75 comments

A Millionaire is Made Ten Bucks at a Time

I was at a party recently and someone walked up to start a conversation. It turned out this person had secretly been reading this blog, and now he had a few questions for me.

“I understand now that even a family can retire on well under a million dollars*, but that is still a lot of money. Yet your blog talks mostly about small things like saving $70 a month on electricity or gasoline or coffee. Aren’t these two different universes of savings that don’t even relate?”

It’s a good question, of course. It is this perception of “small” versus “large” amounts of money that is the downfall of most of us. It drives many to fantasize about lottery winnings, since that’s the only way to become a millionaire if you’re not a Rapper or a greedy corporate CEO, right? And meanwhile, we buy $9.75 bottles of Kirin at the sushi restaurant and $12.00 movie tickets to see Cars 2 with the kids in the movie theatre and drive 20MPG vehicles around town for relatively short trips. And we don’t become millionaires very quickly at all.

The solution to this is a change of mindset. It’s time to start getting excited about ten bucks again.

When I was a kid, I had to cut an enormous and hilly 1/2 acre lawn by pushing a fume-spewing 21-inch Lawn Boy for two hours. That was five bucks. Then I excitedly waited a week so the grass would grow and I could repeat this process to earn another five bucks. That’s ten bucks.

Ten dollars will still buy about 9 pounds of delicious, kickass, nutritious, muscle-building rolled oats – still one of my favorite foods today despite being able to afford fancier things. Or two gallons of organic milk. Or enough gasoline to drive over 100 miles in a good car. WEEKS worth of regular driving. Or enough natural gas to provide hot water for showers and dishwashing for a family for several weeks.

Ten Bucks is a lot of money. So you need to respect it. Ten dollar bills are not just food stamps or amusement park coupons that you fork over by the dozen to get restaurant meals, smokes, strippers, drinks, tourist attraction admission, and assorted domestic services. Each Ten is a critical brick in the Early Retirement castle you are building.

If you save $796 per week for ten years, and get a 7% compounded investment return after inflation, you’ll have $600,000 sitting around ready to party for you. As you can see in the footnote section below, that is more than enough to start a nice Early Retirement, especially if your house is paid off. Maybe more than twice as much as you need, but since we do conservative calculations here at MMM, let’s roll with that number.

Let’s say you’ve got two income earners working together. Now each one has to save only $398 a week. There are 112 waking hours in each week. Each person has to make 40 successful $10 decisions each week – or one $10 decision every 2.8 waking hours.

Some of these decisions can be made automatically – like owning a less expensive car and driving it less ($100 per week per person), using less electricity and other utilities ($25), eating most office meals without going out to lunch ($50), not having cable TV and in general spending less time in retail establishments ($25). Now the remaining number is only $200 a week.

Most zero-savings people blow dramatically more than $200 a week just in random purchases. Spas, yoga, fingernail treatments, bottles of wine, sixpacks of beer, shoes, electronic gadgets, ice cream cones, movie tickets, plastic crappy toys for toddler birthday parties, books from Amazon.com instead of your local library, lawn-care services.. whatever.

Those, combined with the automatic savings above, are the ten-dollar decisions that make the difference between the typical broke and indebted person, and the Mustachian Early Retiree.

If you start Respecting your Tens at age 20, you’ll be Retired by 30**.

Now, before the whiners start chiming in and saying it is no fun to spend zero money, you must realize that there is plenty of wiggle room for luxuries in my numbers.

Each person is saving $400 per week or about $20k per year on top of their house payments. Yet many of us have a take-home pay of over $30,000 per year. Sometimes way over that amount. There is plenty of money to go around in this situation, and I’m even giving you a single family home to live in and a relatively quick 10-year sprint to retirement! If you have any issues with my numbers, make your own adjustments and the results will still be amazing.

But even with all this room for indulgence, it is important to keep your priorities in order, otherwise you are combining Luxury with Fantasy. For example, it is absolutely ridiculous to buy even your first bottle of wine or restaurant meal if you do not yet have a good bicycle and a bike trailer.  It is insane to buy a luxury car if your house isn’t even paid off yet.  If you still have student loans, get them paid off BEFORE you splurge on that iPhone or overseas vacation.  You can still have these frivolous and fancypants things, some of which I admit to owning myself.. but you need to have a rational definition of  “can I afford it”?

Part of the Ten Dollar Philosophy is that you must pay for the current luxuries in your life before you start adding additional luxuries.  (Can you tell I love that word)?

I’d also suggest that since luxury spending is primarily for pleasure, you could try doing much of your purchasing for other people. Perhaps counterintuitively, it is proven that most of us get more pleasure buying a necessity that really helps someone else – for example, a bike for a family member who can’t afford one – compared to yet another luxury for ourselves – a $100 hairstyle or an upgraded china set for our yacht’s main dining room.

So there you have it – the way to become a Retired Millionaire using just those useless paper scraps in your wallet – by changing the way you think about them.

 

* A family of four in the US can live comfortably on about 24k per year plus having a paid-off house. With an nice conservative 4% annual withdrawal/return rate on your investments, you need $600k invested to generate this cashflow, inflation-adjusted, forever, plus your $200k house. $800k total. Or, if you want to get off your butt and work very occasionally to earn $12k per year, you can slice the $600k number down to $300k! Or you can save the $600k AND work, and keep saving more and more over the years – ending up a multimillionaire all while doing very little paid work.

** Holy shit, that’s quite a neat little verse I came up with there! Believe it or not, it happened completely by accident.

 

  • eva August 1, 2011, 6:57 am

    What you’re saying is absolutely true, for most people.

    But this: Yet many of us have a take-home pay of over $30,000 per year. Sometimes way over that amount.

    I WISH. But take note, those of you that make more than that–I make significantly less than 30K and still save 10K a year.

    Reply
    • MMM August 3, 2011, 10:09 pm

      Excellent! Very glad to hear it and you are right – almost any amount beyond minimum wage is actually Sweet Gravy and allows some savings for most people.

      I remember as a University student I was fortunate to make $10k every summer, and from that I would pay for tuition, books, transportation, food, etc – everything except rent since I stayed with family members for most years. Sometimes in exchange for helping them out with house projects. So the $10k a year was already enough to graduate with no debt.. and would have seemed extremely generous if I didn’t have to spend half of it on tuition!

      Reply
      • Rob May 24, 2014, 9:48 am

        For those strugling with nothing left over at the end of the month a simple idea. Financial planning 101 pay yourself first, no more worries about arriving to the end of the month with nothing left over.

        Reply
      • Tom July 2, 2014, 4:36 pm

        I was quite the party boy in college and for a year(ish) out of college and have now left myself with a lot of debt. I currently have about $30K in non-mortgage debt (student loans and vehicle loan). I’m 26 years old, and have recently been very focused on reducing my debt. I pay about $1,200/month towards all of my loans, excluding my mortgage, which is about $600 above my minimums. With using so much of my income to pay off debt, I don’t actually have a ton left over to beef up my actual savings (I’ve got about $30K stashed away in my 401(k)). Do you consider my aggressive debt payments to be roundabout “savings,” or do you believe that even with such aggressive debt reduction habits, I should still be able to save about half of my salary?

        Reply
        • Mr. Money Mustache July 3, 2014, 8:02 pm

          Yes, debt repayment is definitely savings, and one of the best kinds of it there is. Keep up the good work!

          Reply
  • Oskar August 1, 2011, 8:00 am

    Living frugaly is a mindset and once you have it it is not that hard. We did a lot of driving to see the beautiful US when we lived there a few years back, we did not have kids and were able to do a lot of driving. In total we saw 28 states in 2 years (including Alaska) during this time we saved a significant amount of money much of it came from eating out a lot less than our friends (still ate out a couple of times a week) and other frugal decisions like staying at a Motel instead of a 5 star hotel. We did more than most with a lot less money and I think it was the basic mind set that made it possible.

    A note on coffee which is so popular to discuss, we were often on the road and ‘had’ to buy coffee….obviously this is a luxury but still we wanted coffee. We found that the large coffee (latte/cappucino/etc.) cost about 20% more than the small one and was twice as big? Why not share??? The most frugal decision would always be ‘don’t buy the coffee’ but how much fun is that….you have to allow luxuries just be conscious about them. The day when you think buying coffee at S-bucks is a need then you are in trouble.

    Reply
  • Ginger August 1, 2011, 8:30 am

    You are saying $400/week or $16,000/year but those two don’t work together. $400/week is $20800/year and $16,000/year is $307.70ish a week. Which one is it?

    Reply
    • MMM August 2, 2011, 6:35 am

      You are right! $400 per week, 20.8 per year. I have fixed that sentence.. Thanks!

      Reply
  • Michael August 1, 2011, 8:48 am

    Right now, I am putting most of my effort into paying off my mortgage. Can I accomplish that goal and still retire early?

    Reply
    • MMM August 2, 2011, 6:34 am

      Sure! Paying off a mortgage is just another form of investment with a guaranteed cash return equal to your mortgage rate. Statistically investors have earner higher returns over long periods with stocks, but for someone coming up on early retirement in just a few years, I highly recommend a paid-off house. The psychological benefits are great too.

      Reply
  • Kevin M August 1, 2011, 10:18 am

    $24k is about what we live on not counting our mortgage. I am eagerly awaiting the day we pay that bad boy off! We are a family of 4 and live quite comfortably – It is totally do-able. Preach on, MMM!

    Reply
    • Dean July 14, 2014, 10:22 pm

      Please explain how a family of 4 lives off that amount? I don’t doubt your numbers, but would really like to know how you’re doing it?

      What about child care, food, taxes, etc.

      Reply
  • JJ August 1, 2011, 10:36 am

    I’m not givin’ up my strippers Mack.

    Reply
  • jessica w August 1, 2011, 12:51 pm

    here is a fun handy calculator where you can add in your own numbers
    http://www.bloomberg.com/personal-finance/calculators/retirement/
    I had a blast playing with this;seeing it here with a graph even makes it easier to wrap my head around.

    Reply
    • Lori September 11, 2014, 9:54 am

      That is a great calculator. We are better off than I thought! Yahoo!! It makes me even more excited to see the longer term effect of the changes we have put in. This will be great to share with my husband! I’m looking at the road left and saying, heck yeah, we can do this!

      Reply
  • Sarah August 1, 2011, 1:09 pm

    I love your blog : )

    Reply
  • Marcia @Frugal Healthy Simple August 1, 2011, 3:26 pm

    I always try to mind my $10.

    When my coworker shakes his head at my prepaid phone, I think “2 prepaids is $200/year, two Smartphones are $2000/year”.

    And this weekend, we were invited out to dinner. We passed (mostly because I didn’t read the invite until I was an hour into cooking enchiladas). But regardless, dinner cost me $14 and gave leftovers. All in all, I think the enchiladas plus side of veggies will cost $22 for 5 meals for 2.5 people. Or a little over $4 per meal.

    Had we gone out, it would have been $40. Easily.

    Reply
    • MMM August 3, 2011, 9:47 pm

      Hmm.. you’ve got me thinking on the prepaid phone idea. I do have a fancy iPhone right now, although the total monthly cost to me is only $35 since it’s part of a family plan. However, this is still a ton of money. And wi-fi hotspots are getting more common all the time.

      I’m thinking that in one year when the contract expires, I might keep the phone, and use it for everything I do right now, except for voice calls. Which I rarely do anyway. Then I can have a prepaid phone for those rare voice calls. To keep the all-in-one functionality, however, I’d have to duct tape the prepaid phone to the back of the iphone. For a savings of over $300 per year, however, I just might do it ;-)

      Reply
      • David Baillieul August 4, 2011, 10:32 am

        Just get a new prepaid SIM and put it in your iPhone. Use the free wifi at home, work and from hot spots to run apps, browser stuff and Skype. Use the prepaid SIM for the occasional voice or text message.

        Reply
      • JJ August 12, 2011, 8:08 pm

        I have an iphone on a t mobile prepaid plan. Granted, back then you had to jailbreak your phone which requires a little bit of tech savvy, but now jailbreaking is a lot easier, plus they sell unlocked iphones now if you don’t want to void your warrenty. I pay about $12 a month for my telephone service and use wifi wherever i can get it. I’ve stopped telling people about it since people get so confused about the fact my iphone only has data when there’s wifi.

        “But it’s like just like an ipod touch” they say.
        “Yes, like an ipod touch that can make calls” I say
        “But that’s an iphone”
        “Yes it’s an iphone but it doesn’t have data”
        *confused look*

        Reply
        • MMM August 13, 2011, 7:12 am

          Fantastic!! Thanks for those tips on using an iPhone in prepaid mode. I am DEFINITELY copying your idea next August when my current contract expires.

          Reply
      • Abigail July 17, 2014, 3:20 pm

        About to forcibly do that by moving to China. I refuse to pay a cancellation fee for the contract to which I stupidly agreed, so I’ll pay 10 bucks a month and use the iPhone on wi-fi in Beijing until my AT&T contract expires in February. Then I’ll legally unlock the phone and do the prepaid SIM in Beijing.
        Meanwhile, if I really need it beyond my Skype calls, I’ll buy a cheap prepaid phone to get me through August-December.
        Prepaid & wifi are great. Now, if I can translate my love of economy cars and small efficient spaces to somehow wean off my Apple addiction, I’ll have it made!
        Cost of living in Beijing is cheap, thankfully, except for rent. Trying to alleviate that by renting a room instead of a whole place to myself (sorry for the rabbit trail).

        Reply
        • Abigail July 17, 2014, 3:22 pm

          P.S. I adore the new look. If it’s been around longer than a few weeks, I apologize for not stopping in sooner!

          Reply
  • Des August 1, 2011, 3:31 pm

    This is the most inspirational blog post I’ve read in a really long time. I’ve been coming back to it all day because it makes me feel pumped to re-work our budget. Thanks!

    Reply
  • Heidi August 1, 2011, 7:15 pm

    wow. I love your writing. I laugh at each and every post. The brick image is great. My husband follows ERE which allows him to sink into deep thoughts but that always left me a bit behind, now we meet in the middle.

    Reply
  • Liz August 1, 2011, 9:20 pm

    Health care insurance premiums need to be factored in. That unpredictability is what worries me.

    Reply
    • MMM August 3, 2011, 9:42 pm

      Sure, factor them in however you like! As mentioned in the earlier insurance article, I’m a fan of minimal coverage and high deductibles, which minimizes monthly cost. Then you put high priority on staying in top health and have a large amount of savings in case anything does ever come up. In the health department, I am worry-free.

      Reply
  • Sorbet August 2, 2011, 6:56 am

    Good post. It really is a change of mindset.

    I remember when I started paying attention to the little things (the 10$ bills), my expense-tracking spreadsheet showed an over 40% reduction in spending within a month. And this is with very little change in lifestyle, aside from the fact I was paying attention to how I spent money.

    Reply
  • Oskar August 2, 2011, 7:41 am

    I have to agree with Des, I have now come back to this blog post several times. I have an issue with frugality that I have to start working on which is that while more frugal than most, when I have budgeted a certain amount for something can be 5$ for coffe, 100$ a night out or 10 000$ for a family vacation for the most part I end up spending the whole budget even if there could have been a way to save some of that money. I am great at budgets because I stick to them….I do not overspend them but also hardly ever underspend them…..

    Maybe it is time to challenge the budget all over and take out 10% and see what happens???

    Reply
  • Martin August 3, 2011, 12:32 pm

    Did you count in the inflation at the 4% withdrawal rate? If you are invested in stocks, this perhaps doesn’t matter so much, but you can’t get a constant income out of stocks…

    Reply
    • MMM August 3, 2011, 9:24 pm

      Hi Martin.. YES, all of my examples are adjusted for inflation, unless otherwise noted. In this case, I was suggesting you could withdraw 4% of a retirement nest egg’s principal each year and the remaining amount would still grow at least as quickly as inflation. The exact amount of withdrawal you can do safely varies widely between investment types and how much you are willing to adjust your withdrawals in a bad year.. but 4% is on the conservative side.

      You CAN still get a consistent income out of stocks – simply by using the dividends for your spending money, and if that amount is too small, selling an additional amount of the actual stocks each year to cover the difference. Since the stocks grow along with the economy, which grows faster than inflation, you are still covered as long as you don’t sell too great an amount each year.

      Reply
  • Oskar August 3, 2011, 2:45 pm

    Maybe i will try, it is always fun with a challenge:-) I have previously toyed with the idear of trying to live on the absolute minimum (whatever that is….beans rise and water:-) for a short period of time just to challenge the budget and realise how much luxuries we still have in our frugal lifestyle.

    Reply
  • abrown August 8, 2011, 9:11 am

    Hey MMM, I love your blog. It’s been really instrumental in helping my wife and I plan our finances!

    Keep it up!

    Reply
  • Brooke Trout August 10, 2011, 4:35 pm

    Love the straight talk on your blog! I see that you have read Your Money Or Your Life. I just read it myself and it totally changed my perception of money. In the book money is equal to life energy. One of the exercises is to track incoming savings versus spending for a month. I made sure to calculate all the money coming in and out of my life every day that is typically taken for granted; freebies, gifts, discounts, lucky pennies or coupon savings – it adds up! I was surprised to see how much I save doubles my earning power. I’m currently reading The Bogleheads Guide to Investing and the eye opener there so far has been that you can potentially earn more money by being debt free than investing! I hope to be debt free by the end of the year so I can start growing my Frida style money moustache!

    Reply
  • Poor Student February 8, 2012, 2:20 pm

    I love the random button you have or else I never would have seen this article. It is a philosophy I may have already known subconsciously but you articulate it to the forefront of my mind.

    Reply
  • Elaine February 9, 2012, 12:36 pm

    I just found your website last night and I must say I am impressed. Definitely some really worthwhile stuff here to apply to my own life.

    Reply
  • Heath April 27, 2012, 5:50 am

    Wow. This is definitely the page I’m going to come back to in the future. I’m also going to forward this one to people who try to call me “cheap” or that I “worry about money too much” or when I begin to bring my wife into the fold :-)

    The whole concept of spending money to get joy is one that gets most people, and makes it hard for them to save. I know you went over this before, in another post. But I’m going to try to replace that with joyful thoughts of my future early retirement (though I’m nearly 30 and just starting, so it’s going to take a while…). Delayed gratification really does seem to be the key here!

    Loving the blog :-)

    Reply
    • Heath April 27, 2012, 5:51 am

      Oh man, forgot to check the “notify” button. Reply to THIS comment if you want me to see it :-)

      Reply
  • Clint August 15, 2012, 1:00 pm

    This post should have hundreds of comments, so I’m leaving mine now even though I found it months ago. I’ve referred it to friends, family, other bloggers and blog commenters. Truly one of your best!

    Reply
    • Heath August 15, 2012, 1:48 pm

      Agreed!

      Reply
  • A.J. January 7, 2013, 1:26 pm

    Good stuff. Now if only I could convince the wife that ten bucks is really a decent amount of money. :-) Around here it’d buy about a week of natural gas for water heating & cooking, but that’s certainly nothing to sneeze at.

    Reply
  • sean June 7, 2013, 1:41 pm

    Hi MMM,
    I have been thinking of asking what your opinion on the below critical issue.

    paying of mortgage(with extra monthly principal) or funding retirement accounts

    If Real estate boom comes down, the price of home comes down and if stock market comes down, my retirement funds will be reduced.

    So in these scenarios, which option is best for an average person.

    Thanks

    Reply
    • TomTx May 5, 2014, 3:16 pm

      If you don’t sell your paid off house, a real estate crash means nothing. You still live in a warm, safe, dry house that meets your needs. Heck, I was happy as my house value dropped. I wasn’t selling, and my property taxes went down with the value. Win for me

      Reply
  • Silvie July 25, 2013, 3:01 pm

    Hey MMM I found out about this blog yesterday when I saw it on Yahoo. Great stuff! My first impression is that we have it a little easier in the Netherlands with all commuting costs fully covered by the employer and mortgages being tax-deductible but still there’s so much here too learn. Thank you!

    Reply
  • UncleCharlie April 28, 2014, 7:00 am

    $24,000/year in warm Colorado. We are moving back to Canada, London Ontario. I keep hearing how expensive Canada has become with heating costs, gas, insurance, food. Any idea of how much our costs for a family of three will be? My wife is very apprehensive about the move. We have about $300,000 in savings but I haven’t worked in Canada for ten years. We are considering having university homestay students (ESL) to help with the costs for at least the first year back. I plan on paying cash for a 6 year old Civic or similar car. We plan on renting our first year back. But back to the original question: living costs for a family in Canada with a very frugal Korean wife?

    Reply
    • Mr. Money Mustache April 28, 2014, 8:03 am

      Mr. Frugal Toque is an expert at that – search the site for some of his articles or maybe we can query him directly. He lives at around $30k for a family of 4, in a large paid-off house in expensive Ottawa.

      The two countries aren’t all that different, if you shop carefully. Driving is more in Canada, so you drive less (which is a win anyway, and you can bike year-round). London’s climate isn’t overly punishing, so with a well insulated house you should be fine. Health care is free, which will cover the difference in groceries. Costco still exists, and the savings is even larger there, because the competitor is overpriced Loblaws.

      I’d estimate that recreating my exact $25k life here would cost $40k in Ontario. But an equally good but different life could be crafted for $25k back there.

      Reply
      • Ottawa April 28, 2014, 11:43 am

        Mr Frugal Toque may jump on this too – but another Ottawa perspective here. We are a family of 3 in a paid-off 4bdrm townhouse within the greenbelt (i.e. in the city proper). We are currently at $32K annual spending. Based on MMM’s lifestyle, as inferred from his writings, we live similarily luxuriously. By the end of this year we will be below $30K as our child care expenses taper somewhat. Although I don’t believe it would be too difficult to get to $25K, I would suggest $30K is similar to MMM’s $25K (Not $40K).

        Reply
        • Mr. Money Mustache April 28, 2014, 12:01 pm

          Very nice perspective, Ottawa, and the right way to think!

          When estimating $40k, I was figuring in things like the travel we do (flights are much cheaper in the US), the large house within walking distance of downtown, the home renovation parts, eating lots of cheese, etc.

          These things are expensive in Canada and just happen to be cheap here, so we consume a bit more than we should. But they are completely not necessary to live a good life, so you are doing wise substitution of goods – more of some things, less of others, and ending up right at the same level. Excellent!

          Reply
    • Kenoryn April 28, 2014, 10:39 am

      My partner and I live for about $32,000 in Peterborough, ON, which includes $12K for the mortgage – one car, no kids, three cats.

      For specific expenses:
      – our car insurance for a 2007 Matrix is $900/year.
      – Heat – I spent $760 last year for heat & hot water for my 120-year-old totally uninsulated 1000sq ft house with a high efficiency natural gas furnace.
      – Gas costs depend too much on how much you drive to say, but gas here is currently $1.35/L, and seems to be about $.3.35/gallon in Colorado. That means gas is about 1.5x as expensive here.
      – Groceries – we spend about $400-$500/month at this time of year and buy everything organic. In summer and early winter we are eating mostly food we’ve grown and spend a lot less.

      Reply
      • NICO May 8, 2014, 7:33 am

        The hubby and I spend under 33K in Ottawa for a family of 3. We RENT but have no other Debt. We Sold a few year ago. Renting in Ottawa is currently cheaper then getting a Mortgage when all costs are taken into account (Interests and other cost not going towards principal). Our rent is 1200$monthly and our Hydro/Gas/Sewer/Water bills are approx 200-250 monthly. So other than housing related expenses we live on less than 16K (We do have a car also).
        Things that cost more in Canada, Housing (especially after the US Crash and the fact we are in a housing bubble here in Canada), Gas, Groceries, Transportation, Construction Material, Heat, Hydro, A lot of consumer products are also more costly (books, baby items, health products ect).

        Reply
  • Edith April 30, 2014, 9:11 am

    I’m about to start a financial compromise paying 130 dollars a month to a pension plan to ensure my father has a modest retirement in a few years. He’s almost 60 and, being far from mustachian all of his life, will soon find himself broke without my help (I’m an only child). At first, I saw this money as an amount taking me farther away from my own retirement, but seeing it as a source of pleasure and happiness, like you wrote here, makes me feel way better. I also spend 30 dollars a month to help feed and neuter stray cats. I felt guilty about it when I first discovered your blog, but maybe it is just another way to make me happy without buying crap.

    Reply
  • Gobbly April 30, 2014, 1:20 pm

    A million dollars is just saving $10 100k times!

    Reply
  • Aaron May 1, 2014, 7:13 pm

    Just started reading your blog a month ago and it already has started to change my life! I’m finishing up my student loan payments, just got my moto g in the mail from Republic wireless and am ditching my 100$ cell plan for a 25 dollar one, and I’ll be biking to work starting next week! I’m planning on downsizing from the apartment I rent now (1k a month) to one that’s 750 a month. I still have some anti-mustachian habits to kick in the future (probably the 120$ for crossfit and the 110$ for cleaning service per month need to go) but I am excited and glad I found this blog; keep up the good work!

    Reply
  • UncleCharlie May 5, 2014, 10:52 pm

    Thanks for the responses about Ontario. I’m shocked by the Kenoryn’s heat and gas bill. I was under the impression that Canadians were spending $500+/month during the cold months. Are you in some special town that doesn’t use provincial power? Or is it all due to the energy efficient furnace?

    For your Matrix insurance, do you only have collision coverage?

    Great, great, great to hear that $24,000/year is possible in Canada! I think we will have no housing related expenses (small mortgage+2 homestay ESL to pay the insurance/property tax/small mortgage payment), and a paid off used car. With my MRSMM and her frugal ways, and my wannabeMMM-self, I’m looking forward to going full mustache, Canada style.

    Reply
    • Mr. Money Mustache May 6, 2014, 8:25 am

      $500 per month!? I guess it all depends on house size and of course the area (Ontario’s winter climate varies from moderate by Lake Ontario to semi-brutal in Ottawa, even colder in Timmins, and polar bear permafrost if you make the 50 hour unpaved drive to the Arctic wilderness near the top).

      My mom lives in a 1200SF, 120 year old mostly uninsulated house in downtown Hamilton and I think her winter gas bill peaks around $200.

      Reply
      • NICCO May 8, 2014, 7:40 am

        Our previous 15years old two-level home in the Ottawa area was also around 1200SF plus basement and we peaked at 300$ for heat in Jan-Feb (Gas) and we were careful not to have it over 20C.

        Reply
        • MelD May 19, 2014, 1:05 am

          Is it stupid to ask why someone in Canada would have a non-insulated house?!! Nobody in Switzerland (where I live, similar climate) would dream of paying high heating costs before solving the insulation problem… No wonder we Europeans just shake our heads at the poor building quality abroad!

          Reply
          • Rob May 24, 2014, 3:35 am

            Non-inslulated houses are the standard in Spain. Had a friend first year in a house, he went through a 1000l tank of oil a month.

            That’s a 1000€ or so a month for heating

            Insane

            Reply
    • Markham June 27, 2014, 12:49 pm

      Howdy, wife (plus her parents) and I live in Markham. City north of Toronto. Family of four.

      Just to give you an idea of costs near Toronto.

      For the first 6 months this year, natural gas cost us just under $600. Most expensive months were January (mid-December to mid-January) and February (mid-January to mid-February). Approximately $125 each. We have the thermostat at 19C because wife and in-laws complained it was cold (they are used to coal fuelled heated homes in winter). Anyway, in June (mid-May to mid-June), gas bill was $60. The monthly gas bill includes a cost for the hot water heater rental. Gas will continue to go up since Enbridge ran out of gas during the unusually long and cold winter and had to buy gas at market rates. Hydro so far in the first 6 months is $425. Rates have gone up compared to last year. We pay hydro and water every two months, so the most expensive month for all utilities was January and March. We paid around $325. Currently, averaging $200 a month.

      Our insurance rates are crazy. Around $430 a month for two cars. Wife doesn’t want to deprive her parents a car. Government promised to lower car insurance rates by 15% a couple years ago. So far only 5% done. It feels like the insurance companies are taking their time to implement the decrease.

      We try not to drive so much. Gas is around $120 a month. This month I’ve only filled up once. Not bad for two cars. But that probably means I’ll need to fill up more next month. Currently, gas is around $1.42/L.

      Our yearly expenses are around $46k. Without a mortgage, it would be around $27k. $24k is certainly doable in a city further from Toronto.

      Reply
  • NZFrells May 7, 2014, 11:03 pm

    Wow – the US is sooooo cheap!! NZ is crazy expensive, house prices are insane. Petrol, power and food out of this world expensive. Still I love the website, it has meant we have paid off all our crazy debt and can now concentrate on mortgage paydown mission. Thanks for keeping it simple! :-)

    Reply
    • Me June 6, 2014, 10:06 pm

      Asia is cheaper. I’m in Kuala Lumpur, Malaysia and our power bill for 4 people.. was $50. Water was $10. A month. You can eat out (great atmosphere and food!) for about 50 cents. Soda (refillable!) and a hot dog is about $1. Tropical climate means no heating costs.

      This is the place to be if you are poor and want to live well on very little money.

      Reply
  • Russell May 8, 2014, 7:34 am

    I’m 32 and just paid off my house! My work takes care of my cell phone and I drive an 07 Civic financed out at .99% interest so no reason to pay that off in my mind. I have a 79k HELOC and want to use it to me more Mustacian. Any advice? Currently I’m working with a real estate agent and some young contractors to research flipping houses. Is there another way to go that will give better results or anything that i could do to diversify?

    Reply
  • JenSF May 8, 2014, 2:08 pm

    Long time reader, first time commenter. This is my ALL TIME favorite post, and I’ve read all of them. I come back to this one whenever I need a little motivation to stay on track. This blog (and the ideas in this post in particular) has completely changed my relationship with money. I discovered the blog about a year ago at time of big transition for me. I had just turned 40, was recently single, got a new, higher paying job, and had finally paid off my student loans. It would have been a very easy time for lifestyle inflation to hit! Instead, I maxed out my 403B and Roth last year, am saving for a downpayment on a rental property, and I’m on track to retire at age 52. And I’ve done it all $10 at a time!

    Reply
  • Kathleen May 14, 2014, 9:29 pm

    I told a friend recently that every $20 she *already had* and *didn’t* spend meant a day longer she *didn’t* have to work.
    Very rough maths, but it had a definite impact! Five days later, and we’re now working out how she can retire early!

    Reply
  • Jeff May 17, 2014, 8:16 am

    I agree with most of what you said although the 7% compounded IRR is hard to do for most people in today’s age of ads touting 1% CDs and 0.01% savings accounts. Eventually we’ll return to more normal interest rates, unless we become Japan.

    Reply
    • Mr. Money Mustache May 17, 2014, 12:25 pm

      Thanks Jeff, but keep reading – I’m hoping this blog convinces you to forget about the very existence of savings accounts and CDs. Among the ways to put the money to more productive use:
      – Lending Club is easy to exceed 10%
      – REITs pay over 6% dividends
      – stocks will tend to return 7% after inflation over the long run (since even at today’s high prices the S&P has a 2% dividend yield).
      – Paying off your mortgage “yields” 4%, paying off
      – other debts (student loan, car, credit card) may have even higher paybacks when you nuke them
      – owning a rental house or apartment can easily exceed 10% on invested cash as well

      and most interestingly, having cash-at-hand allows you to make smarter unpredictable purchases. Snap up a house down the street with cash that is drastically undervalued but needs work. Buy a bargain Prius on Craigslist when you find one, then take your time selling your previous car for a good price. On and on – 7% overall is easy for a Mustachian.

      Reply
  • Cap_Scarlet June 24, 2014, 3:15 pm

    I love articles that tell me a family of four can live comfortably off $24,000 per annum. My plan has us living off about $125,000 per annum and I still wonder whether we have enough margin for safety.

    This is absurd position is driven by a couple of factors. Firstly, we have been earning a large amount of money for a few years but make some monumentally bad decisions a few years back which caused us to lose a lot of money (around $250,000 – dont ask) which has left us worried about making more bad decisions and running out of money!

    But never mind – what I wanted to say is that there is a middle way. Our middle way involves not “wasting” on take away lunches (I take sandwiches) or frothy coffees (we drink freeze dried) but having expensive cars and paying for the childrens education.

    Anyway I am not completely “mustacheod” (if that is a word) but we will retire next year (age 50) and look forward to a “semi” frugal retirement!

    Reply
  • Sophia June 24, 2014, 10:33 pm

    Dear MMM, I cannot thank you enough for taking the time to keep your blog up. Out of pure anger of having paid debt off 2 times I came back to look for help online to see what we were doing wrong to end up in debt again. I finally get it. Our focus was always on making more, which my husband has been great at. But we spend like crazy on the little things…food, entertainment etc., kids activities… I cannot believe that I could not figure this out on my own.

    After 11 wonderful year home raising my kids, I have started working so I can get rid of the debt ASAP and get back to my kids. I had no idea that all those years of ignoring the details would cost me time with my children.
    Thank you!

    Reply
  • Rob July 3, 2014, 8:46 am

    Just need to vent a little: The amount you suggest I save is more than I earn in a week. This is just one of many recent reminders I’ve been getting recently that it really is time to find a new job.

    Great article, great advice, great wisdom. I can tell that this is one that I’ll be pondering for a while.

    Reply
    • Kira July 15, 2014, 12:47 pm

      Rob, you can always get creative and look for supplemental part-time work as well (obviously I don’t know what your job situation is). Deliver pizzas, barback at a busy bar, etc.

      This is (at least) the second time I’ve read this article and now I’m thinking I need to do the math… At first I was thinking there’s no way I can save $400/week, but if I factor in my reimbursement accounts I might be able to. Avoiding restaurants (including the work café) is by far the easiest way to cut expenses, but not $400/week worth so I’m challenging myself…

      Reply
  • Mouse July 9, 2014, 6:31 pm

    If you start Respecting your Tens at age 20, you’ll be Retired by 30**.

    Well, I don’t know about that sir. I definitely respect my 10’s… my 5’s and even my 1’s to be honest, but I am still not saving anything for retirement. At 24, every penny saved goes toward my tuition. I’ve been in university for 6 years because I go part-time/full-time on an alternating basis to keep making money (always working full-time). Working like this, I’ll graduate almost debt-free (I didn’t have the same mentality or job at 18, so I took loans back then) but at 26K CAD per year, I wont’ be retired at 30… I’ll be graduating at 30, hah! (not quite but close).

    And no, these aren’t anti-mustachian excuses. Like the lady who makes 30K and saves 10K, I do the same. But when talking about young people you’ve got to start accounting for school expenses! Bah!!!!!

    Reply
  • T August 5, 2014, 3:22 am

    In New Zealand we don’t pay interest on our student loans and there is no incentive to pay them off quick. Due to inflation I have been advised merely to pay the minimum rate. Thoughts?

    Reply
  • Karl August 13, 2014, 9:00 pm

    Another poignant article. I am frustrated on a daily basis by people who moan about not having enough money to pay bills and other necessities, but they are the exact same people that drive a ridiculously large and overpowered vehicle multiple short trips each day, running a clothes dryer constantly even when it is fine weather outside, get take-away food even when there is perfectly good left-over food going to waste in the fridge, buy a $4 coffee on the way home even when there is delicious coffee ready to be brewed at home which would cost 50 cents instead, and so-on.

    We all know these types. They can’t see the forest for the trees so to speak. Constantly wasting small amounts of money here and there, and then complaining that life is so tough and expensive! Meanwhile I am cruising along as I have made being ‘comfortably frugal’ and naturally thrifty my way of life. I have enough money to travel and not need to work for the next few years if I desired. So many people comment that they are jealous of my travels and wish they could do the same, but they make excuses instead of accepting the fact that they are wasteful and poorly disciplined.

    A dollar saved is a dollar earned!

    Reply
  • Tim September 5, 2014, 10:41 am

    “A family of four in the US can live comfortably on about 24k per year plus having a paid-off house. With an nice conservative 4% annual withdrawal/return rate on your investments, you need $600k invested to generate this cashflow, inflation-adjusted, forever, plus your $200k house. $800k total. Or, if you want to get off your butt and work very occasionally to earn $12k per year, you can slice the $600k number down to $300k! Or you can save the $600k AND work, and keep saving more and more over the years – ending up a multimillionaire all while doing very little paid work.”

    This is about the most succinct summary of MMM I have seen. I suggest you put it on the homepage.

    Reply

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