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The Simple Math Behind Early Retirement

mrmoneymustache.com

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Re: The Simple Math Behind Early Retirement

#191

Post by grecy »

dinkumthinkum wrote: post #187
grecy wrote: post #163

Earlier quoted context omitted.

Yep. No TV, No cell phone, a 25 year old car and I've never been happier. I'm a Software Engineer, and I save towards 70% of my paycheck. I still bought a new laptop, DSLR, rifle and other toys all in the last 6 months. I don't earn tons for a SE, if that's what you're thinking. It lets me do things like Drive from Alaska to Argentina for two years, simply because I wanted to[1] [1] theroadchoseme.com

That's great for you, nothing wrong with that at all. However, this is pretty anomalous, you know that right. :) Also, from what you describe, do you really think that will let you retire at 35? If so, is that retiring at 35 living, still, very minimally? If you plan to have a long life, which I think you do :) then I don't know if that math works. But it might, just saying ... Anyway, the main point is this wouldn't…

Of course I'm different from others.

I live on the other side of the world from my home country, I drove from Alaska to Argentina for fun, and I don't want to go to work for the rest of my life so I an buy stuff.

As for retiring at 35, absolutely. I'll travel the world on around $15-20k per year for a long time, then see what happens. (before you tell me it can't be done, I've already done it for two years)

Interesting you think I'm living "very minimally" because I said I have no cell phone or TV and an old car, but in the same sentence I said I bought a new laptop, DSLR and rifle in the last 6 months. You are very confused about what "very minimally" actually means.

> Anyway, the main point is this wouldn't work for most people.

Like MMM said in the article, you can start making this work for you, or you can complain about how it's not going to work for you or the majority. Which one are you doing?

Re: The Simple Math Behind Early Retirement

#192

Post by gshubert17 »

roc wrote: post #166

Maybe I missed it, but did the Shockingly Simple Math completely neglect that wages and thus lifestyle typically increase over a career? And that plausible-savings-rates go up as wages increase, as many lifestyle costs are regressive? [1] Calling out young professionals for $4 coffees is not only an act devoid of human understanding, it seems to be ignoring that many young professionals can only maintain their higher…

>Maybe I missed it, but did the Shockingly Simple Math completely neglect that wages and thus lifestyle typically increase over a career?

Perhaps. On the other hand, if one assumes that real (inflation-adjusted) wages are stable, then adjusts the rate of return to 3% and the withdrawal rate to 2.5% in real terms, the numbers work out in a similar way, and the general results that follow are the same.

Re: The Simple Math Behind Early Retirement

#193

Post by mamoswined »

octopus wrote: post #17
STRML wrote: post #9

This is a really fantastic, simple way of looking at it. 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. This could cut your living expenses by a percentage big enough to make a very significant difference in the number of years you have to work. Of course, once you involve kids, the whole th…

The author has a kid. Just be careful that by retirement he doesn't mean "stop the work and do nothing". In the author's view retirement means financial independence - the point in life where you don't need to work anymore but you work for your own pleasure (or you work on what you really like to do).

Actually I felt quite cynical about the whole thing until his article on kids softened me: http://www.mrmoneymustache.com/2011/05/26/what-is-the-real-c...

Because I share the sentiment- I don't want to have to sacrifice a lot of time with my children for my "career" (the one that makes most of my money) at all. Even though I have little interest in retiring early, the same strategies can be used to save up to be able to work part time from home on less lucrative (but still skill-building/maintaining) projects when I have children. Maybe work for a non-profit like I started out at.

Re: The Simple Math Behind Early Retirement

#194

Post by wiredfool »

muzz wrote: post #174
Irregardless wrote: post #136

Earlier quoted context omitted.

True, but it's just one example of a bigger point. I.e. stop pinching pennies and aim for larger savings or gains instead. Swizec posted the name of the guy who wrote the article I was thinking of, Ramit Sethi. Here's one where he talks a little about the issues with frugality: http://www.iwillteachyoutoberich.com/blog/save-on-coffee/

I'm always amazed that coffee, cable tv, or smart phones are called out as budget "excesses". For most people, their biggest expenditure every month is housing, then followed by transportation. If one wants to cut spending at all, the huge savings are made here. I.e. don't "consume" more housing than you need-- rent out extra bedrooms or get roommates if you have an apartment, don't drive an expensive auto when a che…

For me, coffee is so far down in the noise as to be ignored. But it's also made in my kitchen.

For my family, in order (note, not CA): Health insurance, Mortgage, Food, Taxes, Day care. Transportation misses by a long shot, maybe a factor of 4 from taxes, and 2 from day care.

If I had to cut something, Day care is the easiest chunk, as it's not strictly necessary, but it's a sanity thing.

(This isn't quite accurate, since I haven't added in the company contribution to taxes, but I have to health insurance. Anyway. )

Re: The Simple Math Behind Early Retirement

#195

Post by afterburner »

hudibras wrote: post #139
afterburner wrote: post #116

Earlier quoted context omitted.

I agree. It reminds me of the story of a low income divorced father barely scraping by month to month, who could have used a several hundred dollar windfall to try his shot at a trade school or some such training program, but instead spent it on a fun weekend with his son when he had a couple days with him. Long term possibly maybe shot at improving his life slightly, or a good life experience with his son now... it'…

Don't want to make too much of your story but the father had a third option: use the money for the trade school and then say to his son, "Money's tight because I'm going back to school, so this weekend we're going camping (or taking a bus to the beach or watching DVDs from the library) instead of driving to Disneyland. Is that okay with you?"

I can't remember exactly if the money was to be used for travel costs to see his son, or if he was spending it more "inefficiently", but yes, of course there are usually more options. Those options can be constrained by what the father and/or son consider fun though, and when your life is crappy and you're living month to month, you might not have the energy to think outside the box or try something new. There might be a problem though of people thinking having fun = spending.

Re: The Simple Math Behind Early Retirement

#196

Post by cerebrum »

grecy wrote: post #163
cerebrum wrote: post #149

Earlier quoted context omitted.

Are you serious you don't have a cellphone? Just curious, what do you work in, and how much do you manage to save each month?

Yep. No TV, No cell phone, a 25 year old car and I've never been happier. I'm a Software Engineer, and I save towards 70% of my paycheck. I still bought a new laptop, DSLR, rifle and other toys all in the last 6 months. I don't earn tons for a SE, if that's what you're thinking. It lets me do things like Drive from Alaska to Argentina for two years, simply because I wanted to[1] [1] theroadchoseme.com

So how much rent do you pay and what are your living conditions? Btw I never owned a car in my life and only have one cell phone which is prepaid and I almost never use it, so my expenses with it are minimal(around 10 $ every 3 months or so).

Re: The Simple Math Behind Early Retirement

#197

Post by Swizec »

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…

Another important aspect to consider is that penny pinching will make you feel miserable and will often add so much additional hassle as to not be worth it.

For instance, saving 50 euro on airline travel ... not worth it if you can afford the extra 50 euro.

Re: The Simple Math Behind Early Retirement

#198

Post by cerebrum »

grecy wrote: post #191
dinkumthinkum wrote: post #187

Earlier quoted context omitted.

That's great for you, nothing wrong with that at all. However, this is pretty anomalous, you know that right. :) Also, from what you describe, do you really think that will let you retire at 35? If so, is that retiring at 35 living, still, very minimally? If you plan to have a long life, which I think you do :) then I don't know if that math works. But it might, just saying ... Anyway, the main point is this wouldn't…

Of course I'm different from others. I live on the other side of the world from my home country, I drove from Alaska to Argentina for fun, and I don't want to go to work for the rest of my life so I an buy stuff. As for retiring at 35, absolutely. I'll travel the world on around $15-20k per year for a long time, then see what happens. (before you tell me it can't be done, I've already done it for two years) Interesti…

You work remotely? How did you find your current job? I'm aspiring towards a similar lifestyle yet not sure yet how to manage a stable income.

Re: The Simple Math Behind Early Retirement

#199

Post by thenomad »

octopus wrote: post #184
3minus1 wrote: post #144

Earlier quoted context omitted.

Some people feel stylish with their $5 coffee. It's not all about the taste.

There is a word that describes perfectly these kind of people - snobs. I could understand someone that tells me his 5$ coffee tastes "better". But if you drink your 5$ coffee just because you are feeling stylish ...

To quote Tim Ferriss, "It's OK to want [a motorbike] because it makes you feel like a cool dude.".

If something makes a person happier, it makes them happier.

Re: The Simple Math Behind Early Retirement

#200

Post by thenomad »

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...

If you can't learn to make better coffee than a Starbucks brew at home (where "better" is defined as "with more complex, refined tastes and less harsh, burned notes") you're doing something badly wrong. Decent beans, a set of digital scales, a cheap hand grinder and a French Press or Aeropress will do the job.
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