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The Simple Math Behind Early Retirement

mrmoneymustache.com

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Re: The Simple Math Behind Early Retirement

#151

Post by smackfu »

abstractbill wrote: post #132
chimi wrote: post #105

Earlier quoted context omitted.

Yours is a very pessimistic view. You have no faith in your fellow human beings. There are a lot of smart enough people out there with sufficient will power to make these changes in their life if only they have the education and awareness of the opportunities. Sometimes all it takes is seeing the impact these changes have. One of the best quotes I have seen about finances is this: Poor people spend what they have and…

Where can you buy a house for $5000 that pays out $500/month in rent?

Foreclosures in bad neighborhoods that are in rough shape that go up for auction, where there aren't many bidders.

The unmentioned parts are that (1) fixing these places up costs money on top and you probably can't afford to hire contractors, so this is basically a second job and (2) the renters you get at the low end are terrible, and also require a lot of time and effort. It's not just invest and forget here.

Re: The Simple Math Behind Early Retirement

#152

Post by sophacles »

cynicalkane wrote: post #112
Swizec wrote: post #83

Earlier quoted context omitted.

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"

Someone who spends $5 on a latte everyday, that would make you no happier than coffee from the break room, is likely not in a stable equilibrium of spending. If better tasting drinks really did make you happy--something I don't believe--the rational thing would to be to brew your own coffee or tea. This has the added bonus of being a learning experience. The $5 latte drinker, at most income levels, is someone who has…

Or you assume that the coffee is the only part of the experience that counts. I gladly pay $5 for my morning coffee, because I really enjoy the shop. I could drink coffee at home, no problem, but I like going to the shop and reading the news and waking up there. I know I'll see people I enjoy. I actually have to get dressed/ready for my day to get out of the house so I'm not as likely to just be lazy. The window I sit in catches the morning light In a way that I find pleasing. In the warm months I can sit on the patio and enjoy the weather.

Or I could spend $1 or less on my morning coffe that doesn't taste as good, and not wake up in the same, refreshing way, and be overall less productive.

Oh, and I still manage to save 20-30% of my overall income (depending on the month). Lattes don't matter. Overall spending habits and and fiscal approach do.

Re: The Simple Math Behind Early Retirement

#153

Post by jjm »

abstractbill wrote: post #132
chimi wrote: post #105

Earlier quoted context omitted.

Yours is a very pessimistic view. You have no faith in your fellow human beings. There are a lot of smart enough people out there with sufficient will power to make these changes in their life if only they have the education and awareness of the opportunities. Sometimes all it takes is seeing the impact these changes have. One of the best quotes I have seen about finances is this: Poor people spend what they have and…

Where can you buy a house for $5000 that pays out $500/month in rent?

Ditto, because I'd like to know right now as well. Usually if you can buy a house for $5k, it needs _a lot_ of _TLC_

Re: The Simple Math Behind Early Retirement

#154

Post by nanidin »

Irregardless wrote: post #100
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…

Reminds me of a great article I saw posted on HN a few months ago. I wish I could remember where it was, but it basically said "You'll never get anywhere by skipping coffee and bringing lunch to work, focus on the big gains like increasing your salary by 30% instead". The frugal lifestyle BS most likely does more harm than good for the average person. People shouldn't be sacrificing quality of life because they're wo…

When I started using Mint, I became aware of how I was spending my money. That cognizance made it easy to cut back in areas like going out to eat and going out at night in a way that didn't impact my quality of life. I started hosting group dinners and did my nights out more efficiently (happy hours, house parties, etc.)

2 years later I had a ton of savings, quit my job and left to travel the world for a while.

Re: The Simple Math Behind Early Retirement

#155

Post by [deleted] »

abstractbill wrote: post #132
chimi wrote: post #105

Earlier quoted context omitted.

Yours is a very pessimistic view. You have no faith in your fellow human beings. There are a lot of smart enough people out there with sufficient will power to make these changes in their life if only they have the education and awareness of the opportunities. Sometimes all it takes is seeing the impact these changes have. One of the best quotes I have seen about finances is this: Poor people spend what they have and…

Where can you buy a house for $5000 that pays out $500/month in rent?

[deleted]

Re: The Simple Math Behind Early Retirement

#156

Post by msluyter »

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…

On the subject of psychology, I think part of the problem is cognitive overload. It's difficult to make good long term decisions and maintain self control when you're overwhelmed by economic choices. The poor suffer from this even more than the well off. Effect with references described here:

http://www.tnr.com/article/environment-energy/89377/poverty-...

Re: The Simple Math Behind Early Retirement

#157

Post by brewdad »

STRML wrote: post #14
jrheard wrote: post #12

Earlier quoted context omitted.

> There are of course many other factors that go into it. One that may very well work in your favor is saving while living in a big city, then moving some place small later on. That's how I've been doing the math (over, and over, and over) ever since I found this article last night - calculate savings based on my tech job in sf, and then calculate expected expenses based on what it'll be like to live basically anywhe…

Christ, many of us on this site could likely get away with retiring now & moving to Thailand, if you really can assume 5-7% long(long!)-term returns on the stock market.

Just don't insult the king.

Re: The Simple Math Behind Early Retirement

#159

Post by smackfu »

chimi wrote: post #147
abstractbill wrote: post #132

Earlier quoted context omitted.

Where can you buy a house for $5000 that pays out $500/month in rent?

You can actually get them for even less than that and get more in rent. The cheapest way is through Tax Sales. You can buy a 3 bedroom house at a Tax Sale for low thousands of dollars and rent them out Section 8 for $800/mo or more and the US Government pays you all or a portion of the rent so it's reliable residual. Of course it isn't that simple, sometimes the houses need a lot of work to get rent-ready and if you…

The tricky part is that it's very easy to not notice when your "investment" turns into a "second job" that may not really be paying that well per hour.

Re: The Simple Math Behind Early Retirement

#160

Post by darkarmani »

ry0ohki wrote: post #15

This is somewhat misleading, because the primary thing that allows these accelerated numbers is an extremely low spending rate. IE you can retire in 2 years if you save 95% because somehow you are able to live on only 5% of your take home pay (in his 50k example, this would mean you could live on $166 per month). I completely agree with his philosophy of living below your means, but just realize that whatever level y…

He assumes your current expenses are at steady state. It's a pretty obvious assumption. If you pay off your home, your expenses in debt servicing will be lower when you retire.
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