US Meet Mr. Money Mustache, who retired at 30.

[das_nut]

To hundreds of thousands of devotees, he is Mister Money Mustache. And he is here to tell you that early retirement doesn’t only happen to Powerball winners and those who luck into a big inheritance. He and his wife retired from middle-income jobs before they had their son. Exasperated, as he puts it, by “a barrage of skeptical questions from high-income peers who were still in debt years after we were free from work,” he created a no-nonsense personal finance blog and started spilling his secrets. I was eager to know more. He is Pete (just Pete, for the sake of his family’s privacy). He lives in Longmont, Colo. He is ridiculously happy. And he’s sure his life could be yours.

- Washington Post.

Well worth the read.

 

[KLS52]

I seriously dislike people like this. Mostly because I am so envious and will most likely be working until I die. But it was a very interesting read. Kudos to him.

 

[das_nut]

I seriously dislike people like this. Mostly because I am so envious and will most likely be working until I die. But it was a very interesting read. Kudos to him.

If I'm lucky and things stay on track, I think myself and my partner will be able to retire some day, but 30 has come and gone for both of us.

One thing I find useful about a lot of frugal blogs is that they emphasize spending money to get the most bang for the buck. It's not about living like a miser. It's about understanding what you need versus what you want, and when it comes to wants, understanding the real worth of what you're buying. Sure, you enjoy the stereotypical $5 latte, but do you enjoy it to the point of paying $5? I sure don't, but someone else may. So I'll skip the latte, while someone else may scrimp in other parts of their life in order to enjoy that $5 latte. (And maybe they'll decide that they enjoy it once a week, but if they drink it daily, it's not worth the $5...)

It's all about being conscious about how you're spending your money.

 

[Moll Flanders]

If I'm lucky and things stay on track, I think myself and my partner will be able to retire some day, but 30 has come and gone for both of us.

One thing I find useful about a lot of frugal blogs is that they emphasize spending money to get the most bang for the buck. It's not about living like a miser. It's about understanding what you need versus what you want, and when it comes to wants, understanding the real worth of what you're buying. Sure, you enjoy the stereotypical $5 latte, but do you enjoy it to the point of paying $5? I sure don't, but someone else may. So I'll skip the latte, while someone else may scrimp in other parts of their life in order to enjoy that $5 latte. (And maybe they'll decide that they enjoy it once a week, but if they drink it daily, it's not worth the $5...)

It's all about being conscious about how you're spending your money.

I wish I had realised this when I was younger. I still probably have too many luxuries but I think if we had been more economical with money earlier we would be in a very fortunate position now.

 

[KLS52]

What's that they say about hindsight being 20/20?
I've made so many bad decisions with regard to finances. I will now have to pay the piper. While I won't be retiring to some beautiful tropical island, I do have it better than a lot of other people, i suppose. And I can hope that my kids don't follow in my footsteps. My daughters seem to be on track. I may have to show this article to my son, however.

 

[mlp]

I don't see how health insurance can be included in that $25,000 that he says his family of three lives on, and if it is, it's minimal coverage.

All it would take to wipe them out financially is one major illness or accident, and if it's something that results in ongoing medical bills, the investments/savings can be reduced to nothing almost overnight.

I agree with what he's saying about frugality, but he's not addressing, or not aware of, the precariousness of his family's position.

 

[das_nut]

I don't see how health insurance can be included in that $25,000 that he says his family of three lives on, and if it is, it's minimal coverage.

All it would take to wipe them out financially is one major illness or accident, and if it's something that results in ongoing medical bills, the investments/savings can be reduced to nothing almost overnight.

I agree with what he's saying about frugality, but he's not addressing, or not aware of, the precariousness of his family's position.

In the comments, someone says he's mentioned having a high-deductable plan on his blog. The not-working probably helps as well, since they never will have to face a missed paycheck if one of them gets seriously injured.

 

[mlp]

In the comments, someone says he's mentioned having a high-deductable plan on his blog. The not-working probably helps as well, since they never will have to face a missed paycheck if one of them gets seriously injured.

A missed paycheck is the least of it. A broken wrist accumulated medical bills for me in an amount roughly equivalent to two years' of Mr. Mustache's annual budget, and that was without the recommeded physical therapy, which I figured I could do on my own. That's a broken wrist, not a serious injury - I missed only half a day of my chores, although I had to adapt to hauling 50 pound feed bags, etc., with one hand for a couple of months.

I know people who, despite good group health insurance, have had net worths in the high six figures wiped out in a matter of months.

I think that people who have never come face to face with it don't realize how life can change in a heartbeat.

As I said, I commend the frugality. I just think that he doesn't realize the risk he's taking by retiring on the expectation that $25,000 per year plus a nest egg of investments will see him through.

 

[das_nut]

A missed paycheck is the least of it. A broken wrist accumulated medical bills for me in an amount roughly equivalent to two years' of Mr. Mustache's annual budget, and that was without the recommeded physical therapy, which I figured I could do on my own. That's a broken wrist, not a serious injury - I missed only half a day of my chores, although I had to adapt to hauling 50 pound feed bags, etc., with one hand for a couple of months.

He pays $219/mo for a family plan with a $10k individual/$20k family deductable, with a 20% copay after that up to $3k per person. So his max yearly out of pocket expense would be $29k (if everyone in his family was afflicted with some horrible tragedy).

He has over $800k in savings. His living expenses are $25k/year. So he could go over ten years paying out the max insurance without going broke.

He's in a spot where his entire family could be afflicted with a horrible, decades-long disease where he couldn't work and he's paying his maximum health insurance payments, without going broke.

How many Americans can say the same?

 

[mlp]

He pays $219/mo for a family plan with a $10k individual/$20k family deductable, with a 20% copay after that up to $3k per person. So his max yearly out of pocket expense would be $29k (if everyone in his family was afflicted with some horrible tragedy).

He has over $800k in savings. His living expenses are $25k/year. So he could go over ten years paying out the max insurance without going broke.

He's in a spot where his entire family could be afflicted with a horrible, decades-long disease where he couldn't work and he's paying his maximum health insurance payments, without going broke.

How many Americans can say the same?

You are assuming:

1. That his insurance doesn't have a maximum payout amount.
2. That his insurance can't be cancelled by the company.
3. That his premium can't be increased.

Those are all really big assumptions. #3 alone is a killer, as I found out personally - coming off COBRA, and trying to get coverage under HIPAA, which mandated that I be provided coverage. My insurance premium, with a maximum payout as well as a the largest possible deductible, would have been just under $5,000 per month. That's for me alone, with no health issues whatsoever, except that I had been on anti depressants for years.

Now I hope that some of those problems will be fixed under the new healthcare law, but I don't think anyone is going to have guaranteed lifetime coverage in unlimited amounts at the rate of $219 per family (and I'm pretty sure such insurance coverage doesn't exist currently). Don't get me wrong - I hope the new healthcare law provides that, but I don't think it's fiscally possible. And I would think (and hope) that people's net worth will be taken into account in determining whether they qualify for public assistance to pay their insurance premiums.

 

[das_nut]

You are assuming:

1. That his insurance doesn't have a maximum payout amount.

Lifetime caps are illegal now. Thanks Obamacare. Yearly caps will be made illegal next year. Again, thanks to Obamacare.

2. That his insurance can't be cancelled by the company.

Hard to do now. It used to be that they could go over your original paperwork and drop you if you made a mistake. That's not possible now. (Again, thanks to Obama).

3. That his premium can't be increased.

If they do it by more than 10%, it's subject to government review. (Obamacare once again).

Now I hope that some of those problems will be fixed under the new healthcare law, but I don't think anyone is going to have guaranteed lifetime coverage in unlimited amounts at the rate of $219 per family (and I'm pretty sure such insurance coverage doesn't exist currently).

Look it up, it does.

ETA: I mean that $219/family insurance rates exist per month for him. It's a high deductible plan - meaning he's paying out of pocket for the first $10k individual/$20k family. That makes health insurance cheaper. The plan is called the Saver80 United Health One.

Sure, he could be horribly injured and need expensive lifetime care that will end up costing millions to him. But so could anyone who is retired, as well as anyone who is working. There's a risk to living life, especially in a country like the US which has such a patchy and weak safety net for the sick and disabled.

 

[mlp]

If you have a “grandfathered” individual health insurance policy, your health plan is not required to follow the new rules on annual limits. (A grandfathered individual health insurance policy is a plan that you bought for yourself or your family; that you did not receive through your employer; and that was issued on or before March 23, 2010.) If you’re not sure whether your plan is grandfathered, ask your insurance company.

Let's hope he bought his plan after March 23, 2010.

Some plans may be eligible for a waiver from the rules concerning annual dollar limits, if complying with the limit would mean a significant decrease in your benefits coverage or a significant increase in your premiums.

IOW, even the plans to which the annual limits prohibition applies can decrease coverage or significantly increase premiums to compensate.

[Rate Review helps protect families and small businesses from unreasonable rate increases. Insurance companies must now justify any rate increase of 10% or more.

It's not a prohibition - rate increases in excess of 10% per year have to be justified.

 

[mlp]

And, sadly, savings of $800,000 isn't a lot even if you retire at 65 or 70, much less at thirty with a child to raise and a lifetime ahead of you.

As I said, I agree with his message of frugality. I hope it works out for him. But I'd bet you dollars to donuts that he'll be trying to re-enter the workforce somewhere along the line, not because he wants to, but out of necessity.

 

[Moll Flanders]

My aunt's husband retired before he was 30 as he was a yuppie banker back in the 1980's. My friend worked with a man who didn't have any electricity in his home (by choice) and so he was so frugal that he had enormous amounts of cash savings. I do worry about our financial situation probably more than I need to as according to this Global Rich List we are in the top 0.11% richest people in the world by income.

 

[das_nut]

And, sadly, savings of $800,000 isn't a lot even if you retire at 65 or 70, much less at thirty with a child to raise and a lifetime ahead of you.

As I said, I agree with his message of frugality. I hope it works out for him. But I'd bet you dollars to donuts that he'll be trying to re-enter the workforce somewhere along the line, not because he wants to, but out of necessity.

$800,000 is 32 years of current expenses for him, not counting any gains (right now, he claims his savings are increasing).

The lack of a house payment probably helps him out a lot. He doesn't like to drive either, so there's savings there.

It's interesting how your comments as well as many of the Washington Post comments were hostile to this guy. I'm trying to understand - is it just unrecognized class background assuming that $25k for a family of three isn't enough to live on, even with no house payments and no work expenses? Or are we trying to prove his choice won't work out, so we don't have to admit we don't like our current financial situation?

 

[kazyeeqen]

Seems reasonable to me. More than reasonable, actually, with that much savings. Something bad may happen and somehow wipe out their savings, but it would have to be really really bad, and there's not really anything one can do to prepare for something of that magnitude. They could keep working and save two million, would that be enough? Or just work forever, just in case? If they do have to renter the workforce, they might not need such a high income job, because they are used to spending less, so they should be able to get jobs, if they need to.

 

[mlp]

$800,000 is 32 years of current expenses for him, not counting any gains (right now, he claims his savings are increasing).

The lack of a house payment probably helps him out a lot. He doesn't like to drive either, so there's savings there.

It's interesting how your comments as well as many of the Washington Post comments were hostile to this guy. I'm trying to understand - is it just unrecognized class background assuming that $25k for a family of three isn't enough to live on, even with no house payments and no work expenses? Or are we trying to prove his choice won't work out, so we don't have to admit we don't like our current financial situation?

I'm not hostile to him - in fact, I live more frugally than he does; the care of my animals constitutes the biggest part of my budget by far.

I just have a few more decades on me than you or he, and have experienced, both personally and through friends, what can happen, and very quickly. So I worry, because I have all of these lives depending on me. Maybe he'll be one of the ones who wins life's lottery (and I'm not talking about money - I'm talking about things that upset well laid plans to a significant degree), and if he does, great.

The only criticism I have of him is that if he's talking people into retiring at a really young age with that little in resources*, he's putting them at risk. If he's just talking people into living a lot more frugally and saving money, then hurrah.

*I know $800,000 seems like a lot to most people, especially at your age. But it's not, not if that's your source of income. Investments fail, cost of living rises, **** happens in life.

Again, this is one of those cases where time will invariably tell the story. Follow him and see what he's doing in ten years.

 

[Muggle]

*I know $800,000 seems like a lot to most people, especially at your age. But it's not, not if that's your source of income. Investments fail, cost of living rises, **** happens in life.

Again, this is one of those cases where time will invariably tell the story. Follow him and see what he's doing in ten years.

From what I gathered from that article, they own a rental home which their $25k income comes from. The $800k is in investments and savings which is their safety net.

But I might have read it wrong.

 

[mlp]

They do own a rental home. I gather that the $25,000 comes from a combination of rent and investment return. I gather that they were careful about the location of the rental home they bought, to minimize the chances that it would stay vacant for any extended period of time. But even in the best of circumstances, rental properties have their own risks. For instance, in most states, you will lose at least a couple of months' rent if you need to evict someone for nonpayment, and in some locations, it takes considerably longer. And it takes only one careless or angry tenant to trash a house to the point where it takes a significant investment to restore it. Rental income from a single unit is a nice *extra* to one's income, but risky to rely on.

 

[kazyeeqen]

Many people get by with much less. The risk seems to be that it's a deliberate choice by rich people, instead of a necessity because of station.

My father lived for years on a 500$ government check (disabled veteran, couldn't work) per month while housing a family of 6 in his house, a family who appeared to get by on less. But those are poor people, so of course there is no option, but these people, though they live frugally, are rich. They have options, but they are living like poor people. Not really poor people, of course. Well off poor people, which I think is a good aim.

This couple has income from a rental property, which they don't actually need to rely on, because they have significant savings. They have enough in savings to live at their current rate of spending for several decades, but they don't need to do that because they have a rental income. They've pretty much covered their bases as well as anyone can in this crazy unsure world.