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

211–220 of 246 posts

Re: The Simple Math Behind Early Retirement

#211

Post by 205guy »

hudibras wrote: post #81
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?

But which is the cult, mustachianism or consumerism?

Re: The Simple Math Behind Early Retirement

#212

Post by kablamo »

My side project is based on this article. I was intrigued by the graph in this post and so I created an interactive chart to explore it. The calculator will tell you how quickly you can retire and what your savings rate needs to be.

http://networthify.com/calculator/earlyretirement

Re: The Simple Math Behind Early Retirement

#213

Post by ef4 »

brazzy wrote: post #6

> As soon as you start saving and investing your money, it starts earning money all by itself. No, it doesn't. Money cannot earn money, people do. Saving/investing money only allows people (via an arbitrarily complex system of indirections) to become indebted to you so they'll pay you some of the money they earn. This is vitally important because it means it's impossible for a significant percentage of people to reti…

This alludes to one of the key problems with central-bank managed credit: you don't get accurate price signals about how much real capital is currently available for investment.

The return on capital obviously does depend on the supply -- more supply should mean lower interest rates, exactly as you're describing, which is exactly what you want in order to keep the level of capital investment at a useful level, neither too high nor too low.

But when your dominant interest rates are chosen by committee and defended by central bank open market actions, all that price signalling doesn't happen. Investors of all kinds get false signals about the availability of capital throughout the economy, and you get clusters of malinvestment.

Re: The Simple Math Behind Early Retirement

#214

Post by tunesmith »

laumars wrote: post #70
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…

Not to mention that if everyone stopped spending money tomorrow, then the economy would crash, millions of people would lose their job - meaning both personal savings and government resources are crippled. Which means the chances of you having enough money and a state pension you can live off by retirement age is significantly reduced. While I'm not trying to argue that saving is a bad thing (clearly it's important t…

Well, that's just because the economy is predicated on the need to expand. One of those huge faulty premises that'll eventually need to change. (If we remove the requirement that an economy must expand, then the whole meaning of recession and depression changes, for instance.)

Re: The Simple Math Behind Early Retirement

#215

Post by 205guy »

rayiner wrote: post #120
danielweber wrote: post #66

Earlier quoted context omitted.

He's right that all savings are someone else's debt. But, if that is your big sticking point, you can literally load up on the cans of pork and beans as your retirement fund. "Savings account" is an abstraction for that, and it's important to realize how abstractions leak and fail, but for most people the abstraction is just fine.

Savings accounts are not abstractions for loading up on cans of pork and beans. If everyone simultaneously did that, then stopped working, everyone could still eat. If everyone put money into a savings account, then stopped working, they'd all starve. I think this is a deeply meaningful distinction. "Saving for retirement" in the modern financial sense is really more akin to having your kids take care of you when you…

"the transaction is severed from the familial unit and carried out in the market."

And this is one of the good things about a capitalist free market, it reaches certain efficiencies and spreads the risk (and rewards) across the whole economy (and all its participants).

Re: The Simple Math Behind Early Retirement

#216

Post by jrheard »

kablamo wrote: post #212

My side project is based on this article. I was intrigued by the graph in this post and so I created an interactive chart to explore it. The calculator will tell you how quickly you can retire and what your savings rate needs to be. http://networthify.com/calculator/earlyretirement

I've been playing around with this page constantly for the past 12 hours and gave you you my email address via the signup box this morning :) great stuff!

Re: The Simple Math Behind Early Retirement

#217

Post by Domenic_S »

grecy wrote: post #141
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…

>> But simply cutting cable TV and a few lattes would instantly boost their savings to 15%, allowing them to retire 8 years earlier!! Are cable TV and Starbucks worth having two income earners each work an extra eight years for??? > Again, mathematically accurate, but not helpful Is extremely helpful to those that have the willpower and motivation for early retirement. I personally think about this kind of tradeoff/d…

> I'm saving an enormous amount of my paycheck and will "retire" before I'm 35.

I see a lot of 35-year-olds who say "I retired at 35 by saving a lot and things are working out great!"

Re: The Simple Math Behind Early Retirement

#218

Post by dro77 »

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.

Oh really? http://stockcharts.com/freecharts/historical/djia1900.html

The only crash that was nearly that drastic was the Great Depression, but it still recovered and grew from there.

But even considering that the stock market is volatile, there are always other decent investments to be made.

Re: The Simple Math Behind Early Retirement

#219

Post by nlawalker »

These two posts should be required reading before digesting anything else on MMM:

http://www.mrmoneymustache.com/2011/09/15/a-brief-history-of...

http://www.mrmoneymustache.com/2012/06/01/raising-a-family-o...

His advice is solid, I won't deny it. But his goals aren't everyone's goals, and the lifestyle that his advice results in isn't what everyone wants from life and certainly does not represent the only way to be happy.

MMM's primary goal was to stop working a full time job as quickly as possible, and he was willing to do a lot to reach it. The goal of his advice is to help you do the same.

Re: The Simple Math Behind Early Retirement

#220

Post by marekmroz »

stephencanon wrote: post #55
run4yourlives wrote: post #22

Earlier quoted context omitted.

For the same reason people buy $5 lattes. People are people. That said, I question a life so stoic it has absolutely no frivolousness. Sounds a little boring.

In particular, money has no intrinsic value. It only has value when you spend it. Saving money just to prove that you can is silly.

On the flip side, making more and more money just to spend it on useless crap that gives instant but short-lasting gratification is also silly. The way I see it, it's a scale, and hitting a balance, not striving for either of the extremes, should be a goal worth pursuing.
Post reply on HN