Author Topic: MMM 2016 Budget  (Read 51718 times)

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Re: MMM 2016 Budget
« Reply #250 on: May 26, 2017, 11:47:45 AM »
I don't think anyone has ever said you can have a "luxurious lifestyle" on $25,000 in yearly income even without a house payment.

You can survive and live out your life, but luxurious wouldn't ever be in the subtitle of that movie.


MasterStache

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Re: MMM 2016 Budget
« Reply #251 on: May 26, 2017, 11:48:37 AM »
I don't think his $24k was ever meant to include a housing payment. He FIRED on 600k and a paid off house, so I've always looked at his budgets with that understanding.

I believe his first house was paid off. He did end up moving into a 350K house and had a house payment for a bit. Before and up to the first year or two of the blog. He never included his mortgage principle payment in his spending though.

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Re: MMM 2016 Budget
« Reply #252 on: May 26, 2017, 11:49:44 AM »
Also didn't he have a $4,000/month rental home too that he leased out?

dougules

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Re: MMM 2016 Budget
« Reply #253 on: May 26, 2017, 11:53:30 AM »
I do think the accounting is a bit questionable, but the real question is does the basic idea still stand?  If he had to move into a modest house and cut back to that $22k for the rest of his life (plus homeowners insurance of course) would he still feel like he was living a luxurious lifestyle?  That probably still holds.

Speaking for myself, I've lived a high consumption lifestyle and a much lower consumption lifestyle.  I've also had periods of very little to no income.  Overall levels of happiness were about the same for me once I adjusted to that particular level.  That's part of why MMM's message resonated with me so strongly - I'd lived a consumerist lifestyle and found myself no happier at the end of it.

There are plenty of people in not-quite-as-rich countries that are living at a lower level than that $22k buys in Colorado, and they seem to be happy maybe more so than a lot of people in developed countries.  Sure they'd love to have the chance to afford some of the luxuries I take for granted, but they clearly don't need them just to be happy.  A lot of them are even still enjoying luxuries my great great grandparents could have only dreamed of. 
« Last Edit: May 26, 2017, 11:55:27 AM by dougules »

Dabnasty

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Re: MMM 2016 Budget
« Reply #254 on: May 26, 2017, 12:22:20 PM »
I'd even go one step further to say that buying the Leaf instead of a Tesla or Prius is a perfect example of why an environmentalist living on 25k/yr could be seen as having made a non-Mustachian choice as compared to MMM who doesn't have to live on 25k/yr.  Pete seems to have a huge (and justifiable) crush on Elon Musk, so why not ramp up spending AND support a good company that you want to see succeed.  Plus a Tesla is a better product (arguable a better value, and seemingly more in line with his values) and it's something more people would be interested in hearing his take on (extra blog revenue).  Why give his money to the Nissan corporation and buy a crappy Leaf that no-one really cares to read about?  Was it just to save money although he's already got an income stream that is (depending on the math) 4 - 8x his annual spending?  I'm pretty sure readers get it that he's FI and still living below his means and forgive him for spending excess blog income on an experiment...
I would bet mustachian readers would be more likely to purchase a leaf than a Tesla. Depending on commutes, some people could actually come out ahead once you consider tax credits and gas money over 5-10 years vs. buying a compact with 100,000 miles.

And I would argue that there is no way a Tesla is a better value because you're paying way more for most of the same practical benefits. The additional pros of the Tesla fall into the luxury category which mustachianism values at 0. And remember the actual price difference is after tax credits so in his case it would be $60,000 vs. $14,000.

Dabnasty

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Re: MMM 2016 Budget
« Reply #255 on: May 26, 2017, 12:32:45 PM »
I don't think anyone has ever said you can have a "luxurious lifestyle" on $25,000 in yearly income even without a house payment.

You can survive and live out your life, but luxurious wouldn't ever be in the subtitle of that movie.
I'm pretty sure MMM did say this? Many times?

And I would kind of agree. I currently live closer to $10,000 with rent included. Admittedly it's not luxury but the biggest thing I would want to change would be my housing situation and if we're not counting housing, my expenses are more like $5500. Also this is for 1 person and housing is shared.

I think if I added $20,000 to the budget and a nice house I'd be well past my personal definition of 'luxury'.

EscapeVelocity2020

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Re: MMM 2016 Budget
« Reply #256 on: May 26, 2017, 01:27:05 PM »
I'd even go one step further to say that buying the Leaf instead of a Tesla or Prius is a perfect example of why an environmentalist living on 25k/yr could be seen as having made a non-Mustachian choice as compared to MMM who doesn't have to live on 25k/yr.  Pete seems to have a huge (and justifiable) crush on Elon Musk, so why not ramp up spending AND support a good company that you want to see succeed.  Plus a Tesla is a better product (arguable a better value, and seemingly more in line with his values) and it's something more people would be interested in hearing his take on (extra blog revenue).  Why give his money to the Nissan corporation and buy a crappy Leaf that no-one really cares to read about?  Was it just to save money although he's already got an income stream that is (depending on the math) 4 - 8x his annual spending?  I'm pretty sure readers get it that he's FI and still living below his means and forgive him for spending excess blog income on an experiment...
I would bet mustachian readers would be more likely to purchase a leaf than a Tesla. Depending on commutes, some people could actually come out ahead once you consider tax credits and gas money over 5-10 years vs. buying a compact with 100,000 miles.

And I would argue that there is no way a Tesla is a better value because you're paying way more for most of the same practical benefits. The additional pros of the Tesla fall into the luxury category which mustachianism values at 0. And remember the actual price difference is after tax credits so in his case it would be $60,000 vs. $14,000.

Ah, but you're not using MustacheMath.  Just make a few assumptions about resale value (the next gen Leaf is going to have 2x the battery capacity, so Pete's Leaf is gonna depreciate like a rock), and that MMM's Leaf broke down once already.  Surely there is a personal / time cost to having to recharge more often and being limited by range.  And Pete himself also acknowledges that his target audience are the upper middle class making six figures, not a whole lot of Leafs in my company garage, but a few Teslas... 
« Last Edit: May 26, 2017, 01:32:53 PM by EscapeVelocity2020 »
Transitioning to FIRE'd albeit somewhat cautiously...

sol

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Re: MMM 2016 Budget
« Reply #257 on: May 26, 2017, 01:28:37 PM »
The MMM Enterprise is a victim of its own success.  It's a good problem to have, but that doesn't mean it's not a problem.

The early message was "you don't need to be rich to be happy" and he wrote a blog about finding happiness without riches.  He argued persuasively that money doesn't buy happiness.

Except the blog made so much money that he started spending it on things that made him happy.  It's straight up lifestyle inflation, plain and simple.  I think it's well-done lifestyle inflation, focused on travel and housing and interesting projects instead of disposable consumer goods, but it's still lifestyle inflation.

And I think that's what rubs some of these folks the wrong way.  It seems like a betrayal of the principles he's (still?) pushing, because his current life undermines the message of his earlier work.  You don't work for civil rights all through your 20s and 30s and then join the Klan in your 40s without getting called a hypocrite, or a disappointment.  Your earlier work may have been and good and just, and maybe you've rationalized some way to make your Klan membership also feel good and just to you, but these two periods of your life are not compatible.

...

Isn't the MMM story the same as every rich person's story?  There's nothing magical about "spend much less than you earn and invest the difference" that literally ANY multimillionaire or billionaires doesn't already intuitively understand.  The acquisition and preservation of wealth requires prudent financial management, a skill that you have to learn early, before you have wealth, in order to use effectively later, when you are rich.  MMM hasn't cracked any secret code there, and like every fabulously wealthy person before him he has gradually increased his spending in line with his growing income and assets, using progressively more complicated shell businesses and tax-avoidance strategies to continue growing that wealth prudently. 

These day's, Pete is just another rich guy.  He seems like a pretty down-to-earth rich guy, but in the larger sense he's no different than the guy who owns 12 restaurants in your town, or the startup founder who sold to google in 2007, or the developer who built that 200-home retirement community your parents have been eyeing.  He's a successful entrepreneur, the lucky individual who through hard work and good timing managed to amass a small fortune in our modern economy.  He lives like them, jetsetting around the world to exotic locations.  He eats like them, all fancy organic meats and craft beers and abundant recreational weed.  He works like them, sheltering expenses in his businesses and turning down opportunities to deal with people he doesn't like.  The only difference is that while living this capitalist fat cat's utopian lifestyle, he's somehow still stuck with the aftertaste of the project that brought him fame, the MMM-as-frugal-blogger persona.

Shake it off, Pete!  Embrace your success!  Go ahead and buy that yacht.  Start a foundation, and put your name on a university building.  Take up golf.  Get yourself a top hat and monocle and accept that you've joined the ranks of America's elite successful small business owners.  And whenever one of the peasants complains about the betrayal of your principles, just do what every rapper who lives in a mansion does:  donate some money to the kids back in the projects to assuage any lingering guilt you might feel.
« Last Edit: May 26, 2017, 04:25:31 PM by sol »

Classical_Liberal

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Re: MMM 2016 Budget
« Reply #258 on: May 26, 2017, 04:38:46 PM »
Whenever @Sol makes a thoughtful post I either LMAO, get pissed at him, start having deep thoughts on the subject, or some combination of all three.  Do you have your own blog?

MasterStache

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Re: MMM 2016 Budget
« Reply #259 on: May 26, 2017, 05:02:52 PM »
Whenever @Sol makes a thoughtful post I either LMAO, get pissed at him, start having deep thoughts on the subject, or some combination of all three.  Do you have your own blog?

Haha!! Good way to put it. I am a bit jealous that I can't cobble the words together as well as Sol can to explain how I feel.

I'll just +1 him. Well said

DavidAnnArbor

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Re: MMM 2016 Budget
« Reply #260 on: May 26, 2017, 05:15:55 PM »
It's the values that MMM has espoused that are important, not actually how much Pete spends now that his blog makes him a yearly fortune. Pete has taught the importance of super-saving, finding satisfaction in a less consumerist lifestyle that is still rewarding, being mindful of how lifestyle choices impact the climate, investing in passive index funds rather than trying to "beat" the market, and gaining financial independence in order to find a better and more rewarding quality of life.

And what does Pete actually spend his newfound income on?  Things that grow in value (home office building), provide enriching experiences (conferences), a car that reflects the need to take global climate change seriously, and charitable giving as well.

sol

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Re: MMM 2016 Budget
« Reply #261 on: May 26, 2017, 06:37:57 PM »
Whenever @Sol makes a thoughtful post I either LMAO, get pissed at him, start having deep thoughts on the subject, or some combination of all three.  Do you have your own blog?

I've been telling myself that I'm too busy to get organized enough to start my own blog, but honestly I spend so much time here that it's a pretty thin excuse.  I've always figured I'd start writing more once I'm free of the 9-5, but the longer I have it the less motivation I feel to get rid of it.  Suddenly, early retirement is becoming a lot less attractive to me.  That sounds like the core of a decent blog post...

Anyway, thanks for the vote of confidence. 

MasterStache

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Re: MMM 2016 Budget
« Reply #262 on: May 26, 2017, 06:43:13 PM »
Whenever @Sol makes a thoughtful post I either LMAO, get pissed at him, start having deep thoughts on the subject, or some combination of all three.  Do you have your own blog?

I've been telling myself that I'm too busy to get organized enough to start my own blog, but honestly I spend so much time here that it's a pretty thin excuse.  I've always figured I'd start writing more once I'm free of the 9-5, but the longer I have it the less motivation I feel to get rid of it.  Suddenly, early retirement is becoming a lot less attractive to me.  That sounds like the core of a decent blog post...

Anyway, thanks for the vote of confidence.

Can I suggest a good theme? Deep Thoughts by Sol Handey.

dragoncar

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Re: MMM 2016 Budget
« Reply #263 on: May 26, 2017, 07:22:51 PM »
Whenever @Sol makes a thoughtful post I either LMAO, get pissed at him, start having deep thoughts on the subject, or some combination of all three.  Do you have your own blog?

I've been telling myself that I'm too busy to get organized enough to start my own blog, but honestly I spend so much time here that it's a pretty thin excuse.  I've always figured I'd start writing more once I'm free of the 9-5, but the longer I have it the less motivation I feel to get rid of it.  Suddenly, early retirement is becoming a lot less attractive to me.  That sounds like the core of a decent blog post...

Anyway, thanks for the vote of confidence.

I was agreeing with you until the end, when I was no longer sure if you were being super-ironical. 

That said, you could publish a book "The best hits of Sol" where you just take some of your posts and post the best replies, with director commentary. 

obstinate

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Re: MMM 2016 Budget
« Reply #264 on: May 26, 2017, 09:05:59 PM »
The next question is: "why is your $25k much less luxurious?" (to obstinate).  Why does it feel that way?  There are many possible reasons
- you have housing costs (in which case you aren't comparing apples to oranges)
- you have childcare costs (ditto)
- you live in a HCOL area
- you spend money on things that don't add value to your life
Oh, I spend a lot more than MMM does, although most of the delta is housing + childcare. What feels luxurious to me about his life is basically that he can breakfast as long as he wants, seven days a week, and no one will ever hassle him about it. That seems amazing. I'll be there in due time.

Fireball

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Re: MMM 2016 Budget
« Reply #265 on: May 26, 2017, 09:51:05 PM »
Whenever @Sol makes a thoughtful post I either LMAO, get pissed at him, start having deep thoughts on the subject, or some combination of all three.  Do you have your own blog?

+1... lol.

EnjoyIt

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Re: MMM 2016 Budget
« Reply #266 on: May 28, 2017, 12:46:05 PM »

..... I've always figured I'd start writing more once I'm free of the 9-5, but the longer I have it the less motivation I feel to get rid of it.  Suddenly, early retirement is becoming a lot less attractive to me.  That sounds like the core of a decent blog post...


Would you mind elaborating a little bit about the above statement.  I seam to have some of that thinking as well and curious how you got there and what your plans might be.

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Re: MMM 2016 Budget
« Reply #267 on: May 28, 2017, 01:46:45 PM »
@Everyone nitpicking the numbers, I'm pretty sure he still throws out the spending articles because he's been doing it for years now, but at this point his complete finances are not representative because he has multiple sources of FIRE income now. But his ~30k spending still represents what people would be spending for a family of 3. It's not to say he personally hasn't made and spent money elsewhere, but you could conceivably be living on the spending in the main table with interest income.

BUT, that's not the point of the blog at all. Seriously, you could nitpick every article he writes but he's always been true to his core principles. Keep your spending down, and you can retire earlier than you think. Once you FIRE, do things that you love to do. If they make money, even better, you get to live a life of more luxury because you have more money. I mean he claims to be living a life of luxury from the beginning of his FIRE but he clearly didn't fake it through high interest personal loans or credit card debt.

Most importantly, you don't have to worry about living your life after losing your job. I mean how is that not the biggest advantage of FI? And even then, he stresses that making more 9-5 income pre-FI is still very helpful to FIRE. Just not as helpful as cutting back spending (because work income ends at FIRE, spending doesn't).

And on top of that, FIRE may not be for everyone; everyone has different principles. But the idea that it's impossible should be clearly false by now.

There's no denying that it takes some hard work to get there. I don't think anyone claims that this is easy. We're all subject to emotions after all.

[Not sure why I had an urge to defend him but whatever]
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nereo

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Re: MMM 2016 Budget
« Reply #268 on: May 28, 2017, 02:58:53 PM »
I don't think anyone has ever said you can have a "luxurious lifestyle" on $25,000 in yearly income even without a house payment.

You can survive and live out your life, but luxurious wouldn't ever be in the subtitle of that movie.

**I** would say I live a luxurious lifestyle spending far less than $25k after excluding our mortgage payments (but including all taxes).  We live in an urban environment, eat great food, go on vacations, own a way-too-nice car, have hobbies, host parties, ski extensively, etc.  Basically money doesn't limit what we want to do.

we're not surviving, we're thriving.
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lemonde

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Re: MMM 2016 Budget
« Reply #269 on: May 28, 2017, 03:22:13 PM »
Meh, he's not retired, but he's been FI for years. He spends lots more than 25k a year, but it's possible to be happy on 25k (or less). All of this is readily apparent, but it makes for good banter (like the endless discussion over whether or not Trump did this or that with the Russians). The blog is a business, and business is about branding. Use what you find useful and ignore the rest.

TomTX

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Re: MMM 2016 Budget
« Reply #270 on: May 28, 2017, 08:45:05 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.

Hyatt Regency on Maui is under $500/night right now. Hell, even the Ritz Carlton is only $659. There are lots of hotel options in the ~$250 and under range, without even looking at Airbnbor regular B&B. Days Inn is $140.
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nereo

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Re: MMM 2016 Budget
« Reply #271 on: May 29, 2017, 08:45:37 AM »

Hyatt Regency on Maui is under $500/night right now. Hell, even the Ritz Carlton is only $659. There are lots of hotel options in the ~$250 and under range, without even looking at Airbnbor regular B&B. Days Inn is $140.
Frankly I'm a bit shocked that people on this forum would ever pay the full sticker price... it's like paying MSRP for a brand new car.  The Sheraton & Hilton on the big island (Kona) both have rooms for <$200/night.  ::shrug::  It just seems wierd that we'd be nit-picking on MMM's budget while entertaining a discussion on spending half my take-home pay for a one-week vacation when I make annual trips to the big island to visit family and friends.
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TomTX

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Re: MMM 2016 Budget
« Reply #272 on: May 29, 2017, 09:10:57 AM »
Man, to think we average $200/mo for our son's Boyscouts and my daughter is beginning competitive gymnastics which will cost roughly $300/mo plus travel. Guess it's time to switch to Ramen. Haha I kid.

How do you spend $200/month on Scouts?
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TomTX

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Re: MMM 2016 Budget
« Reply #273 on: May 29, 2017, 09:13:50 AM »

Hyatt Regency on Maui is under $500/night right now. Hell, even the Ritz Carlton is only $659. There are lots of hotel options in the ~$250 and under range, without even looking at Airbnbor regular B&B. Days Inn is $140.
Frankly I'm a bit shocked that people on this forum would ever pay the full sticker price... it's like paying MSRP for a brand new car.  The Sheraton & Hilton on the big island (Kona) both have rooms for <$200/night.  ::shrug::  It just seems wierd that we'd be nit-picking on MMM's budget while entertaining a discussion on spending half my take-home pay for a one-week vacation when I make annual trips to the big island to visit family and friends.

When we went to the Big Island a few years ago for a wedding, our average lodging cost was around $135/night - without even travel hacking. Mostly B&Bs, so breakfast included. we did stay in one motel for a couple of nights to stay near family - and those were our most expensive nights.
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Chris22

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Re: MMM 2016 Budget
« Reply #274 on: May 29, 2017, 11:26:02 AM »

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.

Hyatt Regency on Maui is under $500/night right now. Hell, even the Ritz Carlton is only $659. There are lots of hotel options in the ~$250 and under range, without even looking at Airbnbor regular B&B. Days Inn is $140.

"Right now".  Well, yeah, it's summertime now. Who wants to go to Hawaii when it's beautiful at home??  Check the prices for, say, February and get back to me.
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MasterStache

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Re: MMM 2016 Budget
« Reply #275 on: May 30, 2017, 06:02:32 AM »
Man, to think we average $200/mo for our son's Boyscouts and my daughter is beginning competitive gymnastics which will cost roughly $300/mo plus travel. Guess it's time to switch to Ramen. Haha I kid.

How do you spend $200/month on Scouts?

That's the average. Some months we spend 0. Others we spend more than $200. He goes on at least one campout per month which sometimes requires food and extra gear. He's growing so he outgrows things like boots and more recently his backpack. Sometimes we volunteer to drive. We have a big Philmont trip coming up. Between myself and my son we have to come up with a couple grand, plus travel cost. I'll need to purchase gear as well. We always seem to be buying something. It's a bit frustrating, but since he plays no sports we are fine with the cost. It keeps him involved.

BeanCounter

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Re: MMM 2016 Budget
« Reply #276 on: May 30, 2017, 06:24:26 AM »
Man, to think we average $200/mo for our son's Boyscouts and my daughter is beginning competitive gymnastics which will cost roughly $300/mo plus travel. Guess it's time to switch to Ramen. Haha I kid.

How do you spend $200/month on Scouts?

That's the average. Some months we spend 0. Others we spend more than $200. He goes on at least one campout per month which sometimes requires food and extra gear. He's growing so he outgrows things like boots and more recently his backpack. Sometimes we volunteer to drive. We have a big Philmont trip coming up. Between myself and my son we have to come up with a couple grand, plus travel cost. I'll need to purchase gear as well. We always seem to be buying something. It's a bit frustrating, but since he plays no sports we are fine with the cost. It keeps him involved.
We pay ridiculous money for all the boys sports and activities. This is something I feel is missing from MMM's budget. It seems odd that there would be nothing for this.
At least with boy scouts it's something you all do together and make many memories. Pretty important stuff in my book.

fa

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Re: MMM 2016 Budget
« Reply #277 on: May 30, 2017, 07:12:06 AM »
Except the blog made so much money that he started spending it on things that made him happy.  It's straight up lifestyle inflation, plain and simple.  I think it's well-done lifestyle inflation, focused on travel and housing and interesting projects instead of disposable consumer goods, but it's still lifestyle inflation.

Very well said.  For years I noticed that personal expenses are categorized as "blog research".  I am happy for Pete's success, but he is losing his authenticity.  That does not happen to all rich people.  The founder of IKEA, a billionaire, still buys his clothes at a thrift store.  Warren Buffet drives an old car and has lived in the same house for 50 years or so.  These are business people, who do not build their businesses on personal lifestyle choices.  Pete has built his business on being thrifty.  For him, lifestyle inflation is directly at odds with the core of his message.  It makes me wonder how much of his original message was actually genuine.

Pete is human and is succumbing to the allure of the money.  Still, he has helped many people see a path to FI.  That is priceless.

Spitfire

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Re: MMM 2016 Budget
« Reply #278 on: May 30, 2017, 08:14:49 AM »
MMM has obviously done a good job getting his frugality message across since he is being put through the ringer for spending $75k in a year.

Chris22

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Re: MMM 2016 Budget
« Reply #279 on: May 30, 2017, 08:19:01 AM »
MMM has obviously done a good job getting his frugality message across since he is being put through the ringer for spending $75k in a year.

I don't think anyone cares what he actually spends, it only matters what he actually spends versus what he CLAIMS to spend. 
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threefive

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Re: MMM 2016 Budget
« Reply #280 on: May 30, 2017, 09:18:43 AM »
Except the blog made so much money that he started spending it on things that made him happy.  It's straight up lifestyle inflation, plain and simple.  I think it's well-done lifestyle inflation, focused on travel and housing and interesting projects instead of disposable consumer goods, but it's still lifestyle inflation.

Very well said.  For years I noticed that personal expenses are categorized as "blog research".  I am happy for Pete's success, but he is losing his authenticity.  That does not happen to all rich people.  The founder of IKEA, a billionaire, still buys his clothes at a thrift store.  Warren Buffet drives an old car and has lived in the same house for 50 years or so.  These are business people, who do not build their businesses on personal lifestyle choices.  Pete has built his business on being thrifty.  For him, lifestyle inflation is directly at odds with the core of his message.  It makes me wonder how much of his original message was actually genuine.

Pete is human and is succumbing to the allure of the money.  Still, he has helped many people see a path to FI.  That is priceless.

Buffett recently bought a brand new Cadillac. The dealership in Omaha that sold it made a bunch of hype highlighting exactly that fact. Granted, he traded in his 8 year old caddy. It's a really, really nice Cadillac, too. He may have lived in the same house for 50 years, but have you seen it? It's a very nice house in one of the posher areas of town. All of that said, he certainly lives no where near the lifestyle of what most expect a billionaire to live. But, he doesn't ride bikes all over Omaha, live in a 1,000 sq. ft. house, buy his clothes from thrift stores, and do all of his own manual labor. He also doesn't fly commercial. Both Buffett and Pete enjoy some luxuries well within their ability to afford them, because more spending after a certain point doesn't translate to a better life. I'd say they both have similar philosophies. You should read Buffett's explanation for why he has a private jet: he hates TSA lines, and he can afford to avoid them. Why does Pete have a Leaf? He wants to promote electric vehicles (which, is odd for someone that seems more interested in promoting bikes!) and he can afford it. They have different points for where more spending stops improving their life, as we all do, and Pete's is probably moving out a little with greater wealth and age.

I will agree with the fundamental point, though. Lifestyle inflation and authenticity. Early MMM might well have facepunched current Pete for wasting money on a new Leaf and building a little man cave. But, current Pete has more money and has past the point where he worries too much about how he spends it or what MMM would say. Authenticity: keep in mind that MMM is a character and Pete is a human. Just like the Buffett in your mind is a character, and the real human is not quite so ideal. We build characters as models we can strive to be like while living our flawed (compared to models) human existence. MMM is an authentic model which Pete (and thousands of others) tries to live up to, stymied by our little rationalizations here and there.

tooqk4u22

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Re: MMM 2016 Budget
« Reply #281 on: May 30, 2017, 09:35:07 AM »
The more interesting question to me is this - what's more important, the $25k life, or living off the 4% rule?

Because if we're living off the 4% rule, then Pete could spend a LOT more and still be under the 4% rule, with all his new income and bigger stache. 

I am not so sure about this.   He has had significant income and his stash has likely gotten bigger as a result - but if he made $400k last year and the year prior say that is not what he cleared.  Fed, state, and 2x employment taxes take their toll even after running a bunch of deductions through. So it really comes down to the ratio of the increased spending to the amount saved of the income (ie if his spending went up by $20k and he has saved $500k of his new income the 4% WR is preserved but if he spent $40k and only saved $500k and he has come to enjoy (need) the lifestyle inflation then he is no longer able to be FIRE bc he doesn't have enough to meet the 4% rule. 

Except the blog made so much money that he started spending it on things that made him happy.  It's straight up lifestyle inflation, plain and simple.  I think it's well-done lifestyle inflation, focused on travel and housing and interesting projects instead of disposable consumer goods, but it's still lifestyle inflation.

+1, and the question then goes to if the blog income dried up would he enjoy going back to the lifestyle level he had before? 

mm1970

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Re: MMM 2016 Budget
« Reply #282 on: May 30, 2017, 10:35:15 AM »

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.

Hyatt Regency on Maui is under $500/night right now. Hell, even the Ritz Carlton is only $659. There are lots of hotel options in the ~$250 and under range, without even looking at Airbnbor regular B&B. Days Inn is $140.
I've never spent $800 a night on Hawaii.  Admittedly, our last 2 trips were booked with Costco travel.  Most recent one was at a very nice resort (I have a tendency to prefer condos to resorts because you can cook your own meals.  But anyway, it was fun.)

The biggest variation seems to be airfare.  A quick search earlier this year (for spring break) and just now shows many options for a week in Hawaii for under $5000 (that's with four plane tickets and rental car included).  I checked Maui and Kauai.  My limit for Hawaii would probably be $6k.  Last time we went we spent $4k, but there were only 3 of us at the time.

mm1970

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Re: MMM 2016 Budget
« Reply #283 on: May 30, 2017, 10:38:41 AM »

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.

Hyatt Regency on Maui is under $500/night right now. Hell, even the Ritz Carlton is only $659. There are lots of hotel options in the ~$250 and under range, without even looking at Airbnbor regular B&B. Days Inn is $140.

"Right now".  Well, yeah, it's summertime now. Who wants to go to Hawaii when it's beautiful at home??  Check the prices for, say, February and get back to me.
My absolute cheapest trip to Hawaii ever was in February, booked it in January.  Got some killer deals because: 1. relatively last minute (booked 3 weeks out) and 2. school schedule.

If you have kids in school, then you are beholden to the school calendar.  I was not beholden at the time.  It's important to know that a certain % of school district have a "ski week" in Feb, right around President's day.  (And then a spring break in April.)  Our school does not have this winter break.

So long as you avoid traveling during that particular week, you should be fine.  Same thing around spring break.

Mid Jan to Mid Feb are good.  Most of March until the last week, when spring break starts.

Laura Ingalls

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Re: MMM 2016 Budget
« Reply #284 on: May 31, 2017, 11:40:02 PM »
So why exactly are we not supposed to comment on the lack of homeowners insurance?

I do think he would be self insured on the dwelling, but the hubris about the liability is just crazy. He needs a big umbrella policy too.

It can't even be that big of a savings.


dragoncar

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Re: MMM 2016 Budget
« Reply #285 on: May 31, 2017, 11:51:44 PM »
I always assumed he had liability, because it would be crazy not to.   It's probably cheap enough to fit into the other category

Laura Ingalls

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Re: MMM 2016 Budget
« Reply #286 on: June 01, 2017, 06:42:00 AM »
I always assumed he had liability, because it would be crazy not to.   It's probably cheap enough to fit into the other category

Except that insurance companies don't sell such a product. There are folks that buy renters insurance for paid for homes in hurricane prone areas. 

boarder42

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Re: MMM 2016 Budget
« Reply #287 on: June 01, 2017, 07:36:48 AM »
the insurance thing is a good adder.  an assumed insurance on his house and umbrella to protect his assets probably exists.  and some level of that would still exist if he didnt have the income he did.  you dont fire on 800k and a paid off house and not carry insurance on that house.
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anonymouscow

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Re: MMM 2016 Budget
« Reply #288 on: June 01, 2017, 07:59:00 AM »
Am I reading things wrong or missing something, why does he subtract $23,614 for organic / luxury food?

I do not have a problem with him spending money, but to me, spending is spending. I think you  want to put a line in for the car and at least spread the cost over the expected useful life of the car.

He does not include his studio because it is an investment, he says "spending money on repairs, changing paint colors, gardens, or swimming pools would count as spending to me, since these items are more likely to be recurring and/or not recouped at the time of sale" but I do not see any of these things in his budget unless he is counting it as home renovations.

I don't say I live off 250 dollars a month when I'm spending 1500 because I "could" live off 250 dollars, saying and doing are two different things.

undercover

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Re: MMM 2016 Budget
« Reply #289 on: June 01, 2017, 09:36:57 AM »
I will agree with the fundamental point, though. Lifestyle inflation and authenticity. Early MMM might well have facepunched current Pete for wasting money on a new Leaf and building a little man cave. But, current Pete has more money and has past the point where he worries too much about how he spends it or what MMM would say. Authenticity: keep in mind that MMM is a character and Pete is a human. Just like the Buffett in your mind is a character, and the real human is not quite so ideal. We build characters as models we can strive to be like while living our flawed (compared to models) human existence. MMM is an authentic model which Pete (and thousands of others) tries to live up to, stymied by our little rationalizations here and there.

Regarding authenticity: isn't it LESS authentic to hide your "extraneous" spending? I think there's less separation between MMM/Pete as you're making out. I think Pete/MMM has evolved. His core message still fits within his current lifestyle. He's making smart purchases with money he didn't expect to have totally under the same intentions and goals. He's always said that the purpose of work is to create and thus the path to happiness. If you have the money to create things that you weren't able to before because you had less money, what does it matter? Why is that a sin in the MMM ecosphere? It's not in my opinion because the core message has never changed.

These day's, Pete is just another rich guy.  He seems like a pretty down-to-earth rich guy, but in the larger sense he's no different than the guy who owns 12 restaurants in your town, or the startup founder who sold to google in 2007, or the developer who built that 200-home retirement community your parents have been eyeing.  He's a successful entrepreneur, the lucky individual who through hard work and good timing managed to amass a small fortune in our modern economy.  He lives like them, jetsetting around the world to exotic locations.  He eats like them, all fancy organic meats and craft beers and abundant recreational weed.  He works like them, sheltering expenses in his businesses and turning down opportunities to deal with people he doesn't like.  The only difference is that while living this capitalist fat cat's utopian lifestyle, he's somehow still stuck with the aftertaste of the project that brought him fame, the MMM-as-frugal-blogger persona.

No. I'm pretty sure he chose who he wanted to deal with LONG before he was "rich". That's how most rich people get rich is by choosing carefully who they deal with. And he chose carefully to quit his job long before he was at this level of "rich".

You're making his situation out to be much more enviable than it actually is. I don't envy MMM at all. At the end of the day, what is the point of amassing so much wealth that you don't know what to do with it? His hobby is working and creating income producing ventures. That's what drives him. Not many people are going to sit down and write hundreds of thousands of words into a blog. But plenty of people can take those words and live a much more "settled" life. If you (like me) do believe that after a certain point of money that happiness doesn't increase, you'd know that MMM's own life wouldn't be any different in terms of happiness had the blog not blown up in success.
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EnjoyIt

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Re: MMM 2016 Budget
« Reply #290 on: June 01, 2017, 09:58:22 AM »
. . . .If you (like me) do believe that after a certain point of money that happiness doesn't increase, you'd know that MMM's own life wouldn't be any different in terms of happiness had the blog not blown up in success.

Depending on the sources, they say that at spending level of about $75k/yr you do not buy significantly more happiness.  It just appears to me that MMM is creeping closer and closer to that level.  Since he does not drive much, that $75k would be closer to $60k and I am pretty sure that is very close to what he spent in 2016.  Lets see what he does in 2017.

I think the message is still clear.  You can live a happy life on $25k/yr if you so desired, but by doing so you may find yourself even wealthier over time considering the one more year syndrome and also other sporadic earnings potentials. This would lead to the ability to spend more and potentially purchase more happiness.  Even if his blog did not take off and he retired with $600k, he still did some side hustles that made him extra money that would allow his stache to continue to grow over that decade which would allow him to spend more.  Maybe by now he would not be spending $60k/yr.  Maybe it would be $35k but I am pretty sure it would increase either way.  It is human nature.


mm1970

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Re: MMM 2016 Budget
« Reply #291 on: June 01, 2017, 10:57:05 AM »
Quote
Am I reading things wrong or missing something, why does he subtract $23,614 for organic / luxury food?

He's only subtracting a little bit of money to get TO $23,614.  Meaning he's estimating $2247 of his annual food bill is luxury and could be eliminated if he so chose.  That would put his annual food bill at a little under $5k, which I still think would be a challenge for a family of 3? 

Nangirl17

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Re: MMM 2016 Budget
« Reply #292 on: June 01, 2017, 10:57:19 AM »

..... I've always figured I'd start writing more once I'm free of the 9-5, but the longer I have it the less motivation I feel to get rid of it.  Suddenly, early retirement is becoming a lot less attractive to me.  That sounds like the core of a decent blog post...


Would you mind elaborating a little bit about the above statement.  I seam to have some of that thinking as well and curious how you got there and what your plans might be.

I'm also interested to hear your thoughts.

We hit a "skin-of-our-teeth" FI lately, and somehow something in my brain relaxed and I'm not even half as anxious to retire now! (Maybe it is because I went part time and the balance it brought to my life made work seem so much less stressful....?)



EnjoyIt

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Re: MMM 2016 Budget
« Reply #293 on: June 01, 2017, 11:01:12 AM »

..... I've always figured I'd start writing more once I'm free of the 9-5, but the longer I have it the less motivation I feel to get rid of it.  Suddenly, early retirement is becoming a lot less attractive to me.  That sounds like the core of a decent blog post...


Would you mind elaborating a little bit about the above statement.  I seam to have some of that thinking as well and curious how you got there and what your plans might be.

I'm also interested to hear your thoughts.

We hit a "skin-of-our-teeth" FI lately, and somehow something in my brain relaxed and I'm not even half as anxious to retire now! (Maybe it is because I went part time and the balance it brought to my life made work seem so much less stressful....?)

definitely true, the less I work, the more I enjoy the work. 

sol

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Re: MMM 2016 Budget
« Reply #294 on: June 01, 2017, 11:06:49 AM »

..... I've always figured I'd start writing more once I'm free of the 9-5, but the longer I have it the less motivation I feel to get rid of it.  Suddenly, early retirement is becoming a lot less attractive to me.  That sounds like the core of a decent blog post...


Would you mind elaborating a little bit about the above statement.  I seam to have some of that thinking as well and curious how you got there and what your plans might be.

I'm also interested to hear your thoughts.

Oh no you don't.  I won't be goaded into starting a blog until I'm good and ready.  Not by either of you.

I should start writing these things up and then NOT posting them to the forum, so I can have a little backlog of blog posts for when the time is right.

In the meantime, suffice it to say that we each need to answer the question "why do we work" and then decide for ourselves whether our job is contributing to, or interfering with, that goal.  It's not always about money.  Lots of folks here work long past their FI date.  Brad Pitt and Warren Buffett don't need to work anymore, but they choose to do so anyway.  Why is that?

tyort1

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Re: MMM 2016 Budget
« Reply #295 on: June 01, 2017, 11:13:19 AM »
I've been doing some thinking on that very question of "Why do I work"?  I can say this - my current job pays me a lot of money and I like it, but it's not particularly exciting or rewarding.  There's other things that I'd love to do instead, but those other things pay very little (or nothing).  So I'm going to keep working after FI, but doing other things.

What things, you might ask?  OK, here's an example - I'd love to work with our local library or other community groups and teach money/finance/work/society life hacks and skills to people that haven't been able to learn these things from their families.  It'd be very cool and rewarding to do but would not pay much, if anything. 

That's only one thing, there's quite a few others, but you get the idea.   
Frugalite in training.

EnjoyIt

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Re: MMM 2016 Budget
« Reply #296 on: June 01, 2017, 11:17:16 AM »

..... I've always figured I'd start writing more once I'm free of the 9-5, but the longer I have it the less motivation I feel to get rid of it.  Suddenly, early retirement is becoming a lot less attractive to me.  That sounds like the core of a decent blog post...


Would you mind elaborating a little bit about the above statement.  I seam to have some of that thinking as well and curious how you got there and what your plans might be.

I'm also interested to hear your thoughts.

Oh no you don't.  I won't be goaded into starting a blog until I'm good and ready.  Not by either of you.

I should start writing these things up and then NOT posting them to the forum, so I can have a little backlog of blog posts for when the time is right.

In the meantime, suffice it to say that we each need to answer the question "why do we work" and then decide for ourselves whether our job is contributing to, or interfering with, that goal.  It's not always about money.  Lots of folks here work long past their FI date.  Brad Pitt and Warren Buffett don't need to work anymore, but they choose to do so anyway.  Why is that?

Sol,
I thought I wanted to retire very early as well, but the closer I get the more I think I would rather semi-retire and work part time. My job and what I do gives me joy especially when I can really turn around someones life. Once I retire and have a significant amount of time off, most places would never hire me as I would have lost a lot of skill. I believe I need to work at a minimum of 6-8 days a month to still be proficient at my job. My goal is still to semi-fire by December 2018 though it may be sooner if I get sick of my administrative duties. I also like the added security of more money so who knows I may change my mind again by that date.

anonymouscow

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Re: MMM 2016 Budget
« Reply #297 on: June 01, 2017, 11:35:55 AM »
Quote
Am I reading things wrong or missing something, why does he subtract $23,614 for organic / luxury food?

He's only subtracting a little bit of money to get TO $23,614.  Meaning he's estimating $2247 of his annual food bill is luxury and could be eliminated if he so chose.  That would put his annual food bill at a little under $5k, which I still think would be a challenge for a family of 3?

Ah thanks, it wasn't clicking with me how he was subtracting things.

brooklynguy

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Re: MMM 2016 Budget
« Reply #298 on: June 01, 2017, 11:51:19 AM »
I won't be goaded into starting a blog until I'm good and ready.

Hate to break it to you, but you already have one.  It just happens to be embedded within this forum.  And I'd venture to guess that your readership eclipses that of many respectable stand-alone blogs.

Reynold

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Re: MMM 2016 Budget
« Reply #299 on: June 01, 2017, 12:57:20 PM »
I'm not sure why people are so bent out of shape about MMM's business expenses and consider it "shady" to not include those in his personal expenses.   To start with the Ecuador trips, has anyone seen any indication from him that if the MMM empire didn't exist, he would be flying down there once a year?   He is not claiming his Canada trips as business expenses, and there are probably creative ways to do that if he really wanted to.   Regarding the car, maybe if MMM didn't exist he would have bought it anyway, but we have no way of knowing, and he didn't seem unhappy with his previous car(s).  The shed is probably on the shakiest ground, I suspect it is used more for his construction side gigs (still a business expense if so) than for MMM, since he is not writing as much these days.  If the IRS wants to challenge it, let them do so, and he can reclassify it at that point. 

I do think there was a good argument made that if he got extra capital from selling a larger house, and put part of it into a new capital asset of a shed, it might not be appropriate to consider the shed a "sudden expense" without matching it against the "windfall income" from the profit on the larger house.   That is separate from whether it is a business expense, of course. 

But as a general thing, it is completely appropriate to separate business expenses from personal ones.  To give an example, suppose the sole side gig of the MMM household was an Etsy business, and they spent a million dollars on supplies in a year, and sold what they made for a million and one dollars (because they were terrible business people).  They now have personal expenditures of about $25k, and net additional business income of $1, not personal expenditures of $1,025,000.   

I would also say the blog is not, and has never been, focused on the details of how to start and manage side gigs.  He has given a few suggestions, but MMM is trying to show how to manage your personal lifestyle.  Thus I wouldn't expect him to break out all the information on his and Mrs. MMM's side businesses the way he does their household budget.   Does he have a separate business structure for the construction stuff versus the blog stuff, or is the construction stuff considered part of what he wanted to learn to keep ER expenses low?  We don't know, but we don't need to to get his core messages.