Early Retirement: It’s Not as Risky as you Think

MMM vs. Financial Samurai!

Breaking News!

Mr. Money Mustache has just made another one of those online Road Trips – this time to the home of the Financial Samurai.

I wrote a guest posting there, in response to a little battle that had been brewing between the Samurai and myself. The goal was to set the record straight about how the Mustache family survived the 2008-2009 Great Financial Crash, without having our retirement savings destroyed.

Critical to my point was the fact that while US stock prices dropped about 52% during that period, the dividend payments made by those same companies only dropped by 21% – and then rapidly recovered. Similarly, while house prices were cut by 10-30% in my own city, rental rates actually increased. In other words, early retirees don’t need to worry about stock market crashes, unless they are stock speculators.

Here’s the post, as I originally wrote it to appear on his site:

Early Retirement: It’s Not as Risky as You Think

Like you, I’ve been inspired by the teachings of the Financial Samurai for some time now. I enjoy his constantly bullish take on life, his flame-breathing enthusiasm for hard work, and his interesting tales involving large sums of money and rental houses.

But there’s one place we seem to disagree, and that is in the area of Early Retirement. For those that don’t know me, I’m a big proponent of that lifestyle, and I write about it frequently on my own blog. My wife and I quit our own cushy corporate jobs over six years ago in order to raise our little kid, and we haven’t looked back since then.

The Samurai, on the other hand, occasionally likes to poke fun at the idea of early retirement. I’ve collected a few quotes from him on the matter.

Let’s be honest, writing about retiring in your 20′s and 30′s is a gimmick.
Apparently, there are people in this world who actually work 40 hours a week or less and complain why they can’t get ahead!

I love to work and the ideal amount is 2 to 4 hours. I think if everybody were able to work less hours a day, they’d probably love their jobs that much more and last that much longer too.

On top of that, I’ve seen the Samurai speculate that several million dollars in net worth would be required to retire, and I’ve read case studies on this site suggesting that people might not want to walk away from their $250k jobs, even after they’ve been working them for 16 years.
“That’s cool”, I always say, “to each his own”. The MMM family is still happy with our own early retirement and the party goes on.

But recently there have been some challenges thrown down between our two camps. Financial Samurai has been popping up around the web, saying things like “The best thing about Mr. Money Mustache is how he was able to show investment gains even during the 2008 meltdown! He should be a hedge fund manager!”.

I know a friendly ribbing when I see it, and I think the Samurai is really challenging me to answer this question: “How can you retire at age 30, with a family, on less than a million bucks, and still live a good life and even survive gigantic financial turmoil like we’ve seen?”.

So here’s the answer: Very Easily! To illustrate, allow me to tell you this little story:

I didn’t know much about retirement when I set out to become financially independent. I was only 21 years old when I got started, and I hadn’t yet learned about retirement planning, savings rates, or even the basics of stock investing. The only things I understood were how to earn more money (working hard at my job), and how to spend less than I earned (buying less stuff than my friends did).

As time went on, I learned more things. I read about a hundred books on economics, finance, and investing over the years. I learned how to renovate my own house and take care of my own cars. I even read about health and fitness, nutrition and cooking. I got married and my wife learned a bunch of skills too. In addition to her main job in software project management, she got her real estate license and became a badass web developer. We moved to the US together and learned about the new culture in this great and business-friendly country. Most importantly, we had plenty of fun and met lots of people in our new hometown – people with many additional skills that were happy to share them.

As the years passed, the habit of stashing away cash and the new skills started to mix in interesting ways. I was able to move from my first house, which I had renovated from a 1978 junkpile into something trendy and modern, and rent it out at a profit. This paid our mortgage on a second house, which I also renovated. The hobbies of fitness and biking paid off in the form of being able to share one older car instead of two newer ones, saving thousands per year. These savings could then be profitably invested in stocks due to the better investment knowledge. Weird synergies like these continued.

Eventually, we realized we had built up enough passive income from stock dividends and rental houses to sustain our low-cost lifestyle, so we quit our office jobs and had a baby.

But just like the Financial Samurai, we both still love to get things done occasionally. We took up part-time jobs doing things we enjoyed, from home. She would occasionally help a friend buy a house and earn a real estate commission, and I would occasionally do some carpentry in my garage or around the neighborhood. At other times, when family duties or long vacations called, we would not work.

Things didn’t always go smoothly.  The Great Financial crisis hit in 2008, and caused the worst recession since the Great Depression. The value of my retirement savings in stocks was sliced in half. I was also stuck with an extra house I couldn’t sell. We had been blindsided by something we never could have predicted a few years earlier.

Were our early retirement dreams shattered?

Amazingly enough, they barely took a hit! Most US companies continued to make their dividend payments at a barely-reduced level throughout 2008 and 2009. The rental market remained strong enough to keep properties from sitting vacant. Sure, the stock prices were down, but who cares about stock prices when you’re not selling them?

We dialed back our spending for a year or two, continued to rent out the un-sellable house, and I even made a point of doing some extra work so I could afford to buy some of the stocks that had been beaten down to bargain levels.

Eventually, the economy recovered. Stocks rebounded, my rental income went up and I started working less again. Meanwhile, my little boy has made it to six years old now, and hanging out and learning with him continues to be my biggest job by far, just as it has been since he was born.

What does all this look like on a graph? I put my best estimate of the numbers into the chart below for your review:

This chart is based on the numbers from an old article on my own blog called “a brief history of the ‘Stash” . The key thing to note is that while stock prices and real estate values fluctuate wildly, dividend and rental income barely changes with a recession.

That’s a long story, but it’s supposed to be a lesson too. I am trying to show my more fearful friends that Early Retirement is not a risky or scary proposition. It’s pretty much just the same as a regular working life, except you have much more flexibility. This flexibility lets you adapt to any changes that might happen – financial, health, or otherwise – and continue to lead a good and happy life. The more flexible you are, the greater your chance of being happy, wherever your life takes you.

A big part of this flexibility comes from having a bunch of complimentary skills. Imagine a workaholic double-career family who are so busy earning (and spending) $300k per year that they don’t even have time to clean their own house or cook their own dinner. These people feel “security” from their high-income jobs, but they are also locked into two expensive cars that they depend on even to get to the grocery store 2 miles away, a gigantic mortgage, $900 per month in extracurricular activities for their kids on top of the $3,000 in childcare or private school tuition expenses, and the list goes on…

This family is secure only as long as they both maintain their high-income jobs. Even a few months of job loss would leave them deep underwater with no hope of rescue. If an industry evolves and their skills become obsolete, they could be stuck forever, with bills they can never pay. If their roof leaks or the car breaks or the lawn needs mowing, these people don’t have the skills to solve their own problems without spending a ton of money. So they will always be dependent on earning ton after ton of money.

Let’s contrast that to the early retirees. With the mortgage paid off and no debt of any sort, these people have very minimal monthly bills (mine are only about $2,000 per month, and that includes raising a young child and living in a rather large house). They have savings equal to at  least 25 years of living expenses, which are invested to provide enough cashflow for the expenses, with plenty held back to keep up with inflation. They have the ability to cut their spending much further if hard times ever hit. Plus they have skills and personal connections that would allow them to earn income if it were ever needed. On top of that, they actually do earn occasional income, and save 100% of it, further growing the nest egg.

When you really think about the two lifestyles, does it really seem that early retirement is risky at all? I feel safer now than I ever have in my life. And the freedom is useful in motivating me to try things that I wouldn’t otherwise have time to do – like starting some low-key businesses in areas that interest me, and of course, a blog about early retirement!

So for those pondering early retirement, I’d like to offer some advice: if you do the hard work required to save for it, chances are you’ll automatically develop the skills to thrive once you are there. You don’t have to worry about what it will be like – just start the journey and let your life skills grow even as your cash does.

I hope I have helped to slice through another one of life’s financial mysteries!

love,

Mr. Money Mustache

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40 Responses to “Early Retirement: It’s Not as Risky as you Think”

  1. Drew April 12, 2012 at 8:24 pm #

    FIRST!

  2. Rich M. April 12, 2012 at 9:16 pm #

    I can understand that. Many people I know finally caved and sold their assets when the markets plunged the second round in 2009., I was depressed but had the attitude was if the economy is going to completely collapse, only guns, food and gas will have value. So might as well throw the money at the American companies since if it can be pulled out of the gutter, the companies that produce real products that people need will do it. I held fast and added my extra change in the pot.

    It worked.

    My plan was nothing special. It was the plan that you invest for the long term, buying more shares when the stocks are cheap and less when they are not. Dollar cost averaging.

    The key thing I see, and sweated a lot about between 2008-’09 was not to panic and sell.

    When you have a plan, don’t change the plan when your fear the situation.. Otherwise, it was never a plan to begin with. The plan was to consider adverse conditions to begin with.

    Never deviate from the plan….never.

  3. guitarist86 April 12, 2012 at 9:47 pm #

    Excellent post, MMM.
    With every disbeliever, you have an article to point to that shows the how’s and why’s it all works. The nay-sayer’s are running out of things to whine about!
    Dividends are glorious, and I applaud you for looking at the market and realizing you wanted to earn more income to buy MORE shares while the prices were at a severe discount.

    You, sir, get it.

  4. LeCodeCivil April 12, 2012 at 10:04 pm #

    Please, MMM, please nip this “first comment” stuff in the bud right now.

    On topic though, good post. A lot of the confusion I’ve been seeing when you write about these issues is that everyone looks at investments in the market from an economic perspective, where worth equals the current market value of what you own. Thus, wild fluctuations in current market value makes people think they’ve lost money. I like the tax perspective more, which first asks, how much did you spend to acquire property? That’s your basis. Then at any time while you own that property, you will not have any gain or loss. It’s still just worth whatever you put into it and the IRS doesn’t care about its economic value. It’s only when you sell the property and gain something over your investment or suffer a loss below the investment that a gain or loss matters on your taxes.

    Once I started looking at things in that manner, just holding on to property long term makes no economic difference. Its value can fluctuate wildly but I haven’t lost anything unless I’m forced to sell it. In the meantime, the property can continue to produce value in other ways (dividends, rent, etc.). Even if market value drops, it doesn’t even enter the equation because what matters is the extra value produced.

    It’s like Warren Buffet’s comparison using a giant cube of gold: “Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side… Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge)… A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops — and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.”

    To me investing asks the same question. Are you investing in stocks because they’re shiny? Or are you investing in them so they will produce something for you?

    • rjack April 13, 2012 at 6:11 am #

      +1 for “Please, MMM, please nip this “first comment” stuff in the bud right now.”

      MMM – I find the comments almost as useful as your posts. Arguments and counter-arguments are useful. Advertisements and completely irrelevant comments should be deleted.

      • Mr. Money Mustache April 13, 2012 at 8:48 am #

        Oh, don’t worry about Drew’s “First!” comment you sillyheads.. it was completely appropriate in this case, since this article set a record of sitting online for several hours with zero comments coming in. In fact, I was wondering if the blog had suddenly died and it was time to hang up the keyboard for a while.

        Rjack must have been out golfing or something, leaving his computer with the 24 hour auto-refresh of the MMM website unattended. However, I can see how he’d be disappointed to not get his usual first comment in.

        It’s nice to have you all back today!

        • FreeUrChains April 18, 2012 at 1:20 pm #

          We were all getting on our webcams and checking out Google+ Hangouts last night. Anyone want to be in my MMM Circle?

  5. smedleyb April 12, 2012 at 10:19 pm #

    It’s a great point MMM and a dividend investment plan is something I wish I would have followed years ago. 3% dividend on 1 mil in investments gives you 30K a year; a 21% dip knocks that down to a still decent $24K a year. A 6K shortfall is not that hard to make up — never mind the fact that dividends quickly rebounded.

    Trust me, next dip — and there’s always a dip every 4-5 years — I’m going all in on dividend/alt energy funds.

  6. Stephanie April 12, 2012 at 10:53 pm #

    I enjoyed your article and especially the pretty graph. I am a very visual learner and that helped some of your explanations ‘click’, for me.

    It was interesting browsing around The Financial Samurai. But I am glad to have found MMM. I appreciate the fun and sense of a greater purpose, here. Or perhaps just the swearing. ;-)

  7. Shiznik April 13, 2012 at 7:32 am #

    I’m not a big fan of how the Financial Samurai has to poke his comments in all throughout your guest post, like if he doesn’t get his point of view in RIGHT NOW then the guest poster might actually change some peoples minds. Save it for the end of the post please.
    Also, I feel a big reason many people aren’t sold on the early retirement idea is because they don’t understand investing in the stock market at all. Not saying I’m a wiz or anything, quite the contrary is true. Believe it or not, a lot of people (very well the majority of people) don’t know that you can get passive income from dividends! They only know that you can buy shares, and hope to sell them at a higher price later on. So when they try to find out when they can retire they probably just multiply their current salary by how many years they have left to live because the idea of passive income and frugality have never entered their minds, and the math doesn’t add up. “Well I’m 40 now, so I’ve got about 40 years left of life. If I want to retire and keep my $60,000 per year income I would need $2.4 million!!! Dammit, early retirement is impossible!”.

    • Mr. Money Mustache April 13, 2012 at 8:51 am #

      Ahh yes, I did notice those Samurai defenses that had been peppered in as well.

      But I can understand them – I presented the guest posting as a battle of MMM vs. Financial Samurai, and we all know that the MMM blog is not just one guy typing some shit into the computer – it represents the will of the Mustachian Army, which is an undefeatable force.

      The Financial Samurai is rightfully a little nervous. And that guy on his comments section who was hassling me with the questionable math regarding dividends should be as well :-)

      • joe @ Retire By 40 April 13, 2012 at 11:30 am #

        Trust me when I say Financial Samurai is a closet MMM.
        He likes to write contrarian posts about early retirement, but I bet he will join MMM very soon.
        I like the running commentary. It was a long post and I don’t want to wait until the end to get the response. I’ll blame my short attention span, but I did read the whole post.

      • Financial Samurai April 13, 2012 at 8:09 pm #

        I had to add in some commentary b/c despite telling you to edit since I’m in agreement on early retirement, you didn’t, and I didn’t want to hound you to change the article any further after you added the graph I asked.

  8. Matt April 13, 2012 at 8:11 am #

    Why don’t you see if he would let you crash at his Hawaii pad for the winter or has some contacts that could help you out with that.

    • Mr. Money Mustache April 13, 2012 at 8:54 am #

      Does the Financial Samurai have a pad in Hawaii? I didn’t realize this.. if it’s true, maybe I should not be challenging him so boldly and should instead be sending him gifts in hopes of gaining favor? :-)

    • FreeUrChains April 18, 2012 at 1:52 pm #

      (Only) $375,000 for a 1500 2 bedroom, 2 story home in Mililani, Oahu, HI. COL DOUBLE! if the 1$ is 2$. (Double if your needed items exist on the Avg American’s COL Gov List, which most Mustachians do not) Or you could make a wooden shed from 10-20 trees. with nice ventalation, a nice bed and chair, and some solar/wind panels for industrial age comforts.

  9. Landor n Stella April 13, 2012 at 8:15 am #

    I’ve found that even if I never fully reach FI “early” that the concepts and methods behind getting to FI really help with living well within your means. And financial security is so empowering! I never thought that I would look at $55,000 in student loans and think, “I can pay that off easily with time and patience”. Nor did I ever think that I would be in a place where I have the bank balance to buy a $10,000 car for cash but not have a good reason to do so.

    The example MMM gave in the guest post about the two families is very revealing: that financial security has nothing to do with the total dollars earned but everything to do with how they are managed. If Financial Samurai’s readers don’t pick that up from the article then it is their loss.

    • Llama April 13, 2012 at 10:45 am #

      “Nor did I ever think that I would be in a place where I have the bank balance to buy a $10,000 car for cash but not have a good reason to do so.”

      I had the same epiphany recently. I earned a fairly sizable bonus, and tossed it ALL in my savings account. I’ve been really really really wanting a Vespa, and a Kindle, and a new car… But it’s almost as fun to sit in front of my computer like a modern-day Scrooge McDuck and dive into my finances.

      Actually, the Vespa would be more fun. Oh well.

      • Jimbo April 13, 2012 at 11:22 am #

        A Vespa? Is that like an expensive bike that doesnt bring any health benefits and burns gas? Sounds like no fun to me… ;-)

        The Kindle, I do enjoy, though… I find myself reading more and it is just so convenient… Plus you can get books from the Library! I’d buy a used one online – you know, from somebody who just HAD to get the Kindle Fire…

        • Llama April 13, 2012 at 4:07 pm #

          I just looked up the Kymco. They look like insects.

          I have an image to uphold, you know… ;)

      • Clint April 13, 2012 at 11:37 am #

        Don’t get a Vespa! Overpriced. Kymco may not be as sexy, but probably more reliable, but less expensive and definitely just as much fun. But this is coming from a guy with the even less expensive TGB scooter.

    • carolinakaren April 13, 2012 at 2:08 pm #

      “that financial security has nothing to do with the total dollars earned but everything to do with how they are managed. ”

      You are so right about this. I’m reading “The Millionaire Next Door” right now and the book has an excellent analogy about how every good offense still needs a good defense. You have just stated that concept in different words. This idea is not difficult, but non-MMMers don’t usually seem to get it.

      Great post MMM!

  10. ermine April 13, 2012 at 9:22 am #

    I really appreciate hearing about the battle-test of the lower dividend volatility. I only had a global/FTSE100 balanced index fund as a big holding that I added in 2009, and the trouble with those is you don’t get to see the divi separately. The result worked well enough, but it’s good to see why.

    I’ve focused on dividend shares since then, so it’s nice to see someone who’s been through the mill and seen divi income hold up. In the UK where I am the Eurozone will probably deliver the next buying opportunity in the next couple of years ;)

  11. Praxis April 13, 2012 at 9:40 am #

    Hi MMM; what do you look at in choosing dividend stocks? Are you only buying dividend aristocrats, for example?

    • Mr. Money Mustache April 13, 2012 at 12:59 pm #

      Here’s a guest post from Sean at Renewable Wealth, who stopped by MMM in January to teach us about the concept of Dividend Aristocrat companies: http://www.mrmoneymustache.com/2012/01/02/guest-posting-the-dividend-aristocrats/

      Right now, I hold all the stocks in the US market, and some international, in the form of vanguard total stock index fund, and vanguard international index fund. These have lower dividend yields than some individual stocks, in exchange for owning some of the many valid non-dividend-paying companies out there.

      But I definitely do see the value of Benjamin Graham style focus on dividends as well. It’s a complicated debate – when a company chooses to reinvest rather than paying dividends, is it cheating its shareholders? Smart people have weighed in on both sides of that question. Berkshire Hathaway is a very interesting example of a stock that has always reinvested dividends, and put all proceeds into book value instead. It is considered a big success by almost all sophisticated investors.

      But for pure reliable income in retirement (if I wasn’t so interested in rental houses) – yes, I would probably tilt the porfolio a bit more towards dividends and perhaps a few high-yield REITs.

      • Praxis April 13, 2012 at 2:01 pm #

        Thanks! I’ve become interested in rental houses myself too. Just picked up my first, am looking at getting a second. Interest rates right now allow for such an incredible level of leverage…

        That said, I do keep a stock portfolio. I’ve been riding AAPL up, and have a couple stocks that I hold for dividends and occasionally write covered calls for. I don’t want to become overinvested in my region’s real estate market.

  12. No Name Guy April 13, 2012 at 10:06 am #

    In the comments on dividends and the market dip of a few years ago. One can / should consider looking at the Dividend Aristocrats (search the term on Seeking Alpha, read the various articles, and you’ll find the list easily – this is left to the reader as part of their research).

    By definition (e.g. being qualified to be named a dividend aristocrat), these dividend paying stocks not only didn’t lower their dividends during the crash, they kept raising them.

    Now, like so many other things, these are but one part of a well balanced, resilient passive income stream.

  13. Delphine April 13, 2012 at 2:09 pm #

    I like the graph you made. Does the “total net worth” include your house? Because, if so, I’m closer to FI than previously thought.

    • Mr. Money Mustache April 13, 2012 at 2:53 pm #

      Yes, in my own definition of net worth, I include the primary residence since it pays dividends in the form of a rent-free place to live. If you sold your house and started renting a place, it makes sense that your net worth should not increase. Because you’d need the investment returns from the capital formerly tied up in the house, to generate the income to pay your rent.

      I think that an 800k net worth is sufficient to pay for a lifestyle comparable to the one the MMM family lives. As I noted in the comments to the FS article, that graph leaves out any income that we earned from separate work we did after retirement, because that would have clouded out the effects of the financial crisis on the graph. In other words, it estimates what our net worth would be if we had completely quit working in 2005. In reality, we haven’t earned a huge amount since then, but we have definitely earned some, and all of it has been saved, tacking onto NW.

  14. George April 13, 2012 at 10:35 pm #

    One of the interesting things about the Great Financial collapse is that everyone sees the negative;

    Yet if you look during this period, it was actually a huge opportunity to pick up some dividend paying funds cheap (there was a major sale on passive income generating investments, you know the ones that give freedom!!)

    The Samurai seems to be too focused on the negative. Even today, a lot of funds are still decimated from the wreckage of the Great Financial collapse, that I personally look at for opportunities.

    Take FHY for example, its a closed-end mutual fund trading around $17 per share and is yielding 13 cents per share or about 0.75% per month in dividend payouts currently. Yet, if you look back to 2007 or 2008, the monthly payouts were 50 cents per share and trading around $40-60 per share.

    This means that the shares you buy now at the cheap price, could potentially later on be yielding 50 cents per share rather than 13 cents per share.

    Ditto for another fund REM, this is a REIT that is paying out about 3% per quarter in dividends now, just imagine how much passive income for you might get for your buck if the residential real estate market recovers and REM returns back to glory days of high share value and very big quarterly dividend payouts.

    These funds are still wrecked, however, there may be potential to start a decent dividend stream of passive income by buying them cheap now to lock up shares before they increase their dividend payouts (and thus would be much much more expensive later on at that time).

    The more passive income that is flowing in, the earlier retirement seems to get. The Great Financial Collapse may end up being a creator of early retirement for some rather than destroying it.

    Thus, if we get another financial collapse again, try not to worry so much about what percentage your net worth has dropped, instead think, “do I have some cash available to pick up investments I always wanted on the cheap”

    • Financial Samurai April 14, 2012 at 10:00 am #

      I actually believe wealth creation and retirement is straightforward and not difficult.

      Everybody I’ve met online has made money from the crash and is much wealthier than precrash. I don’t know anybody hurting online, which is the beauty of the internet.

      I’m one of the most bullish people there is to know!

      • Mr. Money Mustache April 14, 2012 at 1:37 pm #

        It’s OK, Financial Samurai! We all love you, and we’re not actually questioning your belief in becoming rich and early retirement. And indeed, the bullishness is the reason I like your blog.

        I was TRYING to highlight our differences in the name of a fun internet battle, but I think you might be ruining my attempt at controversy by coming here and being so nice to everyone! I guess I’ll have to find another fake enemy.

        • Financial Samurai April 15, 2012 at 11:37 am #

          Excellent! I think you will enjoy my kimono opening post on 4/16/12 then.

          Bull market 4 life!

          Cheers, Sam

  15. smedleyb April 15, 2012 at 6:40 pm #

    I too am bullish on the future like the Samurai. The malaise we’re going through is something we need to go through; it’s an erratic, chaotic, painful, gut wrenching, anxious journey that should create the conditions for an unbelievable bull run (not just in asset prices but in all kinds of opportunity). What conditions are those? Low debt and high savings — the only legitimate basis on which to construct a natural, self-sustaining economic expansion that raises all boats, both rich and poor.

    That said, it’s painfully obvious to this observer that we have so, so much more work to do; and though the potential existed several years ago to take our medicine and blow out the unsustainable debt loads, it appears our government has taken us in the complete opposite direction, effectively doubling down on the debt.

    The liquidity spigot works — until it doesn’t. With our governments “all in” on the debt and monetization of debt side, it remains to be seen: who will bail out the governments when confidence in their ability to “pay up” collapses? Watch Spain and Italy closely over the next month.

    I’m long term bullish yet realize the next 2-5 years are gonna be extremely volatile.

    • Mr. Money Mustache April 15, 2012 at 8:07 pm #

      I think I agree with you there, Smedley. And unlike in 2008, I should be in great position by the time the next stock market crash hits to buy up some on-sale assets. It’s hard to decide which is more fun when you’re an investor – booms or busts!

  16. FreeUrChains April 18, 2012 at 2:01 pm #

    I went to Tokyo last November for 2 weeks. Most people forget that samurai were paid in GOLD coins. and a Katanna would cost about 50 Gold Coins.

    Now if you found a wooden box with a Samurai Katanna and 50 Gold Coins, the contents would be worth $500k for the katanna and around $100k for the gold coins.

    Back then, they’re Freedom/Retirement Funds were defined by their Skill swith the Sword and the maintenance of their sword. (not a bad life, walking around freely, supposedly protecting the civilians in your village, clan territories, and then you die by an arrow in the back…)

  17. Monevator April 20, 2012 at 9:36 am #

    I love Sam’s writing style, his attitude, much of what he writes about money, and for that matter everything he’s done for the PF blogging community (the Yakezie etc). (Love ya Sam! ;) ).

    But more than once I’ve been very surprised by his heavy touting of cash (CDs I think in US terms) as an ideal investment and his dismissal of inflation as making cash returns near worthless over the long-term. We debated it a couple of times IIRC in the past.

    This was a couple of years ago so his thinking might have changed.

    But personally I’ve long been in the camp of invest wisely in equities and other riskier assets, focus on income, and ride volatility (e.g. See this post — http://monevator.com/try-saving-enough-to-replace-your-salary/)

    I think Sam has a point in questioning the “early retirement” movement more generally, however. I see very few people working and saving hard enough to retire early, let alone in their 30s. I was also rather non-plussed by Jacob’s return to work (not questioning his choice or motives, but I do think he and certainly his fans previously somewhat downplayed life in a mobile van for 50 years on a very low income as an aspirational goal).

    Still, early retirement is very likely a better path to go on and fail to get to the end of quite as soon as you thought you would then the infinitely more popular alternative — to try to be super rich and spend via debt long before you are!

    • Mr. Money Mustache April 20, 2012 at 12:19 pm #

      I gotta step in to correct the common misconception regarding Jacob and ERE back in the RV days: his montlhly expenses for living in the RV in the San Francisco Bay area were identical to choosing to move somewhere less expensive and own his own house. And in the US, this doesn’t imply living in a substandard area – there are thousands of cities and towns to choose from with beautiful scenery, culture, and climate options, even if you limit yourself to areas where single family homes are under $175k or so.

      I also have some correcting to do about misconceptions about the MMM family lifestyle as well. People keep thinking it is minimalist or ultra-frugal – something they would need to adjust to their own situation. It’s not – we live a pretty big lifestyle, and I think only a future picture-based article would do to change perceptions.

      • Monevator April 23, 2012 at 3:58 pm #

        I take your point MMM, perhaps the RV image doesn’t translate well to wet and rainy Europe. (I’ve been lucky enough to visit California many times, and I’d happily live there for a a few months in a tent!)

        I don’t dispute Jacob’s thinking at all; he was genuinely novel and occasionally brilliant. But I do find the MMM household much more aspirational. You don’t need to show me pictures — I have no problem at all believing you’re doing fine given the details you’ve revealed in the past about your net worth and so on.

  18. Rob March 12, 2014 at 9:03 pm #

    How can I accurately determine net worth when some assets (e.g. IRA) are tax sheltered and others are held after-tax or are not subject to tax? I estimate that about half of my assets are of each type. Suggestions welcome, please!

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