Author Topic: MMM 2016 Budget  (Read 42901 times)

obstinate

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MMM 2016 Budget
« on: May 20, 2017, 08:24:20 AM »
MMM just posted the family's 2016 budget. When this happened last year, a big thread started where a surprising number of people predicted an immediate end to his frugalness and basically implied that the whole deal was a fraud. Since his spending hasn't really increased very much, doom is still very much impending, and carping is still deeply needed. So I figured I'd get the ball rolling. Let's all come up with excuses on how MMM isn't legit frugal this year!

The thread already has a good bit about how he's not including his imputed rent, so I won't go that route. Instead, I'll start the complaining off by observing that if he were working a full time job, it'd be completely impossible for him to find the time to save (e.g. by going to Sam's Club)! Et tu, MMM????
« Last Edit: May 20, 2017, 08:33:56 AM by obstinate »

surfhb

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Re: MMM 2016 Budget
« Reply #1 on: May 20, 2017, 08:53:21 AM »
I guess I'll assume you're being sarcastic?   

My first reaction is Who Cares?   He created a well written blog and are changing the ways people think about money and living.   All this while backing up his shit.

I feel pretty good about my own spending habits.   I spend about the same living in Los Angeles, with a FT job. 


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Moonwaves

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Re: MMM 2016 Budget
« Reply #2 on: May 20, 2017, 12:51:38 PM »
I only read that thread from last year because he mentioned it in his post. I thought that his adding in a bit more about business expenses was a way of dealing with some of the comments. In particular when he mentioned that both he and Mrs. MMM end up spending money on business stuff or travelling for business and that that probably satisfies any desire for spending/travelling, whereas if they weren't doing so for business, they might end up spending/travelling a bit more for personal fun. As always, I feel like he is as genuine and up-front as he seems to be.

Liked the shout-out for Quiet as well. That book made a big difference to me when I read it.

brooklynmoney

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Re: MMM 2016 Budget
« Reply #3 on: May 20, 2017, 01:40:58 PM »
I just feel shame since I spend 60k for 1 person. He's still badass in my book.

FI4good

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Re: MMM 2016 Budget
« Reply #4 on: May 20, 2017, 02:50:04 PM »
A great successful blog he could drive a brand new tesla and i'd not think bad of him.

I'd worry on a certain level if he got too far away from the nice folksy canadian guy who started this thing , burning round in an F40 and posting photos of a house like one in "the queen of versailles"  or spending money like water.

He seems ok tho'

Aggie1999

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Re: MMM 2016 Budget
« Reply #5 on: May 20, 2017, 06:57:29 PM »
Couple critique comments:

- I don't see where he is including Colorado state income tax. IMO he needs to include that since property tax rates are very much tied whether a state has state income tax. He could certainly move to a state without state income tax so that's an optional expense in my book. Some how the state income tax should be expressed in an amount a normal early retiree would pay from investment income in Colorado.

- No home owners insurance which to the best of my knowledge means no umbrella type insurance policy. IMO, not a good thing given his wealth and future wealth.

Chris22

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Re: MMM 2016 Budget
« Reply #6 on: May 20, 2017, 08:00:06 PM »
He bought (financed) a Leaf.  Not including those payments is a pretty big omission in my opinion.  Claiming it was bought for the blog and advocacy doesn't excuse that IMO.
"If I could get all the money back I ever spent on cars, I'd spend it on cars." - Nick Mason

AdrianC

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Re: MMM 2016 Budget
« Reply #7 on: May 20, 2017, 08:42:11 PM »
I appreciate MMM sharing his families' spending. It is interesting to compare.

Here's a few large expense items for us that are missing from MMMs:
- Kids sporting activities - gymnastics, tae kwon do, soccer, swimming.
- Kids music lessons, instrument rental.
- Transport of kids to activities.
- Visiting elderly relatives and helping with doctors appointments, errands, etc.
- Subsequently much higher vehicle costs.
- College savings.
- Vacations (he include flights only - no other expenses?)

Not intended as criticism. We have a different lifestyle. More middle class "normal", I guess.


Hotstreak

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Re: MMM 2016 Budget
« Reply #8 on: May 20, 2017, 09:09:01 PM »
He bought (financed) a Leaf.  Not including those payments is a pretty big omission in my opinion.  Claiming it was bought for the blog and advocacy doesn't excuse that IMO.


He states the full purchase price in the footnotes, so I don't think he really omitted it, and considering the low balance and rate it doesn't seem particularly material.

EscapeVelocity2020

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Re: MMM 2016 Budget
« Reply #9 on: May 20, 2017, 11:05:37 PM »
Not that it really matters, but MMM's budget is very luxurious if you dig into the real cashflow (not walling off the business expenses like none of it actually happens).  He should definitely include his imputed home income, because these last 9 years have been significantly more optimal to carry a mortgage and keep money in index funds - so that's 46k core spending last year.  Plus 30k for the home office (although he will get some of it back if he eventually sells, but he's enjoying it now and it depreciates) and 14k for his car experiment.  Add in some 4k for travel, although it's probably higher if he included all of the lodging and incidentals.  Then there should be something for getting his wife's business off the ground (he never accounted for this expense previously, but it was probably negative cash flow the first year).  He also seems to enjoy helping renovate homes, which sucks up capital (tools, material, labor) unless he is cashing out, but he doesn't talk about the finances involved in this 'hobby'. 

So, bottom line, I would call his spending to be more like 100k last year, just on a cash flow basis.  Of course, he makes plenty on the blog to cover this and has plenty in investments, along with all his assets.  He can easily cut back to 25k, but why bother if you have a 400k/yr income and spending the business income helps make more...  He's a smart businessman, but not necessarily a traditional retiree that happened to do it 30+ years earlier.   
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Laserjet3051

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Re: MMM 2016 Budget
« Reply #10 on: May 21, 2017, 10:35:19 AM »
He bought (financed) a Leaf.  Not including those payments is a pretty big omission in my opinion.  Claiming it was bought for the blog and advocacy doesn't excuse that IMO.


He states the full purchase price in the footnotes, so I don't think he really omitted it, and considering the low balance and rate it doesn't seem particularly material.

I too wondered where the Leaf cost showed up in his itemized budget. Thank you for letting me know where to find the buried value. Is there a reason why this cost did not appear in his line item budget and why it doesnt contribute to the total computed annual 2016 expense? I bought a car this year to use for my business, should I also be burying this cost and obscuring it from my family by a similar means?

Gondolin

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Re: MMM 2016 Budget
« Reply #11 on: May 21, 2017, 10:57:16 AM »
At this point I am a part of this community to follow the journey of other FIRE people who - though probably inspired by MMM - are doing it without the backstop of $300k /year income.

Doesn't mean the shockingly simple math is wrong, just that MMM's own financial picture is so warped by the blog income that it no longer serves as a relatable guide.
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soupcxan

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Re: MMM 2016 Budget
« Reply #12 on: May 21, 2017, 11:35:59 AM »
It's a shame he diminishes his credibility by choosing to omit so many expenses through his creative accounting. Makes comparisons to normal people meaningless.

former player

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Re: MMM 2016 Budget
« Reply #13 on: May 21, 2017, 11:43:14 AM »
One thing I think his budget does prove is the benefit of having capital resources.  The paid-for house, car, home office, bikes, tools and so on, and the ability to cash-flow bulk groceries, are what allow the revenue expenses to be low.  The converse helps to explain how expensive it is to be poor.

So I think his budget numbers are fine, but just need to be put in context.
Be frugal and industrious, and you will be free (Ben Franklin)

TomTX

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Re: MMM 2016 Budget
« Reply #14 on: May 21, 2017, 11:49:16 AM »
He bought (financed) a Leaf.  Not including those payments is a pretty big omission in my opinion.  Claiming it was bought for the blog and advocacy doesn't excuse that IMO.


He states the full purchase price in the footnotes, so I don't think he really omitted it, and considering the low balance and rate it doesn't seem particularly material.

I too wondered where the Leaf cost showed up in his itemized budget. Thank you for letting me know where to find the buried value. Is there a reason why this cost did not appear in his line item budget and why it doesnt contribute to the total computed annual 2016 expense? I bought a car this year to use for my business, should I also be burying this cost and obscuring it from my family by a similar means?

It looks like the net cost of the Leaf was $5k ($14,000 spent, offset by $9,000 received for the Scion)
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zarfus

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Re: MMM 2016 Budget
« Reply #15 on: May 21, 2017, 12:28:57 PM »
I dunno, people would have complained if he didn't post it, and complained that he did. If anything, his current lifestyle should just be an example of what can come when you have financial Independence. Look how much money he made just doing what he believes.

In my opinion, he just threw that post out there to please the nay-sayers, I'm sure he wishes he could be a little less transparent this stage of the game. He did it and shared his journey with us. I'm guessing you are all here because you were at least a little inspired, just be grateful.

FinallyAwake

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Re: MMM 2016 Budget
« Reply #16 on: May 21, 2017, 12:39:17 PM »
At this point I am a part of this community to follow the journey of other FIRE people who - though probably inspired by MMM - are doing it without the backstop of $300k /year income.

Doesn't mean the shockingly simple math is wrong, just that MMM's own financial picture is so warped by the blog income that it no longer serves as a relatable guide.

+1

Chris22

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Re: MMM 2016 Budget
« Reply #17 on: May 21, 2017, 12:58:42 PM »
He bought (financed) a Leaf.  Not including those payments is a pretty big omission in my opinion.  Claiming it was bought for the blog and advocacy doesn't excuse that IMO.


He states the full purchase price in the footnotes, so I don't think he really omitted it, and considering the low balance and rate it doesn't seem particularly material.

I too wondered where the Leaf cost showed up in his itemized budget. Thank you for letting me know where to find the buried value. Is there a reason why this cost did not appear in his line item budget and why it doesnt contribute to the total computed annual 2016 expense? I bought a car this year to use for my business, should I also be burying this cost and obscuring it from my family by a similar means?

It looks like the net cost of the Leaf was $5k ($14,000 spent, offset by $9,000 received for the Scion)

"This was $9000 more than I got for selling the Scion..." since total cost was $14k, Scion was sold for $5k, $9k cost to MMM.
"If I could get all the money back I ever spent on cars, I'd spend it on cars." - Nick Mason

Cassie

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Re: MMM 2016 Budget
« Reply #18 on: May 21, 2017, 04:57:46 PM »
Overall, he has inspired people to reduce their expenses which is good. However, he did spend 98k last year.

undercover

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Re: MMM 2016 Budget
« Reply #19 on: May 21, 2017, 05:03:52 PM »
I'm not sure where MMM claimed to be the king of frugality that warrants all the speculation and naysaying. He freely admits to living a luxurious life of excess. Nitpicking by trying to include opportunity costs into his spending is just ridiculous.

Sure if he started splurging on restaurants and expensive travel then his credibility would go down a bit. That would make it obvious that he doesn't practice what he preaches, which is a big part of the blog since he is the face of it. But I don't get the impression at all that he's not at least somewhat authentic. He's obviously business-minded and I think that he just tries to incorporate a way of making money into everything he does for the added security it affords his days of not working. His blog is based on ideals, facts, truisms, and basically no more than a framework on how to live a purposeful life.
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tyort1

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Re: MMM 2016 Budget
« Reply #20 on: May 21, 2017, 05:06:39 PM »
To me, MMM is really about reaching FIRE.  After you've built wealth and are FI?  Well, do whatever you want, you've made it.  Where is it written that one must never spend money, especially after FI?
Frugalite in training.

EnjoyIt

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Re: MMM 2016 Budget
« Reply #21 on: May 21, 2017, 06:31:13 PM »
Overall, he has inspired people to reduce their expenses which is good. However, he did spend 98k last year.

How did you come up with that figure?

TryingtoFIREinNYC

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Re: MMM 2016 Budget
« Reply #22 on: May 21, 2017, 06:52:53 PM »
The thread already has a good bit about how he's not including his imputed rent, so I won't go that route. Instead, I'll start the complaining off by observing that if he were working a full time job, it'd be completely impossible for him to find the time to save (e.g. by going to Sam's Club)! Et tu, MMM????

I thought the OP here was just going for some good ol' fashioned face punching sarcasm? 

I'll take it back there by noting my first response to the budget breakdown (pun intended)- $3,000 for doctor's bills for a child's broken arm???!!!  A little frugality, internet research, elbow grease and DIY splintwork and I'm sure the OLD MMM could have saved that money (and maybe it might have inspired a new article: Frugal Home Medical Care!)  He's sure gotten lazy what with all this blog income. 

Probably DROVE the poor little chap to the hospital in that fancypants LEAF instead of biking......

nottoolatetostart

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Re: MMM 2016 Budget
« Reply #23 on: May 22, 2017, 03:05:27 AM »
I dunno, people would have complained if he didn't post it, and complained that he did. If anything, his current lifestyle should just be an example of what can come when you have financial Independence. Look how much money he made just doing what he believes.

In my opinion, he just threw that post out there to please the nay-sayers, I'm sure he wishes he could be a little less transparent this stage of the game. He did it and shared his journey with us. I'm guessing you are all here because you were at least a little inspired, just be grateful.

+1

I also don't think he cares to be bothered with tracking this. Surprisingly, he did include things all the naysayers complain about (the leaf, his shed, travel), which I found to be funny.

I am grateful he just keeps site going...even last week his article on plumbing and Sharkbites saved me some solid Benjamins vs calling a plumber. It's all legit, in my book.

Moustachienne

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Re: MMM 2016 Budget
« Reply #24 on: May 22, 2017, 09:11:12 AM »
Not saying MMM is Jesus or anything but these budget critiques always remind me of the Grand Inquisitor in The Brothers K.  Something about the 'true' religion turning on its founder...
https://en.m.wikipedia.org/wiki/The_Grand_Inquisitor

Or maybe more like the Terreur of the French Revolution guillotining Robespierre and others for insufficient purity/ loyalty.
https://en.m.wikipedia.org/wiki/Reign_of_Terror

If we didn't put someone on a pedestal, we wouldn't have to tear them down....

nmoerbeek

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Re: MMM 2016 Budget
« Reply #25 on: May 22, 2017, 10:24:02 AM »
Not saying MMM is Jesus or anything but these budget critiques always remind me of the Grand Inquisitor in The Brothers K.  Something about the 'true' religion turning on its founder...
https://en.m.wikipedia.org/wiki/The_Grand_Inquisitor

Or maybe more like the Terreur of the French Revolution guillotining Robespierre and others for insufficient purity/ loyalty.
https://en.m.wikipedia.org/wiki/Reign_of_Terror

If we didn't put someone on a pedestal, we wouldn't have to tear them down....

Robespierre and crew where evil and got a just punishment for their deeds.   

intellectsucks

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Re: MMM 2016 Budget
« Reply #26 on: May 22, 2017, 10:29:35 AM »
I definitely have a problem with the 2016 spending article, especially the effect it will have on newcomers to the site.  MMM states or implies often that you can live frugally and still have the “good life” but seems to have trouble relating to the huge impact that some of his “business expenses” make to perceived and actual quality of life.  There is a big, quantifiable difference between having a giant, badass Man-cave/office, and staring at your backyard wishing you had one but not being able to drop 20-30 grand on it.  There is a big, quantifiable difference between vacationing at the local park or free museums, and flying out to LA and Ecuador for a week or two.  Same thing with having a brand new electric car vs having an old Ford POS that may or may not break down the next time you start it.
If I’m new to MMM and I know he dropped $30k on a brand new out-building, then look and see his total spending is listed as $30k FOR EVERYTHING FOR THE WHOLE YEAR, it makes me think the whole thing is bogus.  I don’t care how much his homes value increases because of it, he SPENT that money on that shed.  Same thing for the travel expenses and the Nissan.  “Oh we live such a simple lifestyle….except when we’re flying around the country and world a few times a year and buying brand new cars”.  I get it; MMM is in the position now to do these things because he put in all the hard work before.  He spent years and decades living as frugally as possible to get to where he is.  It’s just that this spending article seems like he’s trying to hide those expenses.  I don’t know if the footnotes at the bottom of the article are enough, or if some of the articles detail those expenses clearly enough. 
Take the etsy shop; the footnotes details 20 grand in materials and shipping.  How much of this was upfront?  How long did it take to recoup those costs?  Are those costs likely to be steady year after year or will future expenses likely be much lower?  After I read the etsy article, I asked my wife (who isn’t working) if she’d be interested in doing something similar as a fun way to earn extra income because the article made it seem like a fairly easy, low cost way to bootstrap yourself into some business income.  If it’s going to cost us 20 grand to get started, then forget it.
I’ve been pretty disappointed with a few of MMM’s articles in the last year or so.  It really started with “Lessons Learned From Having My Bike Stolen”.  The lesson I learned is that it’s really awesome to be a millionaire, internationally famous blogger who lives in an awesome suburb of a major U.S. city; because if I left my bike outside overnight in my neighborhood, odds are high that it wouldn’t be there in the morning.  “1400 Miles of Non-Driving in a Tesla”, “Notes on Doing Something Ridiculously Difficult” and, to a lesser extent, “A DIY Case Study: Building a Fancypants Detached Studio” are all examples of articles that hit me in the same way.
I really wish that MMM would more strongly link the frugality of years past with the ability to do the awesome things that he is doing now, instead of playing games with his accounting.

Chris22

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Re: MMM 2016 Budget
« Reply #27 on: May 22, 2017, 10:32:04 AM »
Not saying MMM is Jesus or anything but these budget critiques always remind me of the Grand Inquisitor in The Brothers K.  Something about the 'true' religion turning on its founder...
https://en.m.wikipedia.org/wiki/The_Grand_Inquisitor

Or maybe more like the Terreur of the French Revolution guillotining Robespierre and others for insufficient purity/ loyalty.
https://en.m.wikipedia.org/wiki/Reign_of_Terror

If we didn't put someone on a pedestal, we wouldn't have to tear them down....

It rubs me the wrong way when someone screams A LOT "I live a hyper-luxurious life for $25k/yr!!!" and then admits in the footnotes that a lot of what makes the life hyper-luxurious (travel, new car, fancy home improvements) is not counted in that $25k/yr.  MMM is obviously free to spend whatever he wants, and I don't begrudge him any of it, but that doesn't mean I won't throw the BS flag when he uses accounting tricks to disguise a lot of his spending.  It's a shame, because I think a lot of his luxurious spending is done on the cheap in intelligent ways (DIY, looking for arbitrage on purchases, etc) and is a model for how to live well inexpensively but it cheapens the message when he just fails to account for it because "it's a business expense" or whatever. 

I think it would be more instructive to do a side by side on what he spent (all of it) and then a list of what others might pay to live the same way less intelligently (i.e., "MMM workshop, DIY, $30k....Normal person workshop, paid contractor, $80k").  THAT would be a comparison worth reading.
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intellectsucks

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Re: MMM 2016 Budget
« Reply #28 on: May 22, 2017, 10:56:31 AM »
Thanks for saying what I wanted to say much more clearly and concisely!!!
Not saying MMM is Jesus or anything but these budget critiques always remind me of the Grand Inquisitor in The Brothers K.  Something about the 'true' religion turning on its founder...
https://en.m.wikipedia.org/wiki/The_Grand_Inquisitor

Or maybe more like the Terreur of the French Revolution guillotining Robespierre and others for insufficient purity/ loyalty.
https://en.m.wikipedia.org/wiki/Reign_of_Terror

If we didn't put someone on a pedestal, we wouldn't have to tear them down....

It rubs me the wrong way when someone screams A LOT "I live a hyper-luxurious life for $25k/yr!!!" and then admits in the footnotes that a lot of what makes the life hyper-luxurious (travel, new car, fancy home improvements) is not counted in that $25k/yr.  MMM is obviously free to spend whatever he wants, and I don't begrudge him any of it, but that doesn't mean I won't throw the BS flag when he uses accounting tricks to disguise a lot of his spending.  It's a shame, because I think a lot of his luxurious spending is done on the cheap in intelligent ways (DIY, looking for arbitrage on purchases, etc) and is a model for how to live well inexpensively but it cheapens the message when he just fails to account for it because "it's a business expense" or whatever. 

I think it would be more instructive to do a side by side on what he spent (all of it) and then a list of what others might pay to live the same way less intelligently (i.e., "MMM workshop, DIY, $30k....Normal person workshop, paid contractor, $80k").  THAT would be a comparison worth reading.

Moustachienne

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Re: MMM 2016 Budget
« Reply #29 on: May 22, 2017, 10:56:51 AM »
MMM lived frugally and worked hard so he could retire and live frugally and work hard AT WORK OF HIS CHOOSING.  That's what I take away from MMM. Living smart to earn the freedom of choice. And if you choose to work, you just might make some money. 

The fact that he's now making so much money is an interesting twist.  Kind of like the challenge the 19 century Quakers faced.  (Cadbury, Rowntree, Lloyds, Fry). The simple life plus hard work ended up making them rich.  Some held to ideals; others not so much.

I think MMM is doing well on this front but I don't have any absolute ideals I'm holding him to. It's his life and I have mine.

Would his budget confuse a newbie?  MMM spends less than he earns and lives a good life.  Everyone has to set those levels for themselves but the inspiration is the same.

Can we all have MMM's life?  Nope, but we can have our own version.


Laura33

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Re: MMM 2016 Budget
« Reply #30 on: May 22, 2017, 11:38:46 AM »
Eh, I thought it was a good article.  He pretty clearly labeled the breakdown as the "basic" expenses associated with maintaining his current lifestyle.  He's just in a sweet spot where his retirement hobby is a business that makes a ton of money, thus allowing him to buy things and expense them in the interest of research.  But all that stuff is optional and could go away if the business did -- and he even (fairly) acknowledges that this might displace some of the desire for travel/stuff he might otherwise have.  IDK, I really don't know many people at his level of income who still maintain his type of lifestyle.

It is an interesting corollary, but my mom just retired from teaching after almost 40 years.  Except she still has her second job, a/k/a the consulting company that she co-founded probably 10 years ago and that makes her more than teaching ever did.  And, like MMM, this is her hobby -- she loves what she does and will do it until she dies.  She cracks me up, because she was telling me that her expenses last year were $30K -- most of which is taxes/utilities on three properties.  It is absolutely, completely true that she has a travel bug, and that her business satisfies a lot of that need (she travels almost every week).  So in the absolute sense, she actually spent a lot more than that on flights, hotels, and restaurant meals.  On the other hand, those expenses are a necessary investment to earn a low-but-multiple-six-figures net profit, and if she shut down her business tomorrow, all those costs would go away -- sure, without the job, she'd probably travel more frequently for personal vacations than she does now, because the business travel scratches the itch, but there's just flat-out no way she'd travel or eat out *that* much.  And when she's home, she's puttering around the house, shopping at the Asian market, working in the garden, and basically still being the fundamentally frugal person she has been my whole life.  So I mean if she weren't working, she might spend $40K vs. $30K, but I can't see her even getting up to $50K.

I get the same impression from MMM:  he seems like the same guy he has always been, just with more cash to play with.  He has fun letting the business play with it some, but he knows better to wrap that into his basic lifestyle expectations.
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Scandium

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Re: MMM 2016 Budget
« Reply #31 on: May 22, 2017, 12:00:55 PM »
Not that it really matters, but MMM's budget is very luxurious if you dig into the real cashflow (not walling off the business expenses like none of it actually happens).  He should definitely include his imputed home income, because these last 9 years have been significantly more optimal to carry a mortgage and keep money in index funds - so that's 46k core spending last year.  Plus 30k for the home office (although he will get some of it back if he eventually sells, but he's enjoying it now and it depreciates) and 14k for his car experiment.  Add in some 4k for travel, although it's probably higher if he included all of the lodging and incidentals.  Then there should be something for getting his wife's business off the ground (he never accounted for this expense previously, but it was probably negative cash flow the first year).  He also seems to enjoy helping renovate homes, which sucks up capital (tools, material, labor) unless he is cashing out, but he doesn't talk about the finances involved in this 'hobby'. 

So, bottom line, I would call his spending to be more like 100k last year, just on a cash flow basis.  Of course, he makes plenty on the blog to cover this and has plenty in investments, along with all his assets.  He can easily cut back to 25k, but why bother if you have a 400k/yr income and spending the business income helps make more...  He's a smart businessman, but not necessarily a traditional retiree that happened to do it 30+ years earlier.   

Yeah, he spent $100 on gas for a snowboard trip, and apparently barely drove the Leaf (electrical costs down)? So except one trip the family never went outside biking distance of their house? Ehh, I'm sure they had a great time being hermits, and their village looks lovely.. But personally I would not want that, my kids would miss on alot of experiences, and the grandparents would be pretty damn pissed if we never bothered to visit! Just to save a tank of gas!

I get that's his thing; truly drastic steps to save drastic amounts of money. But personally I don't bother following now because that's not the type of life my family would want. If anything I've learned that spending time with my kids now is more important than saving a few bucks so I'm actually going back on doing everything myself! (queue; "burn the heretic!"). I may only get to max the 401ks, and be 50 by the time we retire, but I think that balance works better for us.

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Re: MMM 2016 Budget
« Reply #32 on: May 22, 2017, 12:16:52 PM »
Not that it really matters, but MMM's budget is very luxurious if you dig into the real cashflow (not walling off the business expenses like none of it actually happens).  He should definitely include his imputed home income, because these last 9 years have been significantly more optimal to carry a mortgage and keep money in index funds - so that's 46k core spending last year.  Plus 30k for the home office (although he will get some of it back if he eventually sells, but he's enjoying it now and it depreciates) and 14k for his car experiment.  Add in some 4k for travel, although it's probably higher if he included all of the lodging and incidentals.  Then there should be something for getting his wife's business off the ground (he never accounted for this expense previously, but it was probably negative cash flow the first year).  He also seems to enjoy helping renovate homes, which sucks up capital (tools, material, labor) unless he is cashing out, but he doesn't talk about the finances involved in this 'hobby'. 

So, bottom line, I would call his spending to be more like 100k last year, just on a cash flow basis.  Of course, he makes plenty on the blog to cover this and has plenty in investments, along with all his assets.  He can easily cut back to 25k, but why bother if you have a 400k/yr income and spending the business income helps make more...  He's a smart businessman, but not necessarily a traditional retiree that happened to do it 30+ years earlier.   

Yeah, he spent $100 on gas for a snowboard trip, and apparently barely drove the Leaf (electrical costs down)? So except one trip the family never went outside biking distance of their house? Ehh, I'm sure they had a great time being hermits, and their village looks lovely.. But personally I would not want that, my kids would miss on alot of experiences, and the grandparents would be pretty damn pissed if we never bothered to visit! Just to save a tank of gas!

I get that's his thing; truly drastic steps to save drastic amounts of money. But personally I don't bother following now because that's not the type of life my family would want. If anything I've learned that spending time with my kids now is more important than saving a few bucks so I'm actually going back on doing everything myself! (queue; "burn the heretic!"). I may only get to max the 401ks, and be 50 by the time we retire, but I think that balance works better for us.
Er, he did include the flights for trips to Florida and Canada (twice - it's where his family is) in his costs, as well as the snowboarding trip.    So even without the business travel that's 4 separate trips/holidays in the year.  Hardly a hermit, and the grandparents visited twice.
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Re: MMM 2016 Budget
« Reply #33 on: May 22, 2017, 12:22:07 PM »
Not that it really matters, but MMM's budget is very luxurious if you dig into the real cashflow (not walling off the business expenses like none of it actually happens).  He should definitely include his imputed home income, because these last 9 years have been significantly more optimal to carry a mortgage and keep money in index funds - so that's 46k core spending last year.  Plus 30k for the home office (although he will get some of it back if he eventually sells, but he's enjoying it now and it depreciates) and 14k for his car experiment.  Add in some 4k for travel, although it's probably higher if he included all of the lodging and incidentals.  Then there should be something for getting his wife's business off the ground (he never accounted for this expense previously, but it was probably negative cash flow the first year).  He also seems to enjoy helping renovate homes, which sucks up capital (tools, material, labor) unless he is cashing out, but he doesn't talk about the finances involved in this 'hobby'. 

So, bottom line, I would call his spending to be more like 100k last year, just on a cash flow basis.  Of course, he makes plenty on the blog to cover this and has plenty in investments, along with all his assets.  He can easily cut back to 25k, but why bother if you have a 400k/yr income and spending the business income helps make more...  He's a smart businessman, but not necessarily a traditional retiree that happened to do it 30+ years earlier.   

Yeah, he spent $100 on gas for a snowboard trip, and apparently barely drove the Leaf (electrical costs down)? So except one trip the family never went outside biking distance of their house? Ehh, I'm sure they had a great time being hermits, and their village looks lovely.. But personally I would not want that, my kids would miss on alot of experiences, and the grandparents would be pretty damn pissed if we never bothered to visit! Just to save a tank of gas!

I get that's his thing; truly drastic steps to save drastic amounts of money. But personally I don't bother following now because that's not the type of life my family would want. If anything I've learned that spending time with my kids now is more important than saving a few bucks so I'm actually going back on doing everything myself! (queue; "burn the heretic!"). I may only get to max the 401ks, and be 50 by the time we retire, but I think that balance works better for us.
Er, he did include the flights for trips to Florida and Canada (twice - it's where his family is) in his costs, as well as the snowboarding trip.    So even without the business travel that's 4 separate trips/holidays in the year.  Hardly a hermit, and the grandparents visited twice.

OK, I missed that. So four times they were outside bike distance. Good for them, still not my choice

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Re: MMM 2016 Budget
« Reply #34 on: May 22, 2017, 12:51:48 PM »
One thing I think his budget does prove is the benefit of having capital resources.  The paid-for house, car, home office, bikes, tools and so on, and the ability to cash-flow bulk groceries, are what allow the revenue expenses to be low.  The converse helps to explain how expensive it is to be poor.

So I think his budget numbers are fine, but just need to be put in context.

I think this is a fair observation - it doesn't change the spending per se but if one had a fairly spendy lifestyle buying nice things and high priced houses, one could then enjoy those things for a long time with nominal expenses. 



I dunno, people would have complained if he didn't post it, and complained that he did.

Almost always a true statement for people in general.

Should include imputed rent....why is it an ongoing cost.  If he sold to rent or mortgaged is house then costs would be higher...its simple math that any body could figure out for their own budget.  Besides if he had a mortgage then the extra $200k would have been invested and that certainly would have proved better over the last several years - in that case should the extra investment returns reduce expenses? Its a valid question is it not.

I always thought he was too lax on healthcare, obviously makes it easier to handle when you have a nice income but if this would have happened before the blog blew up or back when the market was lower and he was living more on the 4% rule - how would he have felt.  That is a real issue for people (FIREd or not). 

All the extra spending is suspect to the I live awesome on $25k but at least he put it out there this year.  I also don't think some of it shouldn't be included in the year fully anyway such as for the leaf or outhouse.  I would argue that maybe that they be amortized over some period .

The other question is that is his this more reflective of his desired life or just nice extravagances that he is simply working to pay for them - kind of IRP question but if he (or I or anyone) decided that they wanted to take a nice vacation/make their house more luxurious/buy a car they don't need  - all of which are by themselves a one time expense but lets say beyond their FIRE budget and they decided to get some job or make money to pay for that one thing wouldn't that be ok.  Of course if you have many one things every year then it becomes permanent budget additions and means you are no longer FIRE'd I guess. 

There is always a lot of grey.....I replaced my HVAC last year for about $7k but I also transfer $400/month (counted in my annual spending) into a repair/replacement account for house/car/major items (such as appliances/furniture/etc.) that had built up to about $20k that I don't include in my net worth or WR calculations.  So the way I view it is I didn't spend $7k bc transferred it from the "off book" account and the spending is in my $4800 per year on average.  But I will bet some or more of you will argue this is not correct.   

Same could be said for travel - if you plan $5k per year but do a $10k trip one year and $0 in another, which do you use for your WR.....the answer is neither.  You could apply this logic to everything which is why its best to think about it when figuring your spending for FIRE - it shouldn't be your highest or lowest year, it should be a normal/average year.
« Last Edit: May 22, 2017, 12:54:59 PM by tooqk4u22 »

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Re: MMM 2016 Budget
« Reply #35 on: May 22, 2017, 01:22:03 PM »
I've never taken a $25k/yr spending limit seriously for a long term viewpoint. You can't.

I view a limited budget lifestyle as a means to an end. A way to save a bunch of money to improve your life exponentially that would take you a long time under normal savings rates. Pay off the (lower cost) house, purchase investments that make money, and use it to enhance your current life either by cutting back at work giving you more time at home, or allowing you to live a more luxurious/lavish lifestyle than you otherwise could if you had a bunch of bills. Your earned money can go toward enhancing your life vs paying off things you've purchased.

It really boils down to limited housing and limited car expenses. Follow the 80/20 rule. Focus on the 20% of your budget line items that consume 80% of your resources. Once you use your sharp pencil on those, invest the rest in assets that pay you to own them.

My wife and I recently did a week vacation in Maui for around $2,000. But it's disingenuous to say that because airfare was free (I work for an airline). That value of the airfare on that trip was roughly $11,000. We used points to offset the condo and did splurge and do a helicopter tour for $240 although we got a $200 credit from doing a 2-hour timeshare viewing.

Had we not had all these free credits it would've cost over around $14,000 for that trip.


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Re: MMM 2016 Budget
« Reply #36 on: May 22, 2017, 02:30:55 PM »
i think it is what it is.  he is showing you what could be done if you really really dont want to work at all and FIRE ASAP.  but he lives a life of luxury that most high incomers in lower COLs can relate to and picks and chooses where he spends his money.  If he had a mortgage and property taxes like i do in my area we spend about the same amount accounting for his wife's business and his traveling and buying cars and calling them work expenses. 

i mean when you see the budget it points out that this really is more for high incomers to jsut truly spend more smartly.  not to say it doesnt work at most income levels but his levels of badassity arent near what some forum members are.
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Re: MMM 2016 Budget
« Reply #37 on: May 22, 2017, 02:54:13 PM »

My wife and I recently did a week vacation in Maui for around $2,000. But it's disingenuous to say that because airfare was free (I work for an airline). That value of the airfare on that trip was roughly $11,000. We used points to offset the condo and did splurge and do a helicopter tour for $240 although we got a $200 credit from doing a 2-hour timeshare viewing.

Had we not had all these free credits it would've cost over around $14,000 for that trip.

How the hell would a one week trip to Maui cost $14,000? I'm just kind of in awe, because we spend $8-9,000/year for two people to spend several weeks a year traveling to Europe, Asia, and around Canada and the US. We don't use any kinds of points or freebies, and stay in pretty nice condos most of the time.
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Re: MMM 2016 Budget
« Reply #38 on: May 22, 2017, 03:14:38 PM »

My wife and I recently did a week vacation in Maui for around $2,000. But it's disingenuous to say that because airfare was free (I work for an airline). That value of the airfare on that trip was roughly $11,000. We used points to offset the condo and did splurge and do a helicopter tour for $240 although we got a $200 credit from doing a 2-hour timeshare viewing.

Had we not had all these free credits it would've cost over around $14,000 for that trip.

How the hell would a one week trip to Maui cost $14,000? I'm just kind of in awe, because we spend $8-9,000/year for two people to spend several weeks a year traveling to Europe, Asia, and around Canada and the US. We don't use any kinds of points or freebies, and stay in pretty nice condos most of the time.

$14k is a little high, but we did Hawaii recently and hotel rooms are ~$800/night including tax at some of the mid-level hotels (we stay at Hyatts on Kauai and Maui).  So 7 nights x $800 = $5600 plus another call it $1k/person for airfare, you're at about $8k.  Food/fun/rental car is probably another $2k for a week if you're doing some activities and eating out at least 1-2 meals a day, so that's around $10k.  Not sure where the other $4k would come from. 
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Re: MMM 2016 Budget
« Reply #39 on: May 22, 2017, 03:25:02 PM »

My wife and I recently did a week vacation in Maui for around $2,000. But it's disingenuous to say that because airfare was free (I work for an airline). That value of the airfare on that trip was roughly $11,000. We used points to offset the condo and did splurge and do a helicopter tour for $240 although we got a $200 credit from doing a 2-hour timeshare viewing.

Had we not had all these free credits it would've cost over around $14,000 for that trip.

How the hell would a one week trip to Maui cost $14,000? I'm just kind of in awe, because we spend $8-9,000/year for two people to spend several weeks a year traveling to Europe, Asia, and around Canada and the US. We don't use any kinds of points or freebies, and stay in pretty nice condos most of the time.

Did you read? Airfare was valued at roughly $11,000. We flew first class on some legs.

Also we don't stay in hostels.
« Last Edit: May 22, 2017, 03:34:57 PM by inline five »

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Re: MMM 2016 Budget
« Reply #40 on: May 22, 2017, 03:33:38 PM »
He's a smart businessman, but not necessarily a traditional retiree that happened to do it 30+ years earlier.   

I'm surprised to see a member of the Internet Retirement Police here in the MMM forum. :)

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Re: MMM 2016 Budget
« Reply #41 on: May 22, 2017, 03:55:14 PM »
He's a smart businessman, but not necessarily a traditional retiree that happened to do it 30+ years earlier.   

I'm surprised to see a member of the Internet Retirement Police here in the MMM forum. :)

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Re: MMM 2016 Budget
« Reply #42 on: May 22, 2017, 04:17:30 PM »
I would fly first class if I could fly free too. However, most normal people would not choose to spend 11k on airfare unless they were very wealthy.

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Re: MMM 2016 Budget
« Reply #43 on: May 22, 2017, 04:18:16 PM »
To me, MMM is really about reaching FIRE.  After you've built wealth and are FI?  Well, do whatever you want, you've made it.  Where is it written that one must never spend money, especially after FI?

Well, since his stated objective is to save the environment by reducing consumerism, I don't think a go-for-broke attitude post-ER is what he's promoting.
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Re: MMM 2016 Budget
« Reply #44 on: May 22, 2017, 04:23:57 PM »
I think he loves biking and is very concerned about the environment.  Both of those are great.

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Re: MMM 2016 Budget
« Reply #45 on: May 22, 2017, 04:40:28 PM »
Two areas where MMM's budgets have differed from mine:  kid activities and home repair.  If I had known 10 years ago what I know now, both of those categories would have been substantially lower dollar figures for me.  I admire MMM's choice to create great opportunities for his son without getting sucked into expensive sports and other extracurricular activities and his skills related to construction and home repair.  Downsizing his house, using his bike for most transportation needs, and just plain staying closer to home are good for the environment and remind me that I could do better on that front as well.

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Re: MMM 2016 Budget
« Reply #46 on: May 22, 2017, 04:52:54 PM »
How did you come up with that figure?

Here is how: regular spending 30k, shed 30k, car 9k, travel 4k and etsy shop 20k. Grand Total = 93k. Oops sorry not 98k.  Still many things are not going to be reoccurring every year and so next years spending may be much lower.

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Re: MMM 2016 Budget
« Reply #47 on: May 22, 2017, 04:56:39 PM »

My wife and I recently did a week vacation in Maui for around $2,000. But it's disingenuous to say that because airfare was free (I work for an airline). That value of the airfare on that trip was roughly $11,000. We used points to offset the condo and did splurge and do a helicopter tour for $240 although we got a $200 credit from doing a 2-hour timeshare viewing.

Had we not had all these free credits it would've cost over around $14,000 for that trip.

How the hell would a one week trip to Maui cost $14,000? I'm just kind of in awe, because we spend $8-9,000/year for two people to spend several weeks a year traveling to Europe, Asia, and around Canada and the US. We don't use any kinds of points or freebies, and stay in pretty nice condos most of the time.

Did you read? Airfare was valued at roughly $11,000. We flew first class on some legs.

Also we don't stay in hostels.
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Re: MMM 2016 Budget
« Reply #48 on: May 22, 2017, 05:00:35 PM »
I would fly first class if I could fly free too. However, most normal people would not choose to spend 11k on airfare unless they were very wealthy.

Yes I know that is why I said it's disingenuous to state we did the vacation on so little amount of money. Sort of like how it's (kinda) disingenuous for MMM to state he spends $25k a year living like he does, which was my point.

He doesn't. He does a lot of things outside of just subsisting in life. One could "retire" on very little money if they lived in CA, and had a VW bus, and lived in it and begged for food.

MMM core basic $25k spending level is a good shock point to get people down to, it's a nice round number that most people, if they make enough effort, can obtain. It gets them thinking about what really matters and supercharges their savings/retirement plans. But it's not, IMO, a lifelong goal to only spend that amount. One would go completely nuts living in your house, just eating, sleeping, and sh!ting around and posting on forums all day. Hardly a way to live one's life, and certainly not the "retirement" most imagine.

IMO.

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Re: MMM 2016 Budget
« Reply #49 on: May 22, 2017, 05:05:32 PM »

Holy crow !  I can't fathom spending $1000 an hour to sit, regardles of how comfy the chair might be.
Been to Hawai'ii 3x (twice with my SO), always spent less than $2,000 on the entire trip.
To each their own

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It was amazing. I wouldn't spend the money but I can see why people do.

People spend all sorts of varied amounts on vacation. You just have to compare apples to apples. Staying in Motel 6's or Hostels isn't my thing on vacations - I want a nice condo to relax in. That's part of the trip. When we visit we always do things - that costs money - as well as eat out occasionally. We also grocery shop.

I know people who do vacations for almost nothing - they fly for free and stay at friends places. Again apples to apples, just because someone spends more on vacations doesn't mean what they are doing is 'wrong'.