When the Back of the Napkin can be Worth Millions

cashnapkinWhat’s with Mr. Money Mustache and all his funny-business math? 

When you read the criticisms that sprout up around the web, you’ll often see people nitpicking over the accuracy of some of the numbers I present in these articles. You may even find yourself doing some of the nitpicking in your own mind.

You might feel that the assumed inflation rate or investment returns are wrong, or the bicycling data should be shown per mile rather than per hour. People even devote entire website discussions over the perceived inaccuracies in my recollection of how we saved for retirement.

“MMM uses fuzzy math and hand-waving!”, they say. Then they go off and feel better, feeling they have disproved the Tenets of Mustachianism and thus freed themselves from making any changes to their lifestyle.

This accusation is right – I do make up some fuzzy math at times. I’ll throw all kinds of unrelated formulae into the mixing bowl, estimating the dollar-value of being more sexy, or the annual cost of being a complainypants, and multiplying it all by an annual compounding rate pulled from my own hindquarters.

But although the equations are unusual, they can still be very useful. Because it turns out that life itself is very fuzzy, subject to incredible random variation and the splendid irrationality of human nature itself. In a world where you can take over entire countries using weaponry as gentle as an Optimism Gun, how can you argue that your own personal expenditures will invariably inflate at exactly the same rate as the Consumer Price Index?

So today, we are going to learn about why making your best wild-assed estimates (as seen on this blog) can still be massively more productive than making no estimates at all. And in fact, with the right practice and principles, the wild estimation can prove to be much more accurate than you would originally dare to assume.

Let’s use my friend Mark’s story as an example. Mark lives near me in Longmont, but he works far, far away in South Denver, doing some type of high-tech surveying work. It’s about 40 miles each way. As part of the job, he occasionally needs to drive on dirt roads, so he has decided he needs a high-clearance vehicle. But he also has two kids and a wife, so he wants something with four doors and lots of room. Here in America, this sort of wish list often leads to the Ford F-150 pickup, a spectacularly big truck with a very small cargo bed, big cabin, huge engine, and heart-attack level of fuel consumption. It’s the best-selling vehicle in the country.

So Mark visits the dealership, kicks the tires, and the dealer amazingly offers him the deal of a lifetime. The “regular” price is $45,000 or so, but just for Mark, this special model will be sold for only $29,000 with low-interest financing and a low downpayment.  Score, right? Oh yeah, and we’ll roll the $5,000 of taxes and dealer and registration fees into the loan for you.

This is where Mr. Money Mustache would come screeching into the dealership on his bike, with Fuzzy Math guns blazing.

“Mark, you damn fool! This truck is going to depreciate about $25,000 over the next 10 years. Your insurance will be $10,000 higher than it would have been driving an older car over that period. Gasoline at 15,000 miles a year will cost you $18,000 more per decade than it would to fuel a normal car. All told, you are wasting over $60,000 every 10 years with compounding, just by choosing this ridiculous truck over something like an equally capable, much-better-handling 2003 Subaru Outback wagon or maybe a Honda CRV. And that’s before factoring in about $100 grand in commuting costs you could save by moving closer to work or getting a closer job!

See, the standard shopper thinks, “Leather seats, big engine, room for the kids. Sold!”. When instead he needs to be thinking “A hundred and sixty thousand dollars!? I don’t even have a grand in my checking account! Maybe I need to buy something other than this truck”.

Although you could nitpick over the estimates I took at his insurance costs or the future price of gas, if you did, you would be missing the point. Just being in the right ballpark would have allowed me (and Mark) to avoid a potential $100,000 mistake. Avoid just 5-10 of these over a lifetime, and you’ve made the difference between “Broke” and “Retired”.

For most of us, even mundane financial decisions can lead to dramatically different outcomes. But you can’t always see those outcomes in advance if you’re down on the street making decisions with your emotions in the driver’s seat.

It is well known that most consumers, and even some of the newer arrivals to this blog, make shopping decisions emotionally. Meanwhile, I’ve always behaved more like a Vulcan (or an engineer, which is closely related), attempting to apply some logic to each purchasing decision. One reader even critiqued this blog‘s approach*, pointing out that not everyone thinks like an engineer.

But that is exactly my point: to build wealth efficiently, you should act a bit more like an engineer – trying to let go of emotions and put more logic and basic arithmetic into your decisions. You need to learn to do a bit of engineering on your own finances.

The reason is that at moderate incomes, the margin between poverty and wealth, middle class and kickass**, is very narrow. Spend most of your money and you’ll be almost-broke forever. Spend just a bit more and you’re bankrupt. Cut it down by just a factor of 2, and you’re financially independent in under 17 years. Cut it in 4 and you’re free in about 7. But without doing the numbers, trying to accomplish this is like trying to swish a basketball from an airplane.

You don’t need a fancy degree or even a scientific calculator to handle the basics. You just need to be willing to try your best to figure out how much something is going to cost you over time. Even if your numbers aren’t perfectly accurate, this is far better than the cautious person’s result of not trying at all. And here are a few guidelines to make your job easier.

  • Define the best and worst case scenarios. This will give you a range of possible outcomes, and you know the right answer is somewhere in there. Then take your best guess for the numbers, and use that as your guide. Example: Building this deck will take me between 8 and 16 hours. Doing the work myself will save me the $1000 the contractor had bid, so my pay rate will be between $125 and $62.50 per hour. Since even the worst case is quite good, I will do the work myself.
  • Use a search engine to quickly find scientific data or statistics instead of anecdotal evidence. The recent bike safety article is an example of this: Anecdotally, I feel like biking is perfectly safe, since I do it every day and never get hurt. But instead of using my own experience, I looked up official statistics and found that bike accidents do occasionally happen, allowing for more accurate decision-making.
  • Always try to figure out your per use costs. This leads to shocking revelations, like how upsizing to a 7-passenger vehicle might cost you $1000 per hour for the amount of time you actually spend carrying 7 passengers.  In my case, this decision making process has forced me to consider selling my construction minivan next year.
  • Divide annual savings by the money spent to get a return on investment figure. If it’s higher than 10%, you have found a smoking good life optimization and need to put it into action. Solar panels, tankless water heaters and LED light bulbs often do well when you evaluate them this way.
  • To calculate a weekly expense compounded over ten years, multiply the price by 752 (so a light restaurant habit can easily be $100,000 per decade)
  • For a monthly expense, multiply by 173
  • Be Reassured: approximate math and educated guesses can be deceptively accurate. This is because you tend to make random errors on both sides of the right answer. These random errors tend to cancel each other in the equation and you end up roughly right. I’ve seen this over and over again in my house building, fitness, investment, and spending guesses over the years. It’s not an exaggeration to say that my wild-ass guesses are the reason I was able to retire at 30, and they’re still coming through for me today. They may sound bizarre to the uninitated, but they’re not really all that bad.

Earning more money is often best accomplished with emotions – make people feel good about working with you, and they’ll want to pay you more. 

But actually keeping this money in your life requires a bit more hard-nosed practicality.

You can do both.



* To the Pressing Pause guy, I need to offer a bit of a rebuttal. I am of course aware that the battle for frugality is an emotional one rather than a logical one, silly. That’s why so many 350+ posts on this blog are philosophy-oriented. If it really were just about math and spreadsheets, you’d only need one post with a few equations in it, and everyone would say “Aaah! Early retirement it is, then!”.

But people can be made to trust the statistics, if we present the case well enough. Examples include the safety of airplanes,  investing in stocks, donating to distant charities, voluntarily paying taxes, and even believing in currency itself, as explained in the post about good old-fashioned trust.

** That Middle Class to Kickass post is often subject to its own nitpicking of the same type. People often complain, “Middle class!? The imaginary people in this article are making $140,000 a year – that’s super-duper-upper-income!”

Which is again missing the point: the concept of frugality and an efficient lifestyle costs becomes even more important as you move down the income scale. If you don’t like to read about what cutting cable TV does to a $140,000 budget, see what magic it does to a $25,000 budget instead. To figure it out, just bust out your calculator and do your best to run the numbers. You’ll love the results.


  • Stephen at SE June 24, 2013, 10:35 am

    I enjoy the numbers you post on your website. Even if they are used to address a specific point with include assumptions – they can often be inspirational. If someone suggests 8% returns on investments they will get a ton of haters and optimist joining the conversation about realistic expectations. But simply using a number and example can show people an ideal of what a lot of savings and compound interest would look like. I think a lot of financial writers think like engineers but many ‘normal’ readers do not. I think this blog does a great job catering to those who already have an inclination to rational financial expectations.

    • Free Money Minute June 25, 2013, 4:35 am

      I agree. It gives you a rough direction on where your life can go if you make your big decisions count. It you are retired in 10 years rather than 7, no big deal. However, if you don’t get the rough work right, you might be working 30 rather than 10.

  • Sawyer June 24, 2013, 10:40 am

    Another great article by MMM, Every single time after I read one of his articles I am jolted back into cutting costs. I inevitably regress back into my old spending habits though after a couple weeks. How do you keep it up MMM?

    • Mr. Money Mustache June 24, 2013, 10:46 am

      I don’t know, but it sounds like I need to do a better job! How can I make lessons that burn into your mind and can never be erased, rather than just quick cups of Triple M Espresso that you need to come back and drink each day?

      Ideally, I could make myself obsolete and the Sucka Consumer breed would go extinct. However, my time on the Chicago waterfront earlier this week has assured me that there is still work to be done :-)

      • Chris Gammell June 24, 2013, 11:05 am

        There’s a book called “Made to Stick” by Chip and Dan Heath. http://www.amazon.com/dp/1400064287/) I got it from my library on digital edition.

        It’s all about the concepts that make us remember certain stories even though we can’t remember others. The prime example being that people remember urban legend like the guy waking up in a bathtub full of ice but can’t remember their company’s mission statement. I recommend the book.

      • UK Money Motivator June 24, 2013, 12:57 pm

        I think you should start the Ministry of Mustachianism…. if each frugal minded person worked on 2 non frugal people, the word can spread, and consumer suckerism will shrivel and die!

        • Laurie June 30, 2013, 5:20 pm

          Haven’t you heard of Reverend Billy and The Church of Stop Shopping?? He performs credit card exorcisms!

      • Melissa June 24, 2013, 4:26 pm

        I assume all this will stick because of repetition (my weekly read and re-read) just like any overplayed song that you remember the lyrics to a decade later, or that t.v. commercial from when you were a kid. I hope you’re still pecking away at the keyboard in 10 yrs MMM, because I’ll still look forward to my “fix” – even if I’ve become cellular level Mustachian. The big thing for me now is trying to get my 22 yr old to glom onto this thinking – that would be golden for me as a parent.

      • George_PA June 24, 2013, 8:04 pm

        Although I have read every blog entry so far, the interesting thing is that you completely miss things or see them from a different perspective the second time around.

        I started a complete second time read-over by going back to the first post and re-reading them over time, i.e. 2 or 3 a day. I swear when you read MMM for the first time probably only about 50% sinks in immediately, the rest starts to more sense as you spend more time thinking about it.

        Sawyer if ever need a jolt go back to one of the classic early articles and re-read it, these are the really fundamental kick ass ones!! you know the ones back in the days when hardly anyone knew the blog existed and they would generate only 30 or 50 comments; you will be amazed at much you missed the first time; there is so much good stuff there to take in.

        And MMM, the articles are already good enough, you don’t need to do a better job; they already carry impact; the only way they could have more impact is if there was a way that the technology would advance to the point where a fist would come out of your computer monitor and punch you in the face if you turned into a sukka

    • Rob aka Captain and Mrs Slow June 25, 2013, 1:31 pm

      As with all change it takes time for the lessons to sink in. Start with low hanging fruit like utilities or canceling the cable and getting an attenna for example. Also work on delaying purchases. Had to stop in at Media Mart (German chain) to get a small part and whoah I was blown away by those 72 inch TVs OMG HD like I’ve never seen it and A++ energy rating to boot. Was tempted to whip out my visa on the spot and haul that baby home. But ya know once I left the store the desire kind of faded.

      Secondly get in the habit of paying yourself first. Having savings has a wonderful side effect that as it grows you get more encouraged to keep adding ti it.

      Finally reconize that not everyone is a MMM and most of us will fall somewhere between a spender and a skin flint. Along those lines I’ve also realized that my wife and I will never reach MMM levels of un-consumerism but there are so many lessons which I can apply which will make life so much better.

      For we went from 2 tanks a week of gas to maybe (outside of holidays) a tank of every 2 months all while greatly increasing our joy in life. We knew a major move was coming so we really looked at how we cold optimize our lives.

    • Robin June 28, 2013, 6:45 pm

      I suspect it doesn’t stick because the motivation is not sufficient. My husband and I have been reading MMM on and off for several years…but we could never agree on making the lifestyle changes necessary to live on significantly less and pay off our debt. I was something of a tightwad but would get frustrated by his spendthriftiness and “get back” by doing some of my own spending (usually on things for our kids that were easily explained as being educational and good quality)…not a healthy way to manage! We’d try to cut our budget some but it inevitably crept back up. I had a really good job for almost three years and if we’d done it right, we could have been completely debt free by now.

      Then I had a stroke (at the age of 31) and we found ourselves with two small children and an income below the poverty level. The first couple months we struggled to cut our budget (we did have enough savings to live the same as we had for about 3 months) but we cut more and more drastically as we used up the savings on medical bills and living expenses. We’re 6 months out now and have just run out of our savings so are truly living on our pittance. You would not believe how motivating it is! We have a comparatively small mortgage ($1200/mo) but it leaves us only $400 to pay for everything else. Food stamps cover our food budget (and allow us to eat really well with careful home cooking as described elsewhere by MMM). But a big chunk of that $400 is taken up with the consumer debt we ran up as students and didn’t finish paying off when we could have.

      Learn from our mistakes! You never know when life might change. My stroke was a 1/100,000 chance due to a tear in an artery in my neck. A little frugality a few years ago would have prevented significant stress now. That said, we’re going to one-up MMM someday…we’ll be the story of paying off all our debt WHILE living in poverty. :-)

  • Debt Blag June 24, 2013, 10:45 am

    You are absolutely correct. So much of the time, it’s more important to take action and get started than to get calculations right to the hundredth of a percent. It’s so much more important to save more than it is to chase that extra fraction of percent

    • Art Guy June 24, 2013, 1:36 pm

      Another “if only” – ie “If only I had got this info 20-30 years ago”. Well , maybe. Years ago, I was an addict to TV, reading 3 newspapers a day and other helpful habits to be the best consumer I could be. I think that I probably would have just fallen back in the trance. I remember a friend once suggested I go without reading a newspaper for 3 months. Huh! After 3 months I didn’t want to read a newspaper (yes, I am an older reader of this blog) and that might have been the start for me. Like alcohol recovery, I think avoidance of related negative habits is very helpful also.

      The other thing that both this blog, and some of the habits that it recommends helps with, is to avoid even coming in contact with some of the cues. Not watching TV, reading newspapers or magazines, and spending more time being active, makes it harder for Ford to sell me a F-150. But like a previous post about how habits work, you have to work at staying conscious and not falling back into old “loops”.. I so much appreciate this blog and others like it, that I can read regularly, to help me stay away from the constant consumerism for sale everywhere I look, and to help me reinforce good new habits, and slowly add others to my toolbag. I am late to the party, but catching up fast.

      MMM Thanks so much.

      • chc4444 June 25, 2013, 12:10 am

        Well said ArtGuy. It is amazing how all of the little habits that you develop as you learn to live frugally (like not watching TV) help you in so many unintended ways (i.e. you quit watching TV to save money on cable but now you don’t see the commercials so you consume less plus amazingly you now have more time to exercise). It just goes on and on as you become more immersed in frugal living. I’ve been doing tons of frugal things for about 30 years because I wanted to be a stay-at-home mom and I am shocked to see the way most women spend money and then lament that they have to work all the time… let your hair go natural, don’t get your nails done, and for god’s sake who needs more then 3 pairs of shoes.

  • rjack (Mr. Asset Allocation) June 24, 2013, 10:51 am

    This article is destined to be another classic! I agree with you that many people argue over small details while missing the big picture.

    MMM – Have you ever thought about adding a simple savings calculator to the website? I recently wrote a Asset Allocation Calculator plug-in for my website, which also uses Wordpress like your website, and it was pretty easy.

    • Debt Blag June 26, 2013, 12:03 pm

      Exactly! Some people can’t see the forest for the trees. Or some people are afraid to even look at the forest because the trees look so complicated :)

  • Curtis@PayoffMyRentals June 24, 2013, 11:04 am

    Your point is well taken.

    Financial math is rarely going to be “spot-on accurate” simply because of the “personal” variables that must be calculated. But any math is better than no math at all.

    I own a 1997 F-250 7.3 Diesel. I needed to buy it in order to effectively tow our 2006 29′ Holiday Rambler Savoy travel trailer that I use for my volunteer work which can take me away for days/weeks at a time. HOWEVER, doing back of the envelope math told me that a used $7,500 pick-up was a better long-term buy than a newer $20k-65k pick-up. A used $14k travel trailer was a better long-term buy than a newer 30k trailer. The truck usually sits in the driveway until needed while I use my much more efficient 4 cylinder Nissan Altima for getting around. This may not be strictly Mustachian, but it was an attempt to think mathematically about the long-term consequences of my purchases.

    Both were paid for with cash and both will be kept for the long haul with no shiny new upgrades necessary…or justifiable.

    We continue to beat a path toward full retirement by remaining debt-free, paying off our rental real-estate and now fully funding our ROTH IRA’s so that we can live off the tax-free dividend income they produce.

    Math is good…even the “fuzzy” math.

  • Mrs. Pop @ Planting Our Pennies June 24, 2013, 11:09 am

    I’m a math girl, through and through. And I think the first two bullet points in MMM’s post are the most important part. We shouldn’t forget the need to stress the research and being HONEST with yourself as part of the estimation process. Because MMM, you’re right that random errors would likely cancel each other out, but most of us are subject to illusory superiority (https://en.wikipedia.org/wiki/Illusory_superiority – you know where we’re all above average like the children of Lake Wobegon!), which would lead to us overestimating benefits and underestimating costs. Research and honest assessment of our skills can help address that.

  • cj June 24, 2013, 11:10 am

    Freakin’ hot tuna post! I use the calculator on my damn phone more than texting or calling or even the calendar. No internet. I use it to run the number every week with my wife to make sure our finances are where we want to to plan our financial future. BTW, I like your fuzzy math, man.

  • Chris Gammell June 24, 2013, 11:12 am

    I tell a lot of people about this site, mostly whenever personal finance comes up in casual discussion. But the ones that come back and tell me how much they like the site almost always are my fellow engineers. The back of the napkin calculation is a perfect example of why. If you’re not optimizing and sketching the future as you go, you are just guessing! I’ll take a sketch any day.

  • Brandon (And Higher Still) June 24, 2013, 11:19 am

    I get EXACTLY the same complaints of overanalysis.

    So maybe I wrangled a couple decades’ worth of S&P500 returns and inflation rates to create a historical investment calculator. So maybe I built a spreadsheet that calculates the best deals on food in terms of calories per dollar, and allows sorting by calories or grams of protein per kilogram. So maybe I try to include car insurance and depreciation and account for the number of passengers when deciding whether to drive or take the train.

    So maybe I AM a bit of a financial engineer…
    But do you want to make good financial decisions or bad ones?
    Do you want to have more money or less money?

    The Pressing Pause guy’s “messy, unscientific, imperfect combination of intuition, feel, and emotion” is great for plenty of things, but
    it’s dangerously insufficient for making financial decisions. I don’t give a damn how you ‘feel’ about swiping your Visa to buy junk you don’t need on credit — the 29.99% interest rate is fire and brimstone, compounded. If more people saw the spreadsheets and calculations that clearly quantify this doom, they would feel differently than they do when relying only on their flawed intuition.

    You need DATA to make well-reasoned decisions. Data inform your feelings, which inform your decisions. Some people will have a harder time working with and interpreting data, but that doesn’t make the approach any less valuable.

    • Evan June 24, 2013, 12:53 pm

      Any chance you could post the $ / calorie spreadsheet to a google doc and share that. I would be mighty interested to see it!

    • Adam June 24, 2013, 8:29 pm

      Brandon, I too would be interested in your approach to your calorie/$ calculator

    • Linda June 26, 2013, 6:42 pm

      Nice blog! And some truly excellent graphs, you made a money geek happy today :D

  • Brad June 24, 2013, 11:19 am

    It seems to me that people are looking for yet more excuses to not make any positive changes in their lives, and picking on your precise math is the way they are going about it this time.

    Absolutely ridiculous, but maybe that’s why tens of millions of people in this country don’t even have a few thousand dollars saved up and will continue to live in broke ignorance.

    It’s always easy to blame someone or look for the perfect, when good enough will get them places they can’t even imagine.

    I can’t believe that someone could read more than a handful of your articles and not come away with an understanding of the virtues of this lifestyle.

    • Mr. 1500 June 24, 2013, 5:40 pm

      “It seems to me that people are looking for yet more excuses to not make any positive changes in their lives, and picking on your precise math is the way they are going about it this time.”

      One thing I’ve thought about lately is that the change part is easy. Getting people to want to change is the hard part. Once a person wants to change, they’ll embrace the tools you present to them.

      MMM is one of the greatest tools. I mean that in the most positive sense!

      • Art Guy June 25, 2013, 11:48 am

        I would totally agree. But I might add, that most people don’t really know what they want. Usually, it seems, something big happens in a person’s life, and you finally wake up, and pursue a new direction. How’s the saying go? When the student is ready, the teacher will appear? And then, yes, the change can come relatively swiftly, as direction and focus intensifies. Thats what happened for me – Hah! I hardly recognize myself after 2 months of apply MMM principles!!

  • Giddings Plaza FI June 24, 2013, 11:20 am

    Another great post! Like you, I am more of a left-brained person, so I love doing calculations and stats to prove my point to people regarding optimizing spending and getting to financial independence. You have about a million more blog readers than I do, so most of the objections I get are from friends / acquaintances. It stuns me how strongly connected people are to spending what they do, and how offended they become if I suggest that an alternative is available.

    The biggest surprise to me, in my FI journey, has been that people think spending whatever they want is what they deserve, to make up for their high-stress job. Needless to say, what they deserve is to spend less, invest well, and buy their freedom!

  • Ron June 24, 2013, 11:22 am

    Early in this post you put what I am trying to express beautifully, “. . .life itself is very fuzzy, subject to incredible random variation and the splendid irrationality of human nature itself.” Your insistence on consuming, saving, and living more smartly is a wonderful thing given the hedonic adaption-based mindlessness that rules the day. I agree that people should spend more time studying their expenses to find and repair the holes in their personal finance buckets. Your examples of how to do that are tremendously helpful as evidenced by the size of your readership. Keep the equations coming. And keep the pendulum swinging between dispassionate number crunching and the splendid irrationality of human nature.

  • Tim June 24, 2013, 11:22 am

    I agree completely with this article. Back of the napkin calculations are hugely important, and miscellaneous factors of two rarely affect the outcome of the calculation.

    Sometimes I think, though, that some of your most hardcore apologists don’t analyze critically the way you do. Instead, they pick up general messages (biking is superior to driving!) that leads them to wear blinders (biking is always safer than driving!). I understood your previous article to mean that the health advantages of biking more than compensated for the increased injury risk while riding a bike when figuring total lifespan. This isn’t a traditional definition of “safe,” but it works, is interesting, and is useful. In the comments however, it felt like half of the commenters were regressing and trying to argue that the safer (meaning lower risk of injury or death while in transit) form of transportation between point A and point B was bicycling, which of course is nonsense.

  • Jacob@CashCowCouple June 24, 2013, 11:22 am

    I too am a fan of fuzzy math. What could be better than some vague dollar amount I’ve got put away in my head? Especially since it enables me to avoid making stupid unnecessary purchases that I might have stumbled into due to some fuzzy consumer driven thinking.

    Cheers to fuzzy math, and the freedom it delivers!

  • Anne June 24, 2013, 11:37 am

    “Meanwhile, I’ve always behaved more like a Vulcan (or an engineer, which is closely related)”

    Yes! Also, if you ignore the fact that it is a commercial this is pure awesome. http://www.youtube.com/watch?v=UengULt6t7Q, Leonard Nimoy vs. Zachary Quinto.

  • Marcia June 24, 2013, 11:48 am

    I did some back-of-the envelope calculations on driving a few weeks ago, and I figured it was good enough for me.

    Cost to drive to work:
    Gas: 28mpg, mileage 30 miles/day, 4.00/gal = $4.28/day
    Car: $19,000 (total), if I drive it 150,000 over its lifetime = 0.12/mile = $3.80

    That’s >$8 per day to drive, not counting upkeep and insurance (you can argue that I’d be paying insurance anyway, even if I drove less).

    Anyway, a fuzzy math calculation comes out at close to $10 every time I drive to work.

    • Mr. Money Mustache June 24, 2013, 1:28 pm

      True, and if that best-case estimate is good enough to convince you to drive less, you’ve already won!

      If not, you might add in $850/year of opportunity costs for the $19,000 you could have invested instead of spending on the car.. plus all the tires, oil, repairs, and a higher insurance bracket, and registration, and you’d end up even higher.

      That’s why it really bugs me when people use “gas” as their estimate of the price of driving. You can do it, but you have to do the math with gas at about $10-15/gallon to really capture all the costs.

  • Allardi June 24, 2013, 11:48 am

    My best friend just reccomended your site and I love it! I have always been frugal but the hubby, not so much. For years we’ve been spinning wheels living pay check to pay check but through “fuzzy” math in the last year we’ve reduced our mortgage by 50%, have no car payments and our oldest is on tract to go to college for little or no cost. All that progress and we were still living paycheck to paycheck, 2 hrs of fuzzy math later and we realized that paying down debt instead of paying ourselves was causing a vicious cycle of revolving debt. Now we are paying ourselves first and ready to say good by to credit dependence for good.

  • BobTX June 24, 2013, 11:50 am

    MMM – This post and a very related experience* yesterday are prompting me to throw out something I’ve wanted to throw out there on one of your current** posts so you might actually see it:

    I can’t thank you enough for putting out there such a great presentation of the approach and vocabulary necessary to convey what you have termed Mustachianism. It’s just gravy on top that you’ve created a fully fleshed out and incredibly readable/approachable blog that I can then refer friends to after conversations about lifestyle/spending/investing.

    “Mustachian” would pretty perfectly describe the household I grew up in (and both my parents retired super early as a result), and the lifestyle pattern my wife and I have adopted. We’re just starting our careers after training phases and we’re hoping to be fully sustainable on our passive income some time in the next 10 years. Most of our lifestyle was already close to exactly on track with what you preach (although I’ve learned several specific new tricks here on the MMM blog for things like minimizing phone bills with MVNO’s, etc.). However, over the years, I don’t think I’ve been very effective at conveying to friends, family, and coworkers just how simple a “mustachian” lifestyle is to put into practice. I think we’ve just been seen as eccentric or maybe lucky oddities by family and friends. I think your site is going to help out a lot there – we’ll be sending some traffic your way.

    *It’s funny that this is your post today. Just yesterday, I was at lunch with my wife’s coworker, and we were having an epic actual back-of-the-envelope conversation about how to think about and structure spending/investments to be financially independent at the earliest career point possible. He was interested in asking us about all this after observing how frugally but comfortably we live on the exact same income he now earns.

    **As opposed to my current status as a necro-poster – I’m about 2/3 of the way through reading your blog + comments from the beginning right now, after first stumbling upon it a month or two ago

    • Mr. Money Mustache June 24, 2013, 1:38 pm

      Thanks Bob, and great story. I see you have mastered the MMM Silly Footnote System, which is a sign of a dedicated reader.

      Note that there’s no such thing as “Necroposting” on this blog – people are still poking around even on the oldest posts and making comments, and I still see them. In fact, commenting is more powerful on many of those old ones, because there are fewer of them – you have more of a chance of getting read.

  • Savvy Financial Latina June 24, 2013, 11:54 am

    I really try to think about our expenses this way. Ever since I started reading your blog and other personal finance blogs, I have looked at every penny and validated whether it’s worth it. If i can save $20 on car insurance, I can use the $20 to invest or to do something pleasurable, like eating out or going on vacation.

  • AaronC June 24, 2013, 11:56 am

    Warren Buffett has a nice saying that is applicable here:
    “I would rather be approximately right than precisely wrong”

    The importance of guiding our lives through reasonable estimates and goals, rather than just following the herd without any goals or estimates, cannot be overstated. My life is dramatically better today because of the goals that I set and the (rough) calculations that I run on a near-daily basis.

    Keep up the great blogging, MMM. What you write does “stick” for many of us.

  • StillWorking June 24, 2013, 12:18 pm

    I was just thinking: I’ve made a few comments over the years that nitpicked (as overly optimistic) the numbers you use as example portfolio returns. But it just occurred to me that if the wannabe early retiree faces a lifetime of poor returns, so does the general population. In which case, the “early” retirement date may not come as early as one would like, but still earlier than one’s peers.

    It’s easy to find stats that most Americans are saving no or at least very little money. Because of this, I anticipate that the traditional retirement age will start to creep up. Many people simply won’t be able to afford to retire at the “classic” 60-something age.

    So let’s consider a lifetime of 2% real returns: going back to the “Getting Enough…” post from a few days’ back, the table would extend to about 36 years in order for passive income to match living expense income. And one might draw the conclusion, “Even if I’m saving 50% of my pay, it will take 36 years to retire? That’s not early!” It’s not early by today’s standards, but in 36 years, it might very well be early. If, over the years, the average retirement age moves up to 70+, then retiring at 57 or so *will* be early.

    Put another way, in the most cynical case, using MMM’s spend less and/or earn more tactics might be the difference between any retirement at all and working until you die.

  • Done by Forty June 24, 2013, 12:18 pm

    I agree that being in the ballpark is a good approach, as it gets you to the right conclusion. For example, it doesn’t particularly matter whether riding a bike is truly the #1 safest method of transportation if the general message is: ride your bike a lot. It doesn’t particularly matter if your estimate for inflation turns out to be off by a percent or two when the lesson is simply to live on a small portion of your income and to invest the rest. Get the big things right…don’t sweat the small stuff.

  • Christof June 24, 2013, 12:24 pm

    This site resonates well with me because I’m in a very similar demographic. Mid-30, software engineer (and business owner), similar high income. I always rode a bike to work and only got my drivers license in my mid-20 when my wife asked me to.

    Having said this, Pressing Pause does have a point. Not everyone is like this group of people. There’s a ton of research out there that clearly shows that most people will not behave in their own long-term interest. One of those biases has been dubbed WYSIATI by Daniel Kahneman: What you see is all there is. We will jump to conclusion based on what we see, not about what we don’t see. Similar research has shown that most folks value losses higher than gains, which is one reason why rational investing in down-times only works for some.

    Than there are boundary issues. Two families living on $25K per year will have an entirely different live if one family is making $100K and the other $25K, even if the expenses are the same. Our brain does not distinguish very well between real and imagined experiences. So MMM, being able to afford a Tesla, can easily imagine having one, and then simply doesn’t need one. Someone who can never in their life afford that, will more likely crave for one.

    Downsizing, decluttering, slowing down, are all popular topics that come from a position of already having experienced “too much”. If you have never been in the position (and many haven’t), you just won’t accept that you don’t need whatever it is.

    For me it’s perfectly OK that MMM ignores this in his blog. But I’m well aware that the ideas in this blog are only true for a niche demographic and not for everyone. As we say in software development, this isn’t a scalable design.

    Fairly frequently we see the issue brought up on how you can do this with less than 100K income. Of course it’s a matter of your saving rate, only. However, below a certain income level you either can’t save that much, or you need to embrace a life like Jacob of ERE.

    • Mr. Money Mustache June 24, 2013, 1:49 pm

      I dunno, Christof – you might think differently if you got all the emails that I receive every day. There are an awful lot of non-engineers out there, and people making less than $40k. They are making real changes and very excited about it – in pretty large numbers.

      I’m not discounting them at all, and they are the ones that benefit most, proportionally speaking.

      As for the Tesla – I don’t think you need to be able to afford something to be able to give up your craving for it. In Chicago I watched yacht after bikini-filled 50-foot $2-million-dollar yacht motoring out of the harbor into the lake for some cruising. I can’t afford a $2M boat, and yet I had no desire for one.

      The key to losing the envy is separating the real from the fake. I love a good party, which is what makes a boat fun. They’re no good if you just go out and fire up the 2400 horsepower diesels all alone. But it turns out you can have a good party in locations other than a powerboat as well. For most of us, putting your effort into making parties happen results in much more fun than earning/borrowing $2 million, spending it on a boat, and then hosting parties there.

    • Chris June 24, 2013, 2:00 pm

      I’ve been reading for awhile and sometimes do say to myself, “of course it is easier when you have a household income over $100,000”. I’ve spent most of my life with quite a bit less. I’ve spent my adult life as a lab technician, a librarian, and similar jobs – not anywhere near the income of MMM shortly after college – but these techniques really are MORE important for people like me. No, they didn’t cause me to be able to retire at 30 but they did make it so that when my teacher husband got laid off earlier than he planned to retire, we went on a vacation that had never fit with the school year rather than facing a fearful future. We paid our house off 3 years after that layoff. These techniques do mean that I’m retiring at 60 (this year), rather than 70, the age that many of my colleagues expect (hope) to retire.

      By keeping my living expenses down as my income crept up, I’ve gradually increased my savings until they are really adding up now.

      • pdxcyn June 24, 2013, 6:48 pm

        Completely agree with Chris. I only make 40K, my first job out of college was a mere 17K. However I save over 50% and I paid off my mortgage (my only debt) in 6 years. I was also unemployed for two years during the great recession, but thanks to my frugal skills didn’t even have to touch the “emergency fund” But I never really ran the numbers or had an inkling how to, until discovering this blog a few weeks ago. Now my own “wild-assed” estimate is retirement at 50, three years from now. Not as nice as 30, but way ahead of the vast majority.

      • Christof June 26, 2013, 12:10 am

        I realize that one part of my comment may come across as overly negative on living on a low income. Let me add that I do know what living with a lot less than $100K means. My family left Eastern Germany when it was still a communist country with our only possessions being the clothes we wore and what else we could carry in a bag. No money, no assets, nothing.

        Good money skills are crucial with low income. My sister was truly badass in this regard. Despite being a single mom with two kids living of social security, she managed to save enough to travel to Australia (from Germany) with her kids. It took her ten years to save as much, but shows what is possible if you have a goal.

        Optimizing expenses, question traditional “wisdom”, spending less than you earn, all those principles apply to all levels of income, of course. Everyone has to apply them to their individual circumstances and will get a personal result. With a significant lower income it will not be “retire with 30 and live a middle class life”, rather retire at 30 and live off a few hundred bucks a month, or live a middle-class live and retire with 60 instead of 70.

        I was more pointing out that there are psychological studies out there that explain why many people won’t change their behavior even if the facts are clearly laid out in front of them. More importantly this behavior is deeply engraved human nature, not some fault that we can simply fix. Probably I tried to say too much in too few sloppily crafted words. ;-)

    • Skart June 25, 2013, 1:17 pm

      Thank you so much for mentioning Kahneman and WYSIATI. It led me to an excellent article he wrote for the NYT Magazine. Made m’ day.

  • EngGirl June 24, 2013, 12:30 pm

    Okay… so let me get this right. The person from pressingpause stated “Mind boggling that someone as smart as him believes that any spreadsheet might make someone less afraid to ride their bike across a major metropolitan area.”.

    Being shown through statistics that the thing that you are afraid of is less likely than you thought it was DOSEN’T make most people LESS afraid? Because rough estimates such as that one are very soothing to me. It’s just like being afraid to walk on the glass floor of the CN Tower. Wouldn’t you feel soothed by a lesson in materials science and a simple force calculation?

    Not trying to be a jerk, but is there anyone who DOSEN’T react this way? That doesn’t make logical sense to me…

    Although that could be because I am an engineer.

    • Christof June 24, 2013, 1:23 pm

      If statistics would change people’s actions, we would not have canceled or late software projects more than FOURTY years after Frederick P Brooks wrote The Mythical Man-Month about a software project he joined over 50 years ago. That’s two generations of clueless software engineers. ;-)

    • Da55id June 24, 2013, 1:37 pm

      The answer lies in the pool table fallacy. Averages describe the surface of a perfectly flat pool table. What’s missing from much of this analysis is standard deviation which would show how frequently and severely a data set veers away from a pool table surface. This is why pilots are VERY interested in elevation around Denver :-) but not so much in Florida.

      It has been popular in recent times to describe careening events as “black swans”. It’s the swans that can do you in. The best way to add to the data driven approach is to lower your life center of gravity below the high wire of life. The techniques described in this blog remind me of how one can construct a long balance pole to make life on the high wire much more pleasantly possible.

    • Ron June 24, 2013, 6:36 pm

      I’m Ron of now PressingPause semi-fame. No offense taken, but the possibility that you can’t think of a single time in your life in which you’ve acted irrationally leaves me equally perplexed. And, I’m not trying to be a jerk, but if you can’t think of several instances in which friends and/or acquaintances have acted irrationally, I suggest you spend more time outside of work. Or consider Christof’s perspective above or Kahneman’s work who he references.

      • EngGirl June 25, 2013, 5:41 am

        I guess that my perspective has been shaped by the fact that I come from a STEM-heavy family, the vast majority of my friends come from my university days, and I married a financial analyst. I believe that most of the people with whom I associate are rational thinkers who would be pacified upon hearing that something which they were frightened of is much less likely to occur than initially perceived. I guess that this is why I would be in MMM’s ideal target audience. Christof’s argument, although valid, was an extrapolation past the bounds of my argument. I was merely (and truthfully) wondering if there were people out there who would not be soothed by the aforementioned statistics and calculations. I’ve since lost my fleeting interest in human nature, and will be returning the rational field from whence I’ve came.

      • Slugbucket June 25, 2013, 6:07 am

        It’s certainly true—indeed, obvious enough—that people make decisions emotionally and that statistics may, in many cases, not persuade. We are feeling machines that think, not the reverse. People have a tendency to ignore data and go with their guts.

        Still, to call this is a valid criticism of MMM’s point seems ridiculously unfair. Obviously it can still be very useful to see what the data indicates. A few of us will find it very helpful. Many people might mostly ignore it, but it might change even their position just a little in a more rational direction.

        I’m a social worker–about as far from an engineer professionally as you might get—and I find MMM’s way of thinking quite similar to my own on these issues.

        • Ron June 25, 2013, 12:36 pm

          “It can still be useful to see what the data indicate.” Absolutely. I’m not anti-data. All I’m advocating for is a balance between data analysis and what you refer to as “guts”. I like the way MMM strikes that balance in this post.

          • Sarah June 25, 2013, 5:03 pm

            I agree about guts but how to not be gutsy and irrational? For example, in the divorce I lost my retirement funds and got the equity in the house. 4 years later, that’s still all the “savings” I have. I make a high salary, but I am tied to shared custody arrangements in one of the most expensive locations in the country. I can a) rent it out and make $500 per month, but pay higher rent too b) move somewhere I can pay for less house and lose time with my child and up commuting costs, c) move somewhere I can pay off a house and save and lose even more time with my child and up commuting costs. What’s the fuzzy estimate for time with your child? I feel like any decision I make is irrational.

            • Melissa June 26, 2013, 8:53 pm

              Yep, I’ve been in the shared custody situation. There’s no math for raising your precious child. Cut back everywhere else and use your time together to have cheap fun. Instead of buying ice cream out–go to the store and pick out a quart together. Instead of eating out, grill supper in the back yard. Ride bikes together. Cut your cable (plenty of kids shows on public television). Visit the museum on free day. Go to the splash pad in the park. Make muffins from a box together. Go on a camping adventure at a campground 2 miles away. Join Boy or Girl Scouts. Run foot races. Ride bikes together every night. These are all things my shared custody child and I did, and he said he wouldn’t trade it for the world. He never knew I was trying to save money. All he wanted was my full attention–and on his nights he got it. The other nights I was going to college, doing my homework, cleaning and etc, all while working full-time days. Now my 4 yr old and I do these things too. It’s all about time together. No need to move, and I’m sure you wouldn’t anyway. It can work. That on which you concentrate will grow–your time with your child, your finances, your happiness.

  • My Financial Independence Journey June 24, 2013, 1:04 pm

    I make lots of back of the envelope calculations to give me a rough guide on where decisions may lead. But being a scientist, I’m well aware that all estimations include a margin of error and that envelope math easily neglects very important details. So I use envelope math as a starting point rather than treating it as gospel.

    Being in science has also shown me just how easy it is to abuse data and statistics, both intentionally and unintentionally. In these cases I try to figure out what the author’s biases are, run though the numbers myself, and look up things that I don’t know or that don’t make sense.

    • Art Guy June 25, 2013, 1:20 pm

      Good point – that we look at the info, and then review it ourselves. One of the interesting things I have seen on some FI blogs (not so much here), is people asking -“Here is my financial situation…what should I do?”. I think FI stems from TI (Thinking independently), which I am slowly learning to do.

  • StillWorking June 24, 2013, 1:10 pm

    At the risk of being accused a nitpicker, I think there should be a distinction between back-of-the-envelope estimates and sloppy thinking. That is, making rough estimates of things using simplified math is an immensely powerful tool. But it loses all utility if the assumptions/simplifications are based on faulty reasoning or just flat out wrong.

    After doing the rough math, you should be able to step back and answer yes to the question, “Does this result make sense from a purely rational perspective?”

    For example: in all your cost-avoidance and cost-reduction scenarios, all the specifics are debatable. But the fundamental result makes intuitive sense: the more you save, the closer your retirement date comes. The rough math is a concrete explanation of a concept that is fundamentally sound.

    Another sanity check on rough math should be that the fundamental conclusion doesn’t change if you make realistic adjustments to your assumptions and simplifications. Again, with your cost saving and wealth building examples, the fundamental idea doesn’t change.

    And of course, the final check—what real engineers truly do—is sit down and do the rigorous computations and/or modeling of the problem. The results should once again agree with the original estimate (certainly not exactly, but within a margin of error that is reasonable for the problem at hand). For the average person looking to have badass personal finances, this step is probably unnecessary. I think that at this point, it’s basically “economic law” that if you save more and spend less, you’ll experience financial independence well ahead of your consumerist peers.

    Now, to beat a dead horse a bit… the bicycle safety post. I’m not convinced that the fundamental assumptions and simplifications were set up correctly. I don’t know enough about per-mile versus per-hour, but if your back-of-the-napkin “model” of bicycle safety is accurate, per-mile and per-hour should support the same conclusion—if not, then maybe the truth is that the two methods of transportation have different safety modes depending on circumstances. I think there were at least a few comments in there that had legitimate concerns with the methods you used. Off the top of my head: the availability of completely different statistical data sets; the variance in regional bike stats being greater than that for cars; the application of “safe habits” to biking but not driving; discounting the health effect for people who already exercise regularly.

    Maybe there is more than one audience here. I was thinking that being unconvinced by your bicycle safety post makes me an “emotional” decision maker. But in fact, I think it’s the opposite: yes, my feeling is that biking is more dangerous than driving (at least in my neck of the woods), but I can be convinced that I’m wrong… but only if you can present a model in which I’m unable to find any obvious holes. Through intellectual study/research/rational thinking, I’ve changed the way I look at things many times throughout my life. I believe that makes me a thinker more than a feeler.

    • Gerard June 26, 2013, 7:00 am

      I think this is more or less how I feel about the last two posts, too.
      But one of the things that I really value about MMM is a different aspect of geeky thinking that I think he does better than most people — he steps back from both the reason and the emotion and comes up with a different question or a different formulation of the question. Probably the best example of this is thinking of little weekly expenses by multiplying them by 752. It’s “thinking outside the box”, but in a more profound way than most people use that expression.
      wrt the cycling safety column, I think per mile calculations would have made more sense, as a journey doesn’t get shorter just because it’s on a bike. But I think I have an outside-the-box addition to the calculation: If you move and thus switch from commuting 30 miles a day by car to 5 miles a day by bike, you’ll save so much freakin’ money that you’ll retire 20 years earlier, which will reduce the travel in your lifetime by at least 150,000 miles! Holy freakin’ shit! That’s some danger reduction right there!

  • jj June 24, 2013, 1:10 pm

    I think you hit a really key point here. As a single person, I was in a very good place financially because I would do those calculations. Everywhere, forget back of a napkin, I was doodling those notes in the margins of my gradschool notebook with regard to my student loans. And as a married person, even if I NEVER sell my husband on full-blown mustachianism, he’s already absorbed the habit of calculating the extra cost of externalities, pausing to let that sink into his emotional excitement and considering other alternatives. Just that tiny process is a huge change in a world that encourages mindless consuming.

  • Early Retirement Extreme June 24, 2013, 1:18 pm

    For the purposes of this discussion, there are two kinds of thinking: conceptual (out of the box) thinking and analytical (in the box) thinking.

    Fuzzy math and new ideas belong to the former whereas bean counting and old ideas belong to the latter.

    Another way of putting it is that conceptual thinking challenges your own preconceptions whereas analytical thinking challenges other’s preconceptions.

    The issue is that some are simply incapable of conceptual thinking. They do not know how to recognize a principle and apply it to themselves. They are not capable of imagining a perspective from which something that does not make immediate sense to them may make sense to someone else. To be fair, it more likely that they simply prefer to steer clear of conceptual thinking. Ahhh… the bliss of never having to challenge one’s own beliefs.

    To compensate for this inability they go into deep analysis crunching numbers (yours instead of of their own), desperately trying to fit them into the framework they already know. These are the complainypants who argue that only the dictionary gets to define what retirement is; that an entire article is wrong because of a spelling error; that the numbers don’t make sense (because typically they’re missing half of them); and that such and such lifestyle is unsustainable or not comfortable—simply because it conflicts with their framework (as seen on TV). They’re the slaves in Plato’s cave who know only the wall (albeit in High Definition!).

    The problem—if it is indeed a problem—is that with these assclowns you can never win. First you need to provide every single income and expense you’ve ever had. Otherwise, they’ll simply do their analysis wrong—making stuff up due to being too lazy to read a paragraph is very common on the interwebs. In particular, they’ll just fill in their blanks with ideas from their own world. (It’s impossible to get around without a car, fry an egg (unsupervised even), get health insurance for under $100/month, be comfortable without 3 bedrooms, etc.) Obviously providing complete details requires a tremendous effort. However, even if you do that, you’ll give the analytical complainypants a tremendous opportunity to excuse themselves, because they don’t live in the same state, make the same money, have the same number of pets, same health issues, etc. E.g. “That’s easy for you to do because you don’t need an extra car to drive your seven pets to the vet.”

    To me they are euphemistically “out of pedagogical reach”. I’m not sure what the best strategy is. To make fun of them? To use pictures (show, don’t tell)? Or simply to ignore them. I’ve eventually gravitated towards the latter.

    • Da55id June 24, 2013, 1:45 pm

      Wise choice. Some will notice success and will emulate. Most will tell stories to themselves to explain away their predicaments.

    • Curtis@PayOffMyRentals June 24, 2013, 1:48 pm

      “The problem—if it is indeed a problem—is that with these assclowns you can never win. First you need to provide every single income and expense you’ve ever had. Otherwise, they’ll simply do their analysis wrong—making stuff up due to being too lazy to read a paragraph is very common on the interwebs. In particular, they’ll just fill in their blanks with ideas from their own world.”

      Jacob, I see and hear your frustration. You’ve certainly been down this road enough to be an authority on the subject. You’ve reached the only real solution…Just ignore them. To do otherwise is a lesson in frustration. As one man put it about a century ago…”If I stop to kick at every dog biting at my heel, I’ll never get anywhere.” Or, as another wiser man put it… “Don’t throw your pearls to swine nor what is Holy to dogs as they will trample them under their feet.”

      I’m a reader on your blog/forum and while I don’t agree with many ideas or concepts, I’ll always attempt to at least take the time to reason on new ideas and extract some positive lesson from them rather than dimiss them outright due to having a closed mind. Thanks for the comment.

    • Mr. Money Mustache June 24, 2013, 2:09 pm


      I am impressed that you can so seamlessly combine deep social/psychological analysis and the word “Assclown” in the same comment. Very nice.

      As for the truly hopeless cases – here, the fuzzy math helps me again. I don’t care about having every single person like the blog or understand the points. I just need a certain percentage of readers to adopt the ideas, and a positive growth rate.

      From there, we can keep tweaking both variables for greater efficiency and eventually fix the world :-)

      • Joy June 25, 2013, 10:00 am

        LOL! MMM I was thinking the same thing when reading
        Jacobs comment! :) Thanks for calling it out. I needed that
        laugh. :)

        I missed you posting this past week. You have spoiled us. :)

    • rjack (Mr. Asset Allocation) June 24, 2013, 2:10 pm


      It’s great to see you posting on MMM. The biggest conceptual kick in the ass that I ever got was from your great book, Early Retirement Extreme:


      Your concept of Plato’s Cave and particularly Renaissance Man was what convinced me to retire early.

    • jlcollinsnh June 24, 2013, 3:06 pm

      Great way of thinking about the duality of approaches here, Jacob.

      Let me just add, for my part, calling the first approach “fuzzy math” and “hand-waving” is just the assclown way of trying to diminish what’s being discussed.

      Perhaps more useful and accurate is to think of it as “what-if analysis.” That is, what if we did this instead of that.

      Mr. MM’s numbers provide a certain “what if” profile. Instead of saying, “Oh my this doesn’t work if this number changes!”
      use the analysis provided to do some of your own.

      Using the simplest of spreadsheets, even this English major can do it. Just plug in your variables – say the F-150 and the CRV – decide what you want to measure – say purchase price, depreciation, fuel costs, total cost and the like – and plug in your best estimates.

      Then you can simply swap out various numbers to see, for instance, “what if” deprecation was this instead of that.

      What you wind up with is a range of possible outcomes. At that, since you are predicting the future with necessarily imprecise numbers is going to be as good as it gets.

    • Tina June 24, 2013, 7:26 pm

      At the risk of disagreeing with the master, I think it’s even simpler than that. Some people seem unable to consider the future in any but the vaguest way. The present is real and concrete. The future — and thus the ability to plan for it — is out of reach, out of sight, another country.

      I’ve seen this lately in a couple people I care about but can’t get through to — they’ll express some wondrous desire for the future, but when gently pressed as to how they might get there, it’s like I asked how to get to Oz.

      And if you can’t see a pathway between the present and the future, then the future is always going to be some kind of imaginary place which never actually materializes.

    • Anonymous June 24, 2013, 8:48 pm

      > To me they are euphemistically “out of pedagogical reach”.

      This is the most insightful part of your comment, and it’s a concept many people have trouble with.

      Less Wrong calls it “inferential distance”: the gap between the background, assumptions, and reasoning framework of someone explaining an idea and the background, assumptions, and reasoning framework of someone trying to understand the explanation.

      When MMM mentioned that non-engineers have a harder time with some of his explanations, that’s an issue of inferential distance. People already inclined to approach problems analytically will readily accept a clear analysis. People who regularly approach problems non-analytically will see the same thing as “blah blah fuzzy math blah”.

      Worse, in the consumer marketing most people encounter regularly (and MMM no longer does), many people attempt to use numbers and seemingly analytic arguments to baffle and mislead, and people without the necessary background to critically analyze those numbers often fall for it, further reinforcing a mistrust of numbers and analytics.

      “Approaching a problem scientifically” or “like an engineer” is another way of saying “approaching a problem rationally”. You shouldn’t have to say it, and you shouldn’t have to defend it, but you do, because otherwise you’re not acknowledging the inferential distance between yourself and your audience.

      • Stephen June 25, 2013, 10:11 am

        For those who can’t distinguish between a good and bad analysis, what helps them make their decisions? I would think that first, they see what their friends and family do, because that’s who they trust. If you say to a friend, “A bunch of my friends have figured out how to bike safely, and now they look great and save tons of money,” then for some people, that’s much more powerful than showing stats. It’s totally understandable that trust replaces analysis for the faint-of-analysis.

        I’m sure that not everyone who is convinced by MMM gets that way because of his stellar napkin number crunching. I think MMM builds trust with some people through his cursing, his love of manual labor, his confidence, etc.

        • Mr. Money Mustache June 25, 2013, 11:51 am

          Nicely said, Stephen! That is exactly why I share these emotional examples of what I feel is a life well lived. Like the joy I feel right now, sitting out on a back deck in Hamilton, Canada under some shade trees, having a glass of water and cooling off from a run up and down the local mini-mountain – while everyone else is at work :-)

          If people don’t trust their own math skills, they can still learn to trust the math skills of the other Mustachians, and just take our word for it by using the same techniques.

          After all, it’s a pretty safe bet that spending less and embracing hard work and challenge will give you a better life than the opposite approach, so the only issue is getting people to try it for themselves.

    • Pretired Nick June 25, 2013, 2:35 pm

      I took some very good sales and negotiation training some years ago. One of the interesting tidbits was that he noted that different individuals absorb information in different ways. One of his examples was that executives need very results-driven “masculine” approaches, whereas creative types need visuals and analytical people need numbers and so on. He said he was selling to a CEO once and was getting nowhere with his normal “executive” approach. He switched his tactics, and tried something more analytical and started clicking with the guy. Later he found out he used to be a professor. So to make an effective argument to a mass audience, I think you need visuals, numbers, stories, etc. to make your point to all different types.

    • Jen January 5, 2015, 5:37 am

      I also don’t think as a blogger it is your responsibility to reach everyone. Your responsibility is to reach as many people as you can in the best way you can. The message is what’s important, not the messenger.

      As a personal example: My best friend doesn’t get it (at MMM she’d be called a complainypants or on this comment string “out of pedagogical reach”). I’ve sent her to ERE, MMM, and Dave Ramsey and still she gives rebuttals or blank looks. So what does she do? She calls me direct with exact personal situations. And now she named me her personal Money Mustache. If I’m 75% of MMM and she’s 75% of me the culture of this group is expanding and neither MMM nor ERE need to reach her directly.

  • JC June 24, 2013, 1:20 pm

    MMM, your fuzzy math has changed our lives for the better. I look at every purchase differently now. Keep up the great posts.

  • The Stoic June 24, 2013, 1:21 pm

    MMM I think you can sum up what you said here in one little saying I remind myself of all the time; “don’t major in the minor”. It’s easy to let trivial details, the minutiae, distract you from the main tenents of a theory. Your opponents would do well not to major in the minor…

  • tallgirl1204 June 24, 2013, 1:24 pm

    Thanks for this post– like Sawyer, this blog acts as a great cup of caffeine, and often results in me adding yet another worksheet to my Excel file of retirement calculations. I think I tend to ping-pong between feelings of “I can retire right now– this is awesome!” and “oh boy, I still spend too much and maybe I am not being critical enough in my calculations.” MMM’s fuzzy math allows me to do more of my own, and hopefully the average of all my fuzzy calculations hits somewhere near the truth.

    Each of your posts allows me to home in on a more realistic assessment of where I really am– and where I really am (at least, where I think/feel I am) is 1.5 years away from the “one bad day club”– the one where I can start to craft my own work in the way that suits me– and walk away at the point where the time spent at work is not as fun as the time outside of work would be.

  • DJ June 24, 2013, 1:35 pm

    “This is where Mr. Money Mustache would come screeching into the dealership on his bike, with Fuzzy Math guns blazing.”

    Love it, what a great image.

  • Ree Klein June 24, 2013, 1:37 pm

    I love your fuzzy math and agree that trying to calculate even with limited data is a gazillion times better than approaching a purchase with only stars in your eyes!

  • mjmphx June 24, 2013, 1:41 pm

    “…when all eight dimensions were considered together it was found that almost 80% of participants had evaluated themselves as being above the average driver…”

    Thanks to Mrs.PoP for the Wikipedia link on Illusory Superiority. It’s a really hard thing to accept that you might be below-average in some areas, and many Mustachians probably ARE above-average. However, as we’ve heard before, if you find someone better than you, learn from them! Illusory Superiority bias is not a vanquished foe for most of us, and I know it takes me an effort to shut up and listen to people who know more than I do.

    A related challenge is the should you / will you divide. It’s easy enough to read MMM and say “yeah, I should totally do that!”. It’s a good deal harder to say “I will do that; let’s figure out how”. And if you are making decisions (even good ones) emotionally, it’s a lot harder to follow through when the passion’s gone. Bad decisions, though, are often self-enforcing (*cough* debt).

    So do the math, make the right decision, and stick to it, not because you think you’re smarter than the rest of the world, but because you rightly suspect that there are a LOT of SMART PEOPLE trying to TAKE YOUR MONEY in very crafty ways, and you had better make careful, thoughtful, logical decisions about how to stop them from doing that!

  • Jeff June 24, 2013, 2:14 pm

    I think the nitpickers on the biking safety article were less about fuzzy math and more about fuzzy logic. Estimates are great but only if done logically.

  • Derek | MoneyAhoy.com June 24, 2013, 2:26 pm


    Great article. The folks nitpicking the math are missing the forest for the trees!

    I find that people so often do not calculate out the TOTAL cost (including opportunity cost) like you practice here. This causes them to make stupid decisions time and time again.

    If you do not train yourself to think in this mode, you will almost never get to be FI!

  • Iforonwy June 24, 2013, 3:24 pm

    This post reminded me of the tale of how when Mrs Einstein was shown the mind-numbing number crunching that a super-duper computer could do she remarked:- How wonderful, my Albert could work it all out on the back of an envelope (or napkin if he had one to hand).

    I have never been very good at maths but have always been able to understand the Mr Micawber approach.

  • Ivan June 24, 2013, 3:42 pm

    Great post! As a fellow engineer, I love your mix of fuzzy and not-so-fuzzy logic!

    It’s funny how some people love to nitpick the details to death. I guess these people are just scared to take action. More likely than not, they are unhappy with their lives, and they resent you for calling them out on doing something about it.

    So instead of taking action, they try to poke holes in your arguments just so they can feel a little bit better about themselves.

    The ironic thing is, it’s this behavior of not taking action – and not any particular piece of math or advice – that’s really holding them back.

  • Frequent Traveler June 24, 2013, 4:46 pm

    Per use calculation: I always tell my friends how expensive skiing is and how if you had to pay cash on a per-use/per run basis every time based on all-in costs of transport, gear, lift tickets it would kill the industry.

    Nonetheless—I love it!

  • CashRebel June 24, 2013, 4:47 pm

    I love ballpark estimates. They are always surprisingly accurate. I recently guessed within 3%a the population of Toronto just based on speculation about other cities. Folks freak out when you tell them that there’s only 50 weeks in a year, but it just makes for easier math.

  • Kristin June 24, 2013, 4:59 pm

    Your blog and ideas are fantastic! My husband is an engineer and has never been able to convey his financial ideas (similar to yours) to me in a way that got me fired up! I’m a total fuzzy math person. Thanks to finding your website our marriage has never been better because we are finally on the same page! Mustachianism rocks!!

  • RetiredAt63 June 24, 2013, 6:05 pm

    Ballpark estimates can be surprisingly accurate. Years ago my Dad asked me to guess his income (we were talking about retirement) and I came so close he thought I had been snooping in his desk! No, I had just considered all his expenses, roughly, plus a bit of cushion. He was an engineer, of course there was a cushion ;-)

    I am a biologist (so science yes, engineer no) but I love statistics. Most people don’t, including my statistics students. For those who only consider what they see, not what they don’t see, they should study stats, specifically the Poisson distribution. It looks at the situations where you see the events that did occur but not those that didn’t but could have – a radioactive atom did or didn’t decay while you were looking, a squirrel did or did not get across the road safely – you only see the dead bodies, not the ones that made it, the seeds that did or didn’t germinate this spring, you only see those that did. Totally can change one’s world view. But fear of stats is worse than fear of math in general. Sigh.

    • MilwaukeeMN June 27, 2013, 2:45 pm

      Very interesting how you could estimate so close. I’ve had the experience, and probably other MMM followers as well, well I tell people how much I annually put aside they over-estimate my income by 2x-4x. I wish I made that much! I would have retired already. Goal is in 10 more years, give or take.

  • Rich M June 24, 2013, 6:12 pm

    MMM, Maybe you should express your numbers in dB, What’s a few dB between friends? At least the engineers would notice. Oh wait, are the engineers the ones nit picking or the accountants?

    I hope most get what back of the napkin really means…or the envelop.

  • Mike Stankavich June 24, 2013, 6:46 pm

    It does seem that this sort of sloppy thinking and faux criticism is resistance against and denial of the obvious answers. Chasing ephemeral shortcuts and ignoring reality is a poor substitute for accepting the way things are.

    I see the same sort of disconnect in health and fitness. People who are 50 pounds overweight and drive their plushy-tushy SUV every time they set foot out the door get involved in long discussions over which supplement will produce 5% greater weight loss or which late night infomercial exercise program will make them lose weight 3% faster. Sheez. Just eat real food and move.

    Far better to get out there and do something even if it’s suboptimal, rather than endlessly optimizing unrealized good intentions.

  • Mike Stankavich June 24, 2013, 6:55 pm

    I would guess that dedicated Mustachians know this already, but for any who don’t, edmunds.com has a nice feature to calculate the total cost of owning a vehicle. Check out http://www.edmunds.com/tco.html. While they assume that you will finance and factor in an interest expense, I would submit that their interest expense is a reasonable proxy for foregone investment income.

    According to Edmunds, neighbor Bob will spend $45,767 over 5 years to own that F-150.

  • Luis June 24, 2013, 7:03 pm


    You were quoted in a CNN Money article today. Congrats!

  • Joe June 24, 2013, 7:42 pm

    Honestly, I think if you put forth math so airtight it could land a craft on the moon, critics would still find a way to (in their minds) debunk it. To me, the problem has nothing to do with math. It’s simply lack of ownership in one’s own path. It’s easier to blame external forces and most people will violently recoil from anything that forces them to look in the mirror. It’s the same reason people blame our degrading health on companies like McDonald’s. They market to kids, right? Who cares? How many six year olds are riding their bikes to McDonalds with their change jar to buy one? Some “adult” is doing it. But, it is easier to blame a faceless corporation for their ills than to blame themselves.

  • Jr June 24, 2013, 8:32 pm

    Well I had a nice big data example for the new bike I purchased to start my trip to mustache badassity, but I realized I would just be repeating a lot of your fuzzy math. Needless to say after realizing all the benefits and finally being in a position to implement them I am happy to say both me and my wife are now on a bike path to badassity!
    MM, during our cross country we had the fortune to stop in both Colorado Springs and the Denver area to visit friends and must say we fell in love with the area. You may see us a bit down the street “philosophically speaking” in 4 or 5 years.
    Keep up the posts!

  • Amy June 24, 2013, 8:55 pm

    OMG, thank you for this post. I can’t tell you how many people say that my husband and I can’t possibly afford to live on our income, yet here we are! Living like crazy! The sum of my financial knowledge is “try not to spend any money.” It can’t really be that easy, right? Yes, really, it is.

  • Geek June 24, 2013, 9:29 pm

    I have said very similar to Mr. Geek in the past, a SWAG has errors in both directions, and as long as you’re being somewhat reasonable, it’s way more accurate than you think!

    And Sawyer isn’t the only one who still needs a motivational kick in the pants. I have been feeling money-spend-hedonistic (vs. your life is way more comfortable than kings even 100 years ago hedonistic) lately. There’s no logic to it! Spending money will not make anything better. Sigh.


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