A Millionaire is Made Ten Bucks at a Time

I was at a party recently and someone walked up and started a conversation. It turned out this person had secretly started 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 and kickassedly nutritious muscle-carving rolled oats – still my primary fuel by choice despite now being able to afford any food. 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.

***Thanks to Mr. Executioner from Death to The Mortgage for the sweet combination of these two words. He used it in a comment here on MMM and it sounded great so I have copied his lyrics.


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37 Responses to “A Millionaire is Made Ten Bucks at a Time”

  1. eva August 1, 2011 at 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.

    • MMM August 3, 2011 at 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!

  2. Oskar August 1, 2011 at 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.

  3. Ginger August 1, 2011 at 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?

    • MMM August 2, 2011 at 6:35 am #

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

  4. Michael August 1, 2011 at 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?

    • MMM August 2, 2011 at 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.

  5. Kevin M August 1, 2011 at 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!

  6. JJ August 1, 2011 at 10:36 am #

    I’m not givin’ up my strippers Mack.

  7. jessica w August 1, 2011 at 12:51 pm #

    here is a fun handy calculator where you can add in your own numbers
    I had a blast playing with this;seeing it here with a graph even makes it easier to wrap my head around.

  8. Sarah August 1, 2011 at 1:09 pm #

    I love your blog : )

  9. Marcia @Frugal Healthy Simple August 1, 2011 at 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.

    • MMM August 3, 2011 at 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 ;-)

      • David Baillieul August 4, 2011 at 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.

      • JJ August 12, 2011 at 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*

        • MMM August 13, 2011 at 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.

  10. Des August 1, 2011 at 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!

  11. Heidi August 1, 2011 at 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.

  12. Liz August 1, 2011 at 9:20 pm #

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

    • MMM August 3, 2011 at 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.

  13. Sorbet August 2, 2011 at 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.

  14. Oskar August 2, 2011 at 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???

  15. Martin August 3, 2011 at 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…

    • MMM August 3, 2011 at 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.

  16. Oskar August 3, 2011 at 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.

  17. abrown August 8, 2011 at 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!

  18. Brooke Trout August 10, 2011 at 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!

  19. Poor Student February 8, 2012 at 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.

  20. Elaine February 9, 2012 at 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.

  21. Heath April 27, 2012 at 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 :-)

    • Heath April 27, 2012 at 5:51 am #

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

  22. Clint August 15, 2012 at 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!

    • Heath August 15, 2012 at 1:48 pm #


  23. A.J. January 7, 2013 at 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.

  24. sean June 7, 2013 at 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.


  25. Silvie July 25, 2013 at 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!

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