Pipedream or Reality Retiring at 30

His name is Pete. He lives in Longmont, Colorado. And, eight years ago, he and his wife retired at age 30.

He now blogs about finance and lifestyle at Mr. Money Mustache for 400,000 unique visitors a month. Because he’s anonymous, he says that his blog is now popular enough — garnering 37 million page views since its founding in April 2011 — that people mention it in conversation with him without knowing he’s the author.

A few gems of his financial philosophy: Having debt is like being in “a rickety train speeding along the rails towards a broken bridge over the Grand Canyon. Buying anything beyond groceries and rent in this condition is like sitting in that train ordering yourself a fourth cup of tea on credit.”

He calls bikes the money-printing fountain of youth. He calls nature free entertainment. He says happiness does not come from indulging in luxury products, but from challenging yourself and growing personally. In fact, right now, he is in the process of downsizing his already frugal life to live in a house that is 1,000 square ft. smaller than his current one.

I asked him how he accomplished his early-retirement goal — one key was saving more than half of his salary – and how others can retire early too.

Out of all the many things you did to be able to retire early, what was the key to getting there?

The maintechnique to amassing lots of money is: Buy less stuff. As a specific tactic, the biggest single trick was probably choosing to live within biking distance of work, and drive less in general. Unnecessary driving burns up way more of most people’s incomes than they realize.

It helps to think of recurring expenses not on an individual basis, but over a 10-year period, taking into account how much they would earn if invested instead of spent. So a couple who each have a 20-mile commute is not spending “a few bucks on gas,” but rather about $150,000 in car-related costs every ten years, compared to living close to work and biking or walking instead of driving. And that is before taking into account the value of the time wasted in the car. With that in mind, a commute like that really burns at least $300,000 per decade. Car commuting alone really can make the difference between “broke” and “millionaire” within a single working career.

Similarly, a $100 per week restaurant habit is $75,000 every ten years with compounding, bringing your lunch to work alone is at least $30,000, and even the lowly old Starbucks latte habit adds up to more than the price of a luxury car every decade. For a quick shortcut to this: Multiply any weekly expense by 752 to get the cost to you every decade. You can calculate this stuff yourself by entering the series of expenses into a future value calculator.

How and why did retiring early become your goal? And was age 30 the target, or was an amount of money the target?

As my wife and I began to think about starting a family in our mid-20s, we realized that our careers were going to conflict with our desire to be good parents. We decided it would be ideal if we could quit our jobs before we had the first child. This kicked off a savings frenzy. We were already in the habit of not buying new cars, biking to work occasionally, and cooking food at home. But once we realized the power of these measures, we started doing them more. And we stopped the “Oh, that would look really nice in the living room” type of impulse shopping.

At the time that you were working toward retiring early, did you feel that you were scrimping or that sticking to your budget was hard? If so, did you give in to temptation or overcome it? If the latter, how did you stay so disciplined?

We’ve always felt like we live with embarrassing decadence, and still do. This country is one of the fanciest, most luxurious places on Earth, so even living slightly below what everyone else is spending is still a pretty fine place to be. The key is to remind yourself of how good you have it, rather than imagining that you are missing out on something because your car only has four cylinders instead of eight.

What were the things you were still able to do or buy with this budget that might surprise readers?

In the early years, we still lived in a great house, had two cars and a fancy motorcycle, and traveled plenty. Now we have even nicer material stuff including a 2,600-square-foot house, and we spend three months of the year traveling. We eat luxurious organic food of all types and buy whatever we want. We just happen to want a bit less so the family’s annual spending ends up around $25,000 each year these days.

How did you manage the social awkwardness of not wanting to do things that your friends would do because you didn’t want to spend the money? Did they consider you cheap? If so, did it create any tiffs?

We generally did the same things as our friends — hosting parties, camping and mountain bike rides, snowboarding, and working a lot. The difference was mainly in hidden wastes — I would keep my older car instead of upgrading to a new one bought on credit. Maybe light up the fireplace at home on Friday night and pour some wine rather than going downtown for expensive drinks. Cut my own lawn instead of hiring a service company. Things like that can easily chop your spending in half.

You talk about how your initial savings of $4,000 a month became $7,000 a month in a few years. How does that math work?

As a young person gets the hang of living an efficient lifestyle, things improve each year: Your income goes up, but your spending drops as you become better attuned to less materialistic living. On top of that, your investments grow. So if you save $50,000 in the first year and earn 5% annual returns on that, the next year that chunk is adding $2,500 to your annual income, and so on.

How did the great recession five years ago affect your plan? By then, you had already been retired for three years. Were you worried that you would have to go back to work?

A recession doesn’t affect a retiree living on a portfolio of index funds nearly as much as the newspaper headlines would have you believe. In 2008, the dividend yield of the S&P500 dropped much less than the ticker price, which kept some of the cashflow intact. On top of that, most retirees have a portion of their savings in bonds which also provide steady income and serve as a counterweight to fluctuating stocks. In my case, I also had a couple of rental houses at the time, and the rent payments remained uninterrupted.

And recessions are short: If you keep your spending in check for that year or two of lower stock prices and reinvest any spare money, you will often come out wealthier than when you went in.

Why did you decide to downsize your home?

As a challenge to become a bit less materialistic and consume a slightly smaller piece of the Earth. And as a great project for myself, because of the aforementioned love for building things. My goal is to make the new house far more pleasant to live in than the current one, even though it has about 1,000 square feet less floor space.

 What’s your philosophy on living in a big city?

It’s something people should evaluate and not just assume has to be done. Unless you work in a specialized field and earn a six-figure salary, you probably don’t need to be in a high-cost-of-living city to accomplish it. The majority of people living in big cities don’t have to live there to do the kind of work they’re doing. They’re doing support work for the primary industries.

In contrast, during a recent trip I met with a few blog readers in Omaha. Some of them were earning New-York-style salaries, like $200,000 a year, and yet living in an area where you can get a 3-bedroom house for under $100,000 and a beer downtown for $2. This is the perfect example of questioning the old idea of expensive-city living being a necessity.

Only enough to cover the next round of automatic bill payments. I keep everything else invested. You can always sell your investments if you need cash for emergencies.

But the traditional personal finance advice of the “emergency fund” is still reasonable advice for people just starting out, who don’t yet have a base of investments. You need to be able to cover unexpected expenses without going into debt.

How does your philosophy of happiness tie in with your financial advice and way of life?

The idea that material luxury, beyond having your basic needs met, has almost nothing to do with happiness is life-changing. It allows you to live equally happily on almost any level of spending, which obviously does wonders for your savings rate. But it also does wonders for your happiness, because as soon as you let go of the handles of the consumer treadmill, you are free to move on to activities that actually make your life better.

People would be much better off if they started getting excited about how much they can accomplish with the money they already earn, rather than fretting about how difficult things are in modern life. The key lies in optimizing spending — it is only after you do that, that additional income can be efficiently put to use.

Since you’ve started your blog, what are some of your favorite tips from readers?

Readers have introduced me to:

  • low-carb eating through Mark’s Daily Apple and Tim Ferriss-style exercise, which made me healthier
  • much lower cost mobile phone plans, such as the Republic Wireless $19 unlimited-everything smartphone plan and menu-based ones like Ting
  • more efficient investing (William Bernstein’s The Four Pillars of Investing) and more about stock fundamentals and dividends
  • philosophy (Stoicism, Buddhism, and being happy in general). Books included Guide to the Good Life, The Art of Stoic Joy, and the Art of Happiness with the Dalai Lama

Is there anything else I didn’t ask you that you’d like to say?

The one thing that nobody has asked me is why the blog exists and how I think it might accomplish the mission.

It’s really a way of re-teaching some of the greatest past wisdom of human civilization — stuff that has been lost in the consumer rush of the latest decades. Sure, it’s lots of fun to become wealthy and quit your job and be free to do whatever you like. But if we can re-learn these lessons about what happiness really means, we will all be a lot richer and healthier for it.

However, this mission involves changing the culture of the whole rich world. So we need a financial superhero to function as the leader of the movement, and an unstoppable cult-like and ever-growing body of devotees to share it. So far, so good.


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