I mean..wouldn't you rather work a little longer so you can increase your lifestyle in retirement?

Re: The Simple Math Behind Early Retirement

#83

Post by Swizec »

liber8 wrote: post #52

MMM has a philosophy that is mathematically sound, and might even work for some people. Unfortunately, it's proven to fail for just about everyone (the spend less, save more advice has been around since the industrial revolution, and it isn't working to well: the average American has $16k in credit card debt). The reason it fails is because it ignores basic psychology. The key quote in this article is: >>But simply c…

Ramit Sethi's advice on this really rang true with me "Stop saving on lattes, that doesn't matter, negotiate a $5k+ per year pay increase instead"

Re: The Simple Math Behind Early Retirement

#84

Post by hudibras »

hyperbovine wrote: post #72
liber8 wrote: post #52

MMM has a philosophy that is mathematically sound, and might even work for some people. Unfortunately, it's proven to fail for just about everyone (the spend less, save more advice has been around since the industrial revolution, and it isn't working to well: the average American has $16k in credit card debt). The reason it fails is because it ignores basic psychology. The key quote in this article is: >>But simply c…

For the record, it is emphatically not tastier than brewing it yourself.

And I get 21 HD TV channels over-the-air for free!

Now let me tell you about my couponing...

Re: The Simple Math Behind Early Retirement

#85

Post by hippich »

liber8 wrote: post #52

MMM has a philosophy that is mathematically sound, and might even work for some people. Unfortunately, it's proven to fail for just about everyone (the spend less, save more advice has been around since the industrial revolution, and it isn't working to well: the average American has $16k in credit card debt). The reason it fails is because it ignores basic psychology. The key quote in this article is: >>But simply c…

While I agree that keeping worrying about $4 latte is wrong, I disagree that getting rid of cable or some other entertainment is hard. It is hard if it is part of your daily routine or is habit. So to make it work (and stop worrying about spending or not $4 for latte) you need to re-adjust process of your life. Once everything will fit naturally into your daily routine - you will not get stressed about it anymore.

But I agree - if you can't fit cut into your routine - stressing about it worse than not saving extra few percents.

And yeah - negotiating $5k increase is first thing you need to tackle, and only once it is done - proceed with the rest probably :)

Re: The Simple Math Behind Early Retirement

#86

Post by alsocasey »

makira wrote: post #74
ChuckMcM wrote: post #60

Sadly MMM and others don't mention the whole "all 5% per year after tax gains get reset by 20 years when the world markets crash" scenario. Also he doesn't take into account if you have kids and want to help them with their college education where that leaves you savings wise. Yeah, I'm annoyed to have been trying to save money through the second depression.

Fully agree on this one. Assuming "You can earn 5% investment returns after inflation during your saving years" is the exact reason why so many retirement funds are having problems. %5 after inflation, although that might have worked great in the past, is optimist at best regarding the future.

Be working during the relatively high inflation of the 80s (wages lead inflation), retire during the record low rates of 00s so you're money stretches further/longer is definitely a nicer story then the other way around...

Re: The Simple Math Behind Early Retirement

#87

Post by danielweber »

smackfu wrote: post #47
jrheard wrote: post #40

Earlier quoted context omitted.

If you save a high enough percentage of your take-home income, the article actually argues that you could be done in 7-10 years starting from scratch, which sounds a lot more doable to me than the 30 years you're expecting.

The problem with the extremes of this logic is that if you scrimp and save and live poor to get to that 75% savings rate... you still have to live poor for the rest of your life on that 25% of your take home.

You can raise your lifestyle over time.

Given the hedonic treadmill, you are more likely to feel happiness from any increase in your standard of living, but you reset to your prior level of happiness. So make your bumps in standard of living as small as possible.

Re: The Simple Math Behind Early Retirement

#88

Post by hyperbovine »

hudibras wrote: post #84
hyperbovine wrote: post #72

Earlier quoted context omitted.

For the record, it is emphatically not tastier than brewing it yourself.

And I get 21 HD TV channels over-the-air for free! Now let me tell you about my couponing...

Did I say anything about cost?

Re: The Simple Math Behind Early Retirement

#89

Post by cerebrum »

liber8 wrote: post #52

MMM has a philosophy that is mathematically sound, and might even work for some people. Unfortunately, it's proven to fail for just about everyone (the spend less, save more advice has been around since the industrial revolution, and it isn't working to well: the average American has $16k in credit card debt). The reason it fails is because it ignores basic psychology. The key quote in this article is: >>But simply c…

> The reason it fails is because it ignores basic psychology.

What about economics, it assumes that you have a return of 5% over inflation on your investment. Is this really a good assumption?

According to this link(http://home.earthlink.net/~intelligentbear/com-dj-infl.htm) the annual Dow Jones return adjusted for inflation and after taxes is more like 1.1%.

Post reply on HN