211 comments

Is This Blog More Powerful than Doubling your Salary?

“Spend Less!”

“No, Earn More!”

The battle goes on, with scathing mockery volleyed between the opposing camps.

Mainstream personal finance pundits like Dave Ramsey and Suze Orman advocate lower spending for those in debt. Yet they have an apparently unlimited upper ceiling on how much increased spending can still lead to happiness, as evidenced by the high-spending lifestyles they are living today.

Here in the sensible middle, Mr. Money Mustache recommends both paths: earn as much as you can, but never sacrifice your soul to do it. At a certain level of income (which I feel is around $100,000 per person per year), the time to financial independence becomes so short that it becomes increasingly futile to earn more – that’s just how the math works out.

But all the earnings in the world are useless if you never know the meaning of the word “enough”. So get that concept in place right away – before wasting your time with increased income. Otherwise very little of that increased flow of cash will find its way into your ‘stash.

To illustrate this point with sparkling clarity, I am happy to share a neat little story and graph based on data provided by an MMM reader. He says this:

Comments: Your blog > Doubling my salary
Dear MMM,

I’m sure you receive many “thank you” emails a day for teaching your Mustachian values, but I bet you don’t receive “thank you” proof too often. I wanted to show you a graph, but I didn’t know how to attach it, so the following data will have to do (you should graph it if you get a chance).

The data below is my monthly net worth (according to Mint). When you graph it, you can see two distinct slopes. In both cases, my net worth is increasing, but my rate of wealth accumulation more than doubles at one point (Jan 2012). It goes from $600/mo to $1600/mo. What astounds me is that in March 2011, I doubled my salary and you can’t really tell. But in the months after I started reading MMM, my net worth starts increasing like crazy.

I believe that this is proof that reading your blog is more powerful than doubling my salary! Isn’t that nuts??? It certainly took a bunch more research/changes, but your blog is was the impetus. This rate change should take me from retiring in 30-40 years, to retiring in 10-20!

 

Following his advice, I graphed his data, added annotations, and this was the result.

The Effects of Mustachianism on Net Worth (click for larger)

I was naturally both pleased and intrigued by the result, and so I wrote back and asked our friend for more details on exactly how he accomplished these feats: both doubling his salary, and increasing his savings rate. The answer (note that I added a few links to relevant MMM articles based on his list):

So here’s how I was able to double my salary. Right after graduating college with a bachelors in mechanical engineering, I started graduate school. Tuition was waived, and I got a research assistantship making about $25,000. That seemed to be plenty to live on, but the research was boring.

In March of 2011 I quit grad school because I got a job at a giant company working in their corporate sustainability department. It’s a dream job because they actually pay me to calculate/analyze their carbon footprint! It’s great!

Anyway, my salary increased to about $50,000. it’s hard to admit, but I went through some major lifestyle inflation. I moved to a big city, which is 30 miles from where I work. I started spending money like it was my job to fill the new apartment with furniture, drive to work every day/upkeep the car, shop at Whole Foods, buy lunch at work every day.

I took some expensive trips across the country and I started spending more money on christmas gifts and charities. This all seemed like a great idea because as long as I had a fairly positive savings rate, I figured that that what I was supposed to do. I never took on debt/car payments/ credit card balance, and I tracked my finances reasonable closely.

So in December 2011, while searching for this article Men With Mustaches Make More Money, your blog popped up. Although I never found a post related to that news article, I knew I’d struck gold. I read every post you’d ever written in about a month. After that I read many personal finance books/blogs as well as investing books. It all started to become so obvious to me. Here’s a list of the changes I made in a relatively short period of time:


Started taking public transportation to work
Started biking anywhere within a few miles
Stopped buying extra stuff (tech gadgets, extra clothing, impulse Target buys)
Food:
switched to a super cheap Bosnian grocery with great produce
made lunch every day
cooked more meals
cut monthly grocery budget in half
Bought dry goods in bulk
fell in love with oatmeal
opened online savings account
opened Vanguard IRA (simple index funds)
got a 1% cash back card
opened a Vanguard taxable investment account (simple index funds)
Ditched Cable
Started doing home energy audits for friends/family ($100 each)
got a 4% raise because I “exceeded expectations” at work
increased my gas mileage from 24 to 27 mpg by slowing down
use gasbuddy.com to find cheaper gas
bought all LED light bulbs (got them super cheap through my work)

I can’t point to any one thing that accounts for the slope change. I just started making changes and they kind of built on each other. Now I get really excited when I get interest from my online savings account or reinvested-dividends from my index funds. I know my net worth is small now, but the slope is certainly heading in a better direction.

Use whatever info you’d like, and let me know if you’d like to know anything else. Also, if you ever have any energy efficiency/corporate sustainability questions, I’d be happy to help you out.

I’d like to thank this reader for sharing the happy story (he wrote it a little over two months ago). I can type to you all day about the counterintuitively large effect of making a bunch of small conscious improvements in your spending.. and indeed, some days I do just that. But until you see it applied to a real life like this, where the graph of your wealth takes a sudden bend and your mandatory work career is suddenly chopped in half, it can be hard to convince people of just how useful it is to understand your spending, instead of just endlessly chasing more income.

  • Andrew November 15, 2012, 2:59 pm

    I live with possibly the most Mustachian person I’ve met (I share a house with 2 roommates). He works for a major tech company in CA, and amazingly doesn’t have a car (in a place where driving is almost “unavoidable”). Instead he bikes to work every day (or when he doesn’t, takes the company provided shuttle). He gets fed at work so spends nil on food. On weekends he has to eat still, so eats simply. Because he shares a house with the rest of us, his housing expenses are minimal. For entertainment he rides around the community (or wider area for longer weekend rides). I’ve not seen anyone with such a low cost of living before …

    You’d think I’d pick up a lesson or two from him …

    Reply
    • lurker November 17, 2012, 9:05 am

      and he seems happy right??? that is important…time for my bike ride, which somehow always seems to cheer me up!

      Reply
  • David November 15, 2012, 6:17 pm

    “There are two ways to increase your wealth. Increase your means or decrease your wants. The best is to do both at the same time.” Benjamin Franklin. I think this Founding Father sums things up pretty well. A good personal financial advisor should probably stress both aspects of wealth building. You do that pretty well here, others not so much. Im all for people who have done well living well, but maybe that house was a bit much, lol.

    Reply
    • Mr. Money Mustache November 15, 2012, 7:23 pm

      Yeah.. isn’t that interesting that the founders and presidents of this country, hundreds of years ago, understood shit that a president wouldn’t dare speak about today? Wanting less as a source of life satisfaction? I want to hear you say it, Obama, no matter how much it upsets the consumer-industrial complex!

      Reply
      • Clint November 16, 2012, 11:04 am

        How would you ever hear him? You never look at the news!

        Reply
  • Abigail Joy November 16, 2012, 11:53 pm

    As a result of MMM and the friends who led me to his blog, I …
    1. Realized that my debt was an emergency & was keeping me from my true love of travel and desire to work overseas
    2. Moved 20-30 miles closed to work/volunteer stuff, to a “bad” area of town and negotiated rent to $400 for a 400-sq foot place from the $850 I was paying for a 1,000 sq foot place on the outskirts of town (Vegas).
    3. Took on several PT jobs like tutoring, babysitting, and the drama dept at my school, where I teach English.
    4. Haven’t used heat or air for two months
    5. Paid off my car, IRS debt and three “stupid debt” credit cards
    6. Stopped eating crap and paying for manicures, waxing etc.

    I’ve paid off $11,000 of my $32,000 sum and plan to join the Peace Corps with my debt free self next year, if they’ll take me. Thanks, MMM!

    Abigail

    Reply
    • lurker November 17, 2012, 9:02 am

      totally awesome!

      Reply
  • mark gregory November 17, 2012, 7:52 am

    Hi,

    Sorry, I love the post but what blew me away is the fact that the contributor to this article achieves 27 mpg. I love this blog and others, (ERE), but feel compelled to say that the Mustcahian community must do better…. I changed my car to go from 40mpg to 51mpg. Saving 98 gallons and approx £450 p.a.
    Articles recently published suggest the US may soon be the biggest oil producer in the world – good on you, but how strong could the position be if you were to consume 10% less gasoline. I say swap out your gas guzzler and do yourself and the environment a favour..Love the blog.

    Reply
    • TomTX November 17, 2012, 8:24 am

      Mark, don’t forget that we use the puny colonial gallon here, and have very few diesel choices (diesel is more energy dense than gasoline) in economy-minded cars.

      That 27mpg would be 34mpg using your Imperial gallons. Still can be improved, but not quite as bad as it first appears.

      The US has finally started a major shift to higher efficiency vehicles – it will take time to get the fleet converted over, but we are well on the way.

      Reply
      • Jamesqf November 17, 2012, 10:24 am

        When exactly did the US start shifting to high-efficiency vehicles? Unless you count the Volt (a few tens of thousands so far) and the Tesla, the US doesn’t build any high efficency vehicles. Nor, with the except of the Nissan Leaf, do foreign automakers import them. The sad fact is that a dozen years later, there’s still almost nothing that comes close to my 2000 Honda Insight (71.4 mpg average over the 8 years I’ve owned it).

        Reply
        • YAR November 20, 2012, 8:13 am

          Actually, Ford produces 4 models that get over 40 mpg (Fiesta, Focus, C-Max, and Fusion)

          Reply
    • RobDiesel November 27, 2012, 9:38 pm

      What did you spend on “changing your car”? My old car gets 23.7mpg (US), but if I spend $4000 on another car that got better mileage, I would still have to drive it 150K miles to break even on what I save in gas. Of course, it would be less if gas prices go up, but given that my car costs have been incredibly small over the last few years, spending a little more on gas on this cheap car (13 cents/mile total) is still a huge savings.

      Reply
      • Mr. Money Mustache November 28, 2012, 1:28 am

        Wait a minute Rob.. upgrading even to 40MPG would save you over $9600 over that many miles! But your example is an extreme one of course – an extremely low-MPG car and you picked a huge number of miles for the comparison. For many people, paying much more for a more efficient car doesn’t work out. But luckily, in the used market most people can usually get a more efficient car for no more than you can sell whatever you currently drive (because most people currently drive expensive trucks).

        Reply
  • Doug November 17, 2012, 8:51 am

    If you can increase your salary without too much effort and you know you’ll like the higher paying job, then by all means go for it. Otherwise keep in mind that not everyone can increase their salary, and those who can often pay for it in other ways. The payment can include more stress from higher responsibilities, working longer hours and having less of a life, and if you make a lot more you’ll be in a higher tax bracket so the real life increase in pay is less. So if you can’t or don’t desire to increase your salary much or at all that leaves only one option, namely being mustachian!

    Reply
  • bulldog249924 November 17, 2012, 8:55 am

    MMM,

    I had a revelation in January that I was spiraling out of control with my financial life. I own a small row house and I am a school teacher, was doing well on the surface, but I was 16 grand in credit card debt on top of my mortgage. I thought it was important to go out a lot, drink and pay for other’s meals/drinks, gamble at the local casino where I live in PA, etc. I woke up one day, and came to the realization that my life was a financial mess, and for other personal reasons, I just wasn’t happy and didn’t like myself. This was the bottom for me.

    In the next few months, I made wholesale changes in my life. I didn’t have a beer for 6 months in order to free up money to pay down my debt. By doing that, I discovered that I didn’t NEED alcohol or going out to have a good time. I cut up my casino “rewards” card, and haven’t been back. I have no desire to ever step foot in one of those money traps. I refinanced my 16% credit card debt into a personal loan from a credit union at 8.5%. I then went on to refinance my home (from a 6% 30 year to a 3.125% 15 year), lower my insurance costs on my home (1163 dollar “high risk” policy to a 639 dollar a year policy) and car (a Mustachian 2007 Hyundai accent), and also put my 2200 dollar tax return towards paying off more debt. I also restarted my 403b, contributing a small 25 dollar per paycheck amount in order to at least save something in case my pension goes kaput.

    I then in late August stumbled upon your blog. That’s why this article hit home with me. I examined even further the financial waste in my budget. I had 2200 in savings, and decided to put a chunk of that towards paying off more debt because, as you write, it is a big time emergency. I have paid off 9100 dollars of my 16 grand in debt this year, 3500 though in the 90 days since I began reading your blog. I have read more books (from the library instead of Amazon) on personal finance, such as YMOYL. By the end of this year, I will have paid off 10000 dollars of my debt, and I will be debt free definitely by June, and my hope is earlier! I will then use the money I was spending on debt to increase my emergency saving account, increase my 403b contribution, and also look into other investment vehicles, such as Roth IRAs and investment in businesses or properties.

    The most important thing is my happiness and peace of mind I have achieved too. Since reading your blog, those things are at all time highs. I view life much differently, and being closer to achieving FI has accelerated that. My hope is to “retire” from teaching by the time I am 46. I’ll take a huge penalty on my pension, but I will be able to explore other career and business opportunities and will no longer be a prisoner to the 30 year grind of staying in one job just to pay off excessive crap.

    I am not completely mustachian yet. While I do eat at home more, make my coffee at home, and as a whole am wiser about where I spend my money, I also haven’t given up cable..yet, don’t ride my bike to work (even though I could being 3 miles from my job), and I ride my car to places where I could definitely walk. I’m finding it’s a process… Following that process though has given me greater benefits than I could ever imagine! I would put myself at about 40-50% mustachian, with lots of room for growth. Seeing how I have taken on no new debt, and I have essentially lived on 60% of my salary, combined with the feeling of happiness I have, I will continue to work hard to get to that 100% mark! You have changed lives with your blog, mine being one of them. Thanks for what you do!

    Reply
    • Ross November 17, 2012, 2:38 pm

      I like the idea that you are 40%-50% mustachian. Initially, I thought I’d make a few changes and stay just 10%-20% mustachian. As the results began to build on themselves, I realized that levels of 70%, 80%, or 90% mustachianism were within my grasp. For me, the most important thing was just to get started.

      Reply
      • bulldog249924 November 18, 2012, 4:47 am

        Ross,

        I put myself at that number because I did a lot of what MMM preaches preblog. The brown bagging and coffee at home started back in January, and I ate out every other week (usually just breakfast) instead of 3-4 days a week. That’s also when I decided to reign my debt in, because it IS an emergency.

        I love to golf, and I know that isn’t a mustachian hobby, but I went 20 times in the summer, only on two of those occasions did I pay more than 20 bucks for a round. I discovered some really good deals at nice courses. And of course brought my own beer on course (I resumed drinking limitedly in June). I am also finding more free hobbies, and going to the library to get my reading fix instead of ordering 3 books at a shot off of Amazon.

        I buy less crap, severely limited the visits to Target, which drained my $$ and I center my food shopping at the local grocery store around their weekly sales. My bill dropped by $40 bucks each month since I read MMM. More days of windows open and fans, and less AC in the house. I was hell bent four months ago on buying a new car, and MMM convinced me to hold on to the Hyundai Accent and run it into the ground (just turned 90000 miles yesterday on a 2007 car). My next car will be used, probably not a 10 year old used as MMM suggests, but something low mileage that gets 30+ miles to the gallon (and a hatchback!). I also only use my clothes dryer for towels. This has cut the amount of use roughly in half in the last 3 months, and there has been a 4-6 dollar reduction compared to last year in my electric bill.

        Cable I find to be still something I want. However, I took MMM’s advice and no longer watch the MSNBCFOXCNNNews networks. I watch my local news, and as a junior college basketball coach, I enjoy the local sports coverage of the games as it is useful for recruiting and getting film on players. So I am not willing to go the extra yard and give that up, at least not yet. I also still have a landline, which I know I need to eliminate. As you can see, some things die hard! That’s why I came up with my 40-50% number. As time goes on, I agree, doing all these changes has a snowball effect, and I find myself wanting to do more mustachian things. I’m evolving!

        The best part of all this is, I find my quality of life has improved. Less really is more! I am also spreading the ways of MMM to my friends. I playfully make fun of my coworkers about being prisoners to technology with their iphone 5 purchases, and I have a couple of my friends making their own coffee and showed them your blog. So we have a couple of 1-2% mustachians out there…the seeds are planted!

        Reply
  • Mustachian in the Making November 17, 2012, 3:50 pm

    MMM –
    I can’t thank you enough for your entertaining writing and valuable advice. While I have always been fairly frugal I find that reading your blog makes me more focused towards financial independence. The reader comments and stories of their path to early (or earlier) retirement is evidence of the impact you are having on people. Just think of all the people who are not writing their own stories!

    While I agree that Dave Ramsey’s house is way over the top. I don’t think his advice should be discounted. I am an accountant and audit a number of employee benefit plans. For the most part contribution rates are scary low no matter what the income level. Dave’s advice of a 15% Roth contribution would help so many people achieve “normal retirement”. Hopefully they will stumble upon your blog or upcoming book after that and see what is really possible.

    Thanks for your hard work!

    Reply
  • Massive November 19, 2012, 4:09 pm

    I have found exactly the same thing.

    Interestingly, I don’t feel that my lifestyle has changed at all, just that any spending I do is done conciously, even when I am spending money on frivolous things.

    Reply
  • Jane Savers December 9, 2012, 2:44 pm

    I am trying to become a financial badass but I seem to get my ass kicked more often than not. Surprise expenses (not the good kind of surprises either) or hours cut at work eat in to my budget.

    I am working on my 2013 budget and I have been reading your older posts. If you were in my shoes – in debt almost one full year of after tax salary – would you save anything or throw as much as possible at the debt?

    At home in Canada waiting for the freezing rain to start and wishing I was in Hawaii…

    Reply
  • George Potter February 24, 2015, 2:17 pm

    Nice article,I can see how this applies. But,Mr Mustache, I am from Romania. I am in College and in 1 year I will be an engineer with a starting salary of about 300-500$/month. How can any advice apply? Should I just move to another country and try to make it there?

    Reply
    • OhYongHao February 25, 2015, 10:45 am

      All of the advice still applies. Being so low in the salary department you can improve by leaps and bounds just with a little increase in salary, unlike those who already have a large salary where it will take much more to increase and may be easier to cut spending instead. What you have going for you is no luggage burdening from past decisions, I’m assuming. No car payments, no overly sized house, no credit card debt. If this describes you then you are ahead of most people in the US.

      First thing to do is learn about hedonic adaptation and Stoicism.
      http://www.mrmoneymustache.com/2011/10/22/what-is-hedonic-adaptation-and-how-can-it-turn-you-into-a-sukka/
      http://www.mrmoneymustache.com/2011/10/02/what-is-stoicism-and-how-can-it-turn-your-life-to-solid-gold/

      Be happy in your situation, since you are already more badass than 90% of everyone else, and you are reading this blog. Then continue to exercise your frugality muscles.
      http://www.mrmoneymustache.com/2011/06/21/frugality-as-a-muscle/

      Continue reading the blog and find ways to apply things to your situation. Not every piece of advice will be relevant. Investing in Lending Club won’t be something you’ll be doing right away, but is something to think about when you get to that point.
      http://www.mrmoneymustache.com/2012/09/24/the-lending-club-experiment/

      And your cell phone plans may be different, but adapt the advice for Romania and try to find the sweetest deal by constantly trying to optimize.
      http://www.mrmoneymustache.com/2012/10/11/our-new-10-00-per-month-iphone-plans/
      http://www.mrmoneymustache.com/2013/05/15/the-principle-of-constant-optimization/

      By not buying into the over consumption of goods and learning how to properly invest your money so it is working for you you’ll start to see your net worth begin to rise. Of course there will be mistakes made, but those are valuable lessons to learn from.
      http://www.mrmoneymustache.com/2012/02/01/mr-money-mustaches-big-mistake/

      This article does apply to you because it shows you that you could benefit from doubling your salary, and shows you want that should mean. It shouldn’t mean you double your spending, but possibly triple your savings.

      Reply
      • George Potter February 25, 2015, 11:49 pm

        I realise that many of the articles may apply,but it’s just that there is a huge difference between earning 10k$ a month and 500$ a month in terms of saving. I know it’s about the percentage at which you save, but it will take me a longer time to become rich. I still live with my parents, but rent would be about 200-300 dollars if you live alone, half if you live with someone. Food is 100-200$. Bills are another 100$. From a 500$ starting salary I am left with -50$ is I live alone and about 100-150$ if I live with someone. To buy a 300-400$ bike for example,which is inexpensive for you, it would take me 3 months of almost no spending. I am NOT complaining, I can see how you can advance and all that, but it is just a different situation.

        Reply
  • Elizabeth September 19, 2015, 9:12 am

    I don’t think it’s fair to say “they have an apparently unlimited upper ceiling on how much increased spending can still lead to happiness, as evidenced by the high-spending lifestyles they are living today.” Dave Ramsey has made the statement:

    “In the two years we have lived here we have had many many functions to fund raise for ministries, charities, and community causes. Millions of dollars have flowed through those events. We view our home, like everything in our life, as a tool to be used for the kingdom.” (source: http://www.biblemoneymatters.com/dave-ramsey-comments-on-my-post-about-his-new-house-his-debt-philosophy-and-giving/)

    He views it as a tool. Maybe it’s a more extravagant tool than you think he needs. Maybe it is a more extravagant tool than he needs. I don’t know how much difference a house like that makes for the sorts of functions he does with it. But the point I am trying to make is that it’s not the simple “if I buy a bigger house it will make me happier” philosophy, that you seem to state, as though he is doing it all for himself. He sees it as a tool to engage a very wealthy circle of people in making a lot of positive impact. You can disagree with whether or not that is really the tool he needs, but please try to understand and correctly state his philosophy at least. I felt that you misrepresented his motives.

    Reply
  • Taron Millet December 17, 2015, 7:07 pm

    I found the idea of lowering expenses being more powerful than increasing pay to be one of the most fascinating and eye-opening things I learned from randomly stumbling across this blog. Being a nerd, I felt compelled to make a spreadsheet that demonstrated this concept so I could share it with friends and family, since at first it would seem like saving $50 a month and adding $50 a month to your pay would amount to the same thing, right?

    Anyway here’s the result, enjoy!

    https://docs.google.com/spreadsheets/d/13kOv7_1-FB9c_3JX09g4dY6l44irQZZAPS4tkHmHMeA

    Reply
    • Mr. Money Mustache December 18, 2015, 11:19 am

      Awesome Taron! I checked out the spreadsheet and it is really clear and well done.

      Reply
  • Greg January 7, 2016, 8:18 am

    Awesome post – the real life example from a reader is very powerful (not that MMM himself isn’t powerful). A few years ago I started working at reducing our spending, mostly out of necessity aknce we were both working hard but also paying 2x college tuition for children and starting to drown in CC debt etc. At the time the idea was that reducing spending was analogous to (and easier to achieve) an increase in income. Since then I have stumbled on a few Dave Ramsey radio bits and started to get convicted about squeezing that CC debt down and keeping easy cash on hand for an emergency. I have been regularly delighted by the effects of those simple changes: as more money was freed up it was easier to get e $1000 emergency cash, it became easier to pay a little more to credit cards, and that feeling of suffocating started to ease.
    Once I found this blog (just a few months ago) my eyes really opened up! Now I get it! The goal of FI is firmly fixed in my mind and absolutely everything is on the table to reduce, eliminate, re-think, or sell. My wife and I are I our 50’s and are tired of the grind brought on by our own foolishness and not completely thought out decisions. We have plenty of talents between the two of us to earn money and plenty of opportunities to to live on less. Primary goal of 2016 is get out of debt. Pay off those cards, sell the house (downsize temporarily to modest apartment). Then start working on relocating to less expensive location on the road to FI!
    Thanks MMM, we are on the way with plenty of exciting, active years to come. Better late than never!

    Reply
  • Hannah May 27, 2016, 7:13 am

    Love real life stories, this one resonates with my personal story quite a bit. But, you’ve already heard stories like that so I’m posting about something different, that I am surprised isn’t already in the comments. I’m quite positive I’m not the only one aware of this well known economic anomaly.

    I have a BS in Economics – that’s Bachelors of Science not the other BS ;) One of the most fascinating concepts I learned in my studies was one’s Marginal Propensity to Consume (MPC). MPC is what someone is inclined to spend as a percentage of their income. The shocker is that studies reveal that one’s MPC does not change over time.

    A side story – I was explaining this concept to a friend (who is far from a mustachian – love her anyway) and she did not believe me. Her comment after somewhat understanding the concept – “I don’t believe that – if I start making twice my income I’m going to get a purse that is twice as nice”. BINGO! (I cringed). What she didn’t not realize was that MPC is a percentage of your income, therefore as your income goes up so does your spending. Just as this young man did in his early days when his income went up – evidence of this very unfortunate truth is everywhere.

    So the argument at the beginning of this blog is understood with a simple, researched, economic rule – one’s MPC. Doubling your income does not automatically double your wealth. First, you must consider your tendencies towards spending. After you understand your MPC and have it under control, only then, does doubling your income double your wealth.

    Long comment, but I hope someone will learn something interesting from it :)

    Reply
  • JJ Schnabel June 24, 2016, 11:32 am

    If it is true that the greater the % saved, the earlier one can retire, clearly reducing expenses is more powerful by the math… If I make $1000 per month and I currently save $500 of it, my savings rate is 50%. If I wish to increase my savings rate to 75%, I need to save $250 more dollars of my salary. $750 saved / $1000 earned = 75% savings rate.

    Compare that scenario to where I maintain saving $500 of my $1000 salary, but then something happens and that $250 in the example comes to me in the way of an increased salary. I decide to take that increase and throw it at my savings. So now, I make $1250 and I save $750. $750 saved / $1250 earned = 60% savings rate.

    I personally wouldn’t completely throw out the idea of making more money. But the more powerful path is to save what one already makes.

    Sometimes telling the difference between an income increase and money saved is not easy. For example, after living alone for a long time I decided to bring in a roommate. Is that an income increase or money saved in my rental payment? I suppose its more of a spiritual question about happiness. Which actually makes me happier- living alone or living with a roommate? Is living with a roommate tenable for the long haul? If so, I have saved money. If it is something I am tolerating until I can do my own apartment again, I have just increased my income. Time will tell.

    In either case, I am doing better than doing nothing. While saving is more powerful, increasing income and socking the increase away, still increases savings rate.

    Reply
  • DLcygnet January 29, 2018, 12:56 pm

    This is another one of those articles where I wish you would post a “Where are they now?” follow-up. It’s been 6-7 years – has this person stayed on track or has life/marriage/kids eaten away at the progress.

    Have you remained in contact with any of your case studies? Do they still read the blog?

    Reply
  • Grin and Barrett July 29, 2018, 6:01 pm

    Yes, the blog has made a difference in this house more than Dave Ramsey, two incomes, or inheritances have ever made. Now my college-age kids can retire when I will (less than 10 years from now)! What a blessing to change two generations of people at once!

    Reply
  • Jennifer Ward January 14, 2021, 8:02 pm

    Forgive me if this has already been discussed – there are so many responses to this post – but my comment is;
    I’m sure that not only are your correspondents finances in a (much) better state by restricting unnecessary expenditure but equally, their HEALTH will be much better shape by doing so too. Home cooked meals, prepared lunches, (delicious) oatmeal… All of these are great ways to be healthier and what usually follows on from this, is happier. Yay for less unnecessary consumption, for a smaller footprint on the planet and a win-win more towards sustainability both personal, financial and planetary🙂💚

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