I am rather enamored with Mr. Money Mustache’s blog, written by a man who retired from full-time corporate work at age 30 through aggressive savings, investment, and good old-fashioned frugality. According to this post, for 10 years he spent 25% of his disposable income while people around him spent 90%, which “meant saving a good $4,000/month, which rapidly compounds and results in a net savings of $7,000/month after a few years.” After a decade, he and his wife had enough money to do whatever they wanted for the rest of their lives. And he wants you to do the same:
What I want you to do is start thinking of REAL savings. Not putting away $5 or $150 per month, but more like FIVE THOUSAND per month. Not everyone can do that. But a middle-class American family with two teachers making $60k each per year, who are currently saving zero and struggling to get by? THEY SHOULD BE SOCKING AWAY $5000 PER MONTH. Word.
What I like about MMM is that, investment talk and bike obsession aside, he’s basically advocating the same thing Amy Dacyczyn used to advocate in The Tightwad Gazette. In fact, his story reminds me of Amy D’s description of how frugality allowed her to achieve her dream of “a large family and a rural pre-1900 New England farmhouse (with attached barn).” As I point out in my own post about frugality, in 7 years at $30,000 a year in 1980s dollars, the Dacyczyns “… saved $49,000, made significant investment purchases (vehicles, appliances, furniture) of $38,000, and were completely debt free! That is an annual savings/investment rate of over $12,500 per year, or 43% of our gross income.”
Mr. Money Mustache may be the modern version of this, only with different priorities and a higher initial income. Plus he has a lot of good insights, like how learning is one of the pleasure of doing things yourself.
I feel that every time you do something for yourself, even if it’s just washing your own car, you learn new things and build a more balanced personality that learns to love hard work even more. And you build diversity into your day, which allows you to work longer without realizing you are working.
Or his refreshingly sane advice for how to know when you can buy an expensive car like a BMW:
When can you truly afford a fancy car like a BMW? Well, once you have the cash for it in the bank, your house and all other debts are fully paid off, and you are either retired or very comfortable with delaying your eventual retirement for a year or more to pay for this depreciating piece of luxury property, THEN you can roll into the dealership.
People who aren’t frugal sometimes have a hard time understanding why frugal people would bother to make their own cleaner instead of buying the store brand or shave with a safety razor instead of expensive disposable blades or make your own beer when there’s a bar down the street. But it’s all a matter of priorities. When you stop wasting money on small things, they quickly add up to big savings, which you can then use on the things that really matter to you in life.
And it really does work, as MMM’s blog makes clear. [Justinsomnia]