Author Topic: MMM 2016 Budget  (Read 43333 times)

anonymouscow

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Re: MMM 2016 Budget
« Reply #300 on: June 01, 2017, 01:28:28 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.

So is the $2335 for "Flights to Florida in January, Canada in July and December" personal or business? If it's personal why subtract it at the bottom? I can see subtracting it if for business.

I think it's silly he subtracted organic food at the bottom. How is it any different than any other expense that's not really necessary? Gap, Old Navy, books, etc. And why subtract home renovations? I doubt he is increasing the value of his home by the renovation amount.

the car still seems like an expense to me no matter what he says it is for.

Cassie

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Re: MMM 2016 Budget
« Reply #301 on: June 01, 2017, 01:55:34 PM »
We semi-retired 5 years ago and love it. Because I am now almost 63 I have people ask when I will fully retire. The answer is when I no longer love the work I do for about 10 hours/week from home in my pj's:))

dragoncar

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Re: MMM 2016 Budget
« Reply #302 on: June 02, 2017, 12:24:51 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.

so they do sell such a product then

Laura Ingalls

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Re: MMM 2016 Budget
« Reply #303 on: June 02, 2017, 10:32:13 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

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.


so they do sell such a product then

I guess if you put it that way yes liability and personal property andloss of use.  People do it in hurricane prone places because it can save real money (low 4 figures yearly on a modest house).  If I employed the same strategy in my Midwest location it might save me $200 per year for a house with 200k replacement value.  I would have to live to be 150 years old and pay premiums for 100 more years to not be ahead on a catastrophic loss.  Catastrophic losses do happen.  I know of two houses in my town of 15,000 that are currently being rebuilt after serious fires. 


BeanCounter

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Re: MMM 2016 Budget
« Reply #304 on: June 03, 2017, 05:29:45 AM »
I'm pretty sure they wouldn't let me buy our umbrella policy without the comprehensive home owners.

undercover

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Re: MMM 2016 Budget
« Reply #305 on: June 03, 2017, 09:08:33 AM »
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.

Most people (general America) have more money than they know what to do with and don't even realize it. Even more people are so bad with not knowing what to do with it that they blow it all from paycheck to paycheck. I don't think having enough money is really the problem in rich countries. The problem is (not) knowing what to do with it.

MMM getting blasted for doing intelligent things with his money makes zero sense when he's spending equally intelligently on the "core" things in life like travel/food/housing/transportation/etc. He could spend much more in the categories that most people foolishly/obliviously blow their money on but chooses not to because he realizes his money and happiness goes much farther elsewhere. I think that's what people are forgetting when they read his budget. They forget that the past MMM that's always made good choices and developed habits that lead to wealth and happiness has afforded him to have all of these unnecessary additional expenses that don't lead to a better life but simply allow him to do more things than he could or felt like he could before. That's all while still maintaining a 90% savings rate.

He's getting criticized here and elsewhere because people think that he actually needs these extra things above his "basic" budget or he wouldn't be as happy as he is. That's completely and utterly wrong. He doesn't/didn't need the success of the blog to continue to be happy or buy a shed or buy a Leaf or buy a commercial building on main street. He's still doing what he's always done: automate what are for most people the most expensive line items in life and watch as his wealth grows while meticulously spending his money in a way that benefits himself and his family the most. It's all about engineering a beautifully efficiently constructed life. It doesn't require lots of money. Lots of money is the side benefit.
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dragoncar

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Re: MMM 2016 Budget
« Reply #306 on: June 03, 2017, 01:01:11 PM »
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.

Most people (general America) have more money than they know what to do with and don't even realize it. Even more people are so bad with not knowing what to do with it that they blow it all from paycheck to paycheck. I don't think having enough money is really the problem in rich countries. The problem is (not) knowing what to do with it.

MMM getting blasted for doing intelligent things with his money makes zero sense when he's spending equally intelligently on the "core" things in life like travel/food/housing/transportation/etc. He could spend much more in the categories that most people foolishly/obliviously blow their money on but chooses not to because he realizes his money and happiness goes much farther elsewhere. I think that's what people are forgetting when they read his budget. They forget that the past MMM that's always made good choices and developed habits that lead to wealth and happiness has afforded him to have all of these unnecessary additional expenses that don't lead to a better life but simply allow him to do more things than he could or felt like he could before. That's all while still maintaining a 90% savings rate.

He's getting criticized here and elsewhere because people think that he actually needs these extra things above his "basic" budget or he wouldn't be as happy as he is. That's completely and utterly wrong. He doesn't/didn't need the success of the blog to continue to be happy or buy a shed or buy a Leaf or buy a commercial building on main street. He's still doing what he's always done: automate what are for most people the most expensive line items in life and watch as his wealth grows while meticulously spending his money in a way that benefits himself and his family the most. It's all about engineering a beautifully efficiently constructed life. It doesn't require lots of money. Lots of money is the side benefit.

No, he's getting "blasted" because people don't think he's been up front in his characterization of personal and business expenses.  Nobody is saying that he "needs these extra things" or spending intelligently.

undercover

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Re: MMM 2016 Budget
« Reply #307 on: June 03, 2017, 01:19:16 PM »
No, he's getting "blasted" because people don't think he's been up front in his characterization of personal and business expenses.  Nobody is saying that he "needs these extra things" or spending intelligently.

But how isn't he (upfront)? Or better yet, how is it relevant to the authenticity of the blog? It's total conjecture that if his "business" spending wasn't so high then his "personal" spending would proportionally go up. That's something that just can't be proved and in my opinion isn't the case at all given his personal expenses have remained low and virtually haven't inched forward at all in the past 6 years.

I guess you can argue that if he didn't travel so much for business then he might travel more for personal time but even he said that he would likely use that time camping and/or short haul trips versus cross-country or international flights. It's simply not the type of travel he would be doing on a personal level. The blog has just opened his doors up in so many different ways that he'd be an idiot to turn down every opportunity. To me that doesn't mean that his life would be significantly different with or without the blog, it's just a project he has that he tends to like anyone else has their own projects.
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sol

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Re: MMM 2016 Budget
« Reply #308 on: June 03, 2017, 01:21:24 PM »
The blog has just opened his doors up in so many different ways that he'd be an idiot to turn down every opportunity.

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DavidAnnArbor

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Re: MMM 2016 Budget
« Reply #309 on: June 03, 2017, 02:25:48 PM »
I'd like to see Mr. Money Mustache and Suze Orman team up together and do a TV show on personal spending, lifestyle habits, and there also should be a lot of humor too. It could be along the lines of the "biggest loser"

tyort1

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Re: MMM 2016 Budget
« Reply #310 on: June 03, 2017, 03:13:20 PM »
I've always felt like the $25k year a life was really for showing people that are in debt or in the accumulation phase, that it's possible to have an enjoyable life even when expenses are tightly controlled. 

IMO, once you have a ton of money saved up and are FI, well, spend it on whatever you damn well please.  The key is being FI.  As long as you can afford it, then go for it.  It would be silly to save hard, become FI and then not actually enjoy your wealth. 

As long as lifestyle creep doesn't inch you past the 4% rule, you'll be fine. 

Personally I don't plan to change a lot of my habits after FI (in 13 years or so), because I agree with MMM that buying new shit causes harm to the environment and we can/should be good stewards. 
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soupcxan

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Re: MMM 2016 Budget
« Reply #311 on: June 03, 2017, 07:47:56 PM »
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.

Most people (general America) have more money than they know what to do with and don't even realize it. Even more people are so bad with not knowing what to do with it that they blow it all from paycheck to paycheck. I don't think having enough money is really the problem in rich countries. The problem is (not) knowing what to do with it.

MMM getting blasted for doing intelligent things with his money makes zero sense when he's spending equally intelligently on the "core" things in life like travel/food/housing/transportation/etc. He could spend much more in the categories that most people foolishly/obliviously blow their money on but chooses not to because he realizes his money and happiness goes much farther elsewhere. I think that's what people are forgetting when they read his budget. They forget that the past MMM that's always made good choices and developed habits that lead to wealth and happiness has afforded him to have all of these unnecessary additional expenses that don't lead to a better life but simply allow him to do more things than he could or felt like he could before. That's all while still maintaining a 90% savings rate.

He's getting criticized here and elsewhere because people think that he actually needs these extra things above his "basic" budget or he wouldn't be as happy as he is. That's completely and utterly wrong. He doesn't/didn't need the success of the blog to continue to be happy or buy a shed or buy a Leaf or buy a commercial building on main street. He's still doing what he's always done: automate what are for most people the most expensive line items in life and watch as his wealth grows while meticulously spending his money in a way that benefits himself and his family the most. It's all about engineering a beautifully efficiently constructed life. It doesn't require lots of money. Lots of money is the side benefit.

No, he's getting "blasted" because people don't think he's been up front in his characterization of personal and business expenses.  Nobody is saying that he "needs these extra things" or spending intelligently.

If you make your living telling people that they don't need to buy stuff, and then it turns out you yourself actually like buying stuff, it hurts your credibility. A lot. And efforts to rationalize that spending as "investments" or "business expenses" are pretty weak.

LadyStache in Baja

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Re: MMM 2016 Budget
« Reply #312 on: June 05, 2017, 10:06:48 AM »
The shed is an expense in the same way buying the house was an expense. So we should look at how he calculated the house buying, and that will tell us how to account for this expense. I tried to find the post, but I couldn't, and I choose not to spend any more of my time looking.

But it was mentioned that the house he bought was cheaper than the house he sold. And the shed was a planned expense to make up for less square footage that still brought the total cost of the new house to less than the old house.

Therefore, it's not an expense, it's part of the transaction that brought his bottom line a net gain. House Sold > House bought + shed = net gain.

Regarding car, I don't know. He seemed to love his Scion. But he would have eventually needed a replacement car. I think he should have classified it as a personal expense. If he really wanted it to be a business expense, he could have bought the leaf to try it out, write about it, and then create some sort of giveaway where one of his lucky readers WINS a Leaf! How cool would that be? Then he could go back to using his Scion.

Regarding being out of touch, he should write some more case studies. That'll keep it relevant to us poor folk just starting out and not make us so sad that we can't afford cars and trips to Ecuador. ;)
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EscapeVelocity2020

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Re: MMM 2016 Budget
« Reply #313 on: June 05, 2017, 10:43:05 AM »
It's always funny to me that people rush to his defense in these threads.  Yes, we all know that Pete's spending is not outstripping his income, commenters aren't advocating a 'save Ferris' collection, but his posts that show he actually doesn't know how much he spends aren't very Mustachian, IMHO.
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AlanStache

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Re: MMM 2016 Budget
« Reply #314 on: June 05, 2017, 11:12:07 AM »
It's always funny to me that people rush to his defense in these threads.  Yes, we all know that Pete's spending is not outstripping his income, commenters aren't advocating a 'save Ferris' collection, but his posts that show he actually doesn't know how much he spends aren't very Mustachian, IMHO.

?
He has never really been about strict tracking of spending unless you are hair on fire broke.  A great many people do very well without budgets and simply think about what they are buying and if it will really make them happy or benefit there life in some way.  The only spending I really think about in dollars per month terms are what I spend on comics; everything else comes down to the "will it make me happier/is there a more cost effective alternative/is it this just a shiny widget that I will only play with once" tests?  And by and large that works well for me based on my total monthly spending levels.

"posts that show he actually doesn't know how much he spends", sorry am to lazy to go search now but I thought his 2016 budget was fairly well broken down.  Was there something unclear?  The only thing I can think of was his $1k in misc Amazon spending. 
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EscapeVelocity2020

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Re: MMM 2016 Budget
« Reply #315 on: June 05, 2017, 11:57:44 AM »
In his footnotes on the shed, he specifically stated 'is this spending..?'.  So he admits he may be 100% or more off for 2016...  Nice problem to have, but not Mustachian
« Last Edit: June 05, 2017, 11:59:15 AM by EscapeVelocity2020 »
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AlanStache

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Re: MMM 2016 Budget
« Reply #316 on: June 05, 2017, 12:25:25 PM »
In his footnotes on the shed, he specifically stated 'is this spending..?'.  So he admits he may be 100% or more off for 2016...  Nice problem to have, but not Mustachian

He is acknowledging that reasonable people may disagree on how to classify this (and other things).  He is being up front and not hiding anything (we know of... :-)  ).  If his food bill had tripped I would be right there with you but he sold a home and bought a new one with the idea of building an addition-he did this and came out in the black; I cant see kicking him out of the club over this. 

If you want to view this as spending and say he spent +60k last year I think it is a bit missing the forest for the trees but I guess ok.  Maybe I am just happier leaving the grey areas in and taking what I can from it all.
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EscapeVelocity2020

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Re: MMM 2016 Budget
« Reply #317 on: June 05, 2017, 12:45:14 PM »
You can also view this comment to mean he has several expenses (things he paid for in 2016) that he doesn't consider as
spending .  Reasonable people may disagree, but I take this to mean that there are a lot of expenses that he doesn't list / consider to be relevant (like his summer touring with his brother, the accountant, his remodeling business, his wife's business spending, spending on his son, etc).

Just for what he noted, his spending was actually about 100k for 2016.  Not Mustachian if you think you are living on 30k, is my point.
« Last Edit: June 05, 2017, 01:00:46 PM by EscapeVelocity2020 »
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AlanStache

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Re: MMM 2016 Budget
« Reply #318 on: June 05, 2017, 02:04:09 PM »
You can also view this comment to mean he has several expenses (things he paid for in 2016) that he doesn't consider as
spending .  Reasonable people may disagree, but I take this to mean that there are a lot of expenses that he doesn't list / consider to be relevant (like his summer touring with his brother, the accountant, his remodeling business, his wife's business spending, spending on his son, etc).

Just for what he noted, his spending was actually about 100k for 2016.  Not Mustachian if you think you are living on 30k, is my point.

Third bullet point in the pic, I would read that in a limited context and not extrapolate its scope.

Looking at the numbers for his travel spending (personal and MMM) he has to be doing some travel hacking.  There have been several years when I spent $60k in fully reimbursed work expenses; you can get a LOT of hotel and airline points off that.  If he is getting points for MMM inc/house reno business/shed/Esty/etc he could be doing very well in reward points & with an email or two he can crash in a spare room most anywhere.  Is spending reward points real spending?  yes and no.  thinking about it I would be more inclined to call him on any CC point spending than the shed.  But this is 100% speculation and not worth a shrug in my AWFK life.
« Last Edit: June 05, 2017, 02:07:59 PM by AlanStache »
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anonymouscow

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Re: MMM 2016 Budget
« Reply #319 on: June 05, 2017, 06:01:06 PM »
Why not just post everything? I don't care. You make 500k, you spend 100k, I don't care. Just don't say you spend 25k when you spend 100k. Put everything up in a credit / debit / GAPP format. Put down what you are actually claiming as business expenses. It looks shady to come up with your own "deductions". So what, have one column with all expenses, the next list out actual tax deductible business expenses, the next your capital expenses like your shed and car, and so on. Organic food and home renovations are not deductions.

sol

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Re: MMM 2016 Budget
« Reply #320 on: June 05, 2017, 06:58:07 PM »
Organic food and home renovations are not deductions.

The are "deductions" in the sense that they are optional spending, and his lifestyle would not change all that much without them.  For the purpose of trying to demonstrate to people how a family of 3 can live comfortably on $25k, I think it makes sense to separate them out.  His family of three isn't living on $25k anymore, but it's clear that someone else could if they followed the base budget MMM lays out each year.

He's stuck in a "do as I say and not as I do" situation because he makes so much money he no longer lives the lifestyle the blog was built around.  I think it's still useful to highlight "this is how I got here" but maybe not so useful to suggest "this is how I still live".

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Re: MMM 2016 Budget
« Reply #321 on: June 06, 2017, 09:24:58 AM »
Organic food and home renovations are not deductions.

Exactly.

The persona MMM only spends 25k, but Pete spends 100k. 

I can live on 20k a year, if I deduct any expense I deem as frivolous, or luxurious.   The point is REAL money was spent.

dragoncar

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Re: MMM 2016 Budget
« Reply #322 on: June 06, 2017, 04:48:46 PM »
Organic food and home renovations are not deductions.

Exactly.

The persona MMM only spends 25k, but Pete spends 100k. 

I can live on 20k a year, if I deduct any expense I deem as frivolous, or luxurious.   The point is REAL money was spent.

But of course, REAL money was also made.  I guess if MMM loses his fortune because he doesn't have liability insurance, he can go back to spending $25k/year.

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Re: MMM 2016 Budget
« Reply #323 on: June 06, 2017, 06:05:52 PM »
Organic food and home renovations are not deductions.

Exactly.

The persona MMM only spends 25k, but Pete spends 100k. 

I can live on 20k a year, if I deduct any expense I deem as frivolous, or luxurious.   The point is REAL money was spent.

But of course, REAL money was also made.  I guess if MMM loses his fortune because he doesn't have liability insurance, he can go back to spending $25k/year.

Can he?  He preaches all the time about hedonic adaptation and how once you are used to luxury you can't go back...
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EscapeVelocity2020

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Re: MMM 2016 Budget
« Reply #324 on: June 06, 2017, 08:55:00 PM »
Organic food and home renovations are not deductions.

Exactly.

The persona MMM only spends 25k, but Pete spends 100k. 

I can live on 20k a year, if I deduct any expense I deem as frivolous, or luxurious.   The point is REAL money was spent.

But of course, REAL money was also made.  I guess if MMM loses his fortune because he doesn't have liability insurance, he can go back to spending $25k/year.

Can he?  He preaches all the time about hedonic adaptation and how once you are used to luxury you can't go back...

Well, such an event would at least make the blog more relevant to the target audience.  At one point, MMM seemed to advocate giving away all of the excess.  Although he gave away 100k, it's a bit like an Olympian jogging a few miles (his net worth is around 3 million, given the paid off home, 600k should be worth at least 1.8M if indexed + additional investment 'experiments' and personal investment of 200 - 400k for a the last few years).  And his latest tweets (something about how using a car to commute is like eating cake) makes me think he is completely out of touch.  Or maybe just smoking too much of that legal Rocky Mountain high :) 
« Last Edit: June 06, 2017, 09:02:23 PM by EscapeVelocity2020 »
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obstinate

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Re: MMM 2016 Budget
« Reply #325 on: June 06, 2017, 09:46:59 PM »
Can he?  He preaches all the time about hedonic adaptation and how once you are used to luxury you can't go back...
That is definitely not what hedonic adaptation means, and I'm 80% sure he has said nothing like that in the history of his blog.

EscapeVelocity2020

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Re: MMM 2016 Budget
« Reply #326 on: June 06, 2017, 10:01:53 PM »
Can he?  He preaches all the time about hedonic adaptation and how once you are used to luxury you can't go back...
That is definitely not what hedonic adaptation means, and I'm 80% sure he has said nothing like that in the history of his blog.

But I understood Chris22's comment as shorthand for the idea that it takes increasing levels of luxury to produce the same response.  The idea that 'you can't go back' was an interesting conclusion that would need to be tested, and who better a guinea pig than MMM?  If he actually gave away a year of blog income, detailed his passive income (probably 50-90k in dividends and interest on a 2-3M portfolio) and better detailed all of his spending next year, that would revitalize things...
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Re: MMM 2016 Budget
« Reply #327 on: June 07, 2017, 08:26:41 AM »
Can he?  He preaches all the time about hedonic adaptation and how once you are used to luxury you can't go back...
That is definitely not what hedonic adaptation means, and I'm 80% sure he has said nothing like that in the history of his blog.

He definitely insinuates, if not outright claims, that you don't go backwards in lifestyle.  Which I've honestly always felt is a little bit backwards.  For instance, while working, I might buy a new car every 5 years, but once retired, due to less usage and less income, I would probably not continue that habit.  Whereas MMM would tell me I've inflated my spending so I require more of a nestegg to support it in retirement.
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Re: MMM 2016 Budget
« Reply #328 on: June 07, 2017, 08:59:55 AM »
The way I see it, the 9K spent on the Leaf, and the 4K for MMM travel are the only "grey" areas in the budget.  The Etsy business expenses, and studio build, have zero business being in the everyday spend column. 

So Pete maybe spent roughly 44K last year when all is said and done. 

And this makes him a sell-out and a victim of consuma suckaism?  GTFO. 

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Re: MMM 2016 Budget
« Reply #329 on: June 07, 2017, 10:01:14 AM »
Can he?  He preaches all the time about hedonic adaptation and how once you are used to luxury you can't go back...
That is definitely not what hedonic adaptation means, and I'm 80% sure he has said nothing like that in the history of his blog.

He definitely insinuates, if not outright claims, that you don't go backwards in lifestyle.  Which I've honestly always felt is a little bit backwards.  For instance, while working, I might buy a new car every 5 years, but once retired, due to less usage and less income, I would probably not continue that habit.  Whereas MMM would tell me I've inflated my spending so I require more of a nestegg to support it in retirement.

"Save enough so you have 80% of your income in retirement".  That's the standard line everyone gets from the mainstream retirement industry.  But that's not true.  What you need is 100% of your expenses covered.  So not buying a car every 5 years keeps you expenses down and lets you get to 100% expenses covered, faster. 

Why do people want new cars?  Group think and hedonic adaptation.  When you think "hey, this is what successful people do" and "I work hard so I deserve something nice", well then you have lifestyle creep and much higher expenses (and thus need to save a lot more before FI).  Only by letting these 2 ideas go, can you dial down your lifestyle without feeling deprived. 


The way I see it, the 9K spent on the Leaf, and the 4K for MMM travel are the only "grey" areas in the budget.  The Etsy business expenses, and studio build, have zero business being in the everyday spend column. 

So Pete maybe spent roughly 44K last year when all is said and done. 

And this makes him a sell-out and a victim of consuma suckaism?  GTFO. 

QFT.  I think the people that are carping don't live anywhere near a $25k lifestyle, and more to the point, don't WANT to live that life, so any chance they see to poke holes, they will take.  Speaking for myself, I am planning on a $50k with house paid off, so I'm no MMM, but you don't see me taking pot shots at someone who's trying to do something admirable with their life.
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Chris22

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Re: MMM 2016 Budget
« Reply #330 on: June 07, 2017, 10:15:47 AM »
"Save enough so you have 80% of your income in retirement".  That's the standard line everyone gets from the mainstream retirement industry.  But that's not true.  What you need is 100% of your expenses covered.  So not buying a car every 5 years keeps you expenses down and lets you get to 100% expenses covered, faster.

But again, the key is you need 100% of your RETIREMENT expenses covered.  My retirement expenses will be different than my non-retirement expenses.  I understand the effect spending has on my accumulation rate, but I think there is a tendency to assume expenses currently = expenses in retirement, and that just isn't the case.  I might live on $75k while working but plan to retire on $50k, partially by cutting the frequency of purchases of capital assets like cars.   

Quote
Why do people want new cars?  Group think and hedonic adaptation.  When you think "hey, this is what successful people do" and "I work hard so I deserve something nice", well then you have lifestyle creep and much higher expenses (and thus need to save a lot more before FI).  Only by letting these 2 ideas go, can you dial down your lifestyle without feeling deprived.

Some people like cars.  Some people like biking and gardening and going to the library.  Some people like boats or riding horses or what have you.  Assuming shallow motives like "I deserve it" and "to look successful" to my interests while assuming some purity or nobleness in yours is, frankly, offensive.


Quote
QFT.  I think the people that are carping don't live anywhere near a $25k lifestyle, and more to the point, don't WANT to live that life, so any chance they see to poke holes, they will take.  Speaking for myself, I am planning on a $50k with house paid off, so I'm no MMM, but you don't see me taking pot shots at someone who's trying to do something admirable with their life.

You're right, I don't aspire to live a $25k lifestyle.  But apparently neither does MMM!  Because he uses FakeMath to claim that he does.  Again, I don't give a shit what he spends, never has, never will.  But if you tell me "I spend $25k*"  "*does not include all this other great spending" I'm going to throw the bullshit flag. 
"If I could get all the money back I ever spent on cars, I'd spend it on cars." - Nick Mason

tyort1

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Re: MMM 2016 Budget
« Reply #331 on: June 07, 2017, 10:21:36 AM »
Some people like cars.  Some people like biking and gardening and going to the library.  Some people like boats or riding horses or what have you.  Assuming shallow motives like "I deserve it" and "to look successful" to my interests while assuming some purity or nobleness in yours is, frankly, offensive.

Dude, you seem to have a bug up your ass about cars.  Go buy your cars and be happy, nobody gives a shit.
« Last Edit: June 07, 2017, 11:18:13 AM by tyort1 »
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tooqk4u22

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Re: MMM 2016 Budget
« Reply #332 on: June 07, 2017, 10:46:04 AM »
Can he?  He preaches all the time about hedonic adaptation and how once you are used to luxury you can't go back...
That is definitely not what hedonic adaptation means, and I'm 80% sure he has said nothing like that in the history of his blog.

But I understood Chris22's comment as shorthand for the idea that it takes increasing levels of luxury to produce the same response.  The idea that 'you can't go back' was an interesting conclusion that would need to be tested, and who better a guinea pig than MMM?  If he actually gave away a year of blog income, detailed his passive income (probably 50-90k in dividends and interest on a 2-3M portfolio) and better detailed all of his spending next year, that would revitalize things...

Asked and answered as he is already living on $25k (hence not inflated his lifestyle) and providing a detailed breakdown of his spending, so waiting until next year for the same breakdown won't change it.  Oh wait, that is what this discussion is all about ;)


Raenia

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Re: MMM 2016 Budget
« Reply #333 on: June 07, 2017, 11:24:45 AM »
QFT.  I think the people that are carping don't live anywhere near a $25k lifestyle, and more to the point, don't WANT to live that life, so any chance they see to poke holes, they will take.  Speaking for myself, I am planning on a $50k with house paid off, so I'm no MMM, but you don't see me taking pot shots at someone who's trying to do something admirable with their life.

That's not entirely true.  I lived on >25k last year (18k of expenses, plus taxes, and that's including housing, which he doesn't include), and I'm on track to spend even less this year (extrapolating out, about 12-15k expenses), and I still have an issue with the creative accounting.  I think it misrepresents the lifestyle you can have on 25k, and I think that when new readers realize that, it's a big turn off.  It calls into question everything else he's written - i.e. if he fudged the numbers for this, how can we trust the rest of his numbers?  For those who haven't really gotten into the math of early retirement, it's discouraging enough to turn some off from reading more.  I know that, because it happened to me and several other people I know, most of whom haven't come back to give it another chance, and I can't really blame them.

tooqk4u22

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Re: MMM 2016 Budget
« Reply #334 on: June 07, 2017, 11:36:55 AM »
......and I think that when new readers realize that, it's a big turn off. 
 

I hear ya, but it can't be that much of a turn off if he is making $400k....that takes some pretty impressive stats to drive that kind of revenue.

Raenia

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Re: MMM 2016 Budget
« Reply #335 on: June 07, 2017, 11:47:31 AM »
......and I think that when new readers realize that, it's a big turn off. 
 

I hear ya, but it can't be that much of a turn off if he is making $400k....that takes some pretty impressive stats to drive that kind of revenue.

I don't know, at least two people I know read the entire site after concluding it was nonsense, just to search out more things to nitpick at.  Not that I'm saying that's a majority of traffic, of course :)  I do think a fair amount of people may read the site as a curiosity, though, without really understanding that it can apply to them too.

tyort1

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Re: MMM 2016 Budget
« Reply #336 on: June 07, 2017, 11:56:22 AM »
I don't know, at least two people I know read the entire site after concluding it was nonsense, just to search out more things to nitpick at.  Not that I'm saying that's a majority of traffic, of course :)  I do think a fair amount of people may read the site as a curiosity, though, without really understanding that it can apply to them too.

I think the MMM message won't resonate with everyone (of even most people).  That's OK.  Also, some people really don't want to change.  They are already settled/comfortable with how their lives are.  People like that will look for any reason to not change and thus, nitpick. 

For example, 2 years ago the big stink was that "MMM is not really retired", and thus people said "It doesn't work so I won't even try".  Now, it's "MMM spent $50k!"  and again they say "It doesn't work so I won't even try".

That's fine though.  People aren't obligated to change, even if/when they really ought to.  I know for me it took a period of extended unemployment and not enough savings to cover our costs really made me aware that my very nice shit won't help me pay the mortgage when SHTF.  Without that, I probably would not have made any changes either. 
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Laura Ingalls

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Re: MMM 2016 Budget
« Reply #337 on: June 07, 2017, 03:06:57 PM »
Organic food and home renovations are not deductions.

Exactly.

The persona MMM only spends 25k, but Pete spends 100k. 

I can live on 20k a year, if I deduct any expense I deem as frivolous, or luxurious.   The point is REAL money was spent.

But of course, REAL money was also made.  I guess if MMM loses his fortune because he doesn't have liability insurance, he can go back to spending $25k/year.

Can he?  He preaches all the time about hedonic adaptation and how once you are used to luxury you can't go back...

Well, such an event would at least make the blog more relevant to the target audience.  At one point, MMM seemed to advocate giving away all of the excess.  Although he gave away 100k, it's a bit like an Olympian jogging a few miles (his net worth is around 3 million, given the paid off home, 600k should be worth at least 1.8M if indexed + additional investment 'experiments' and personal investment of 200 - 400k for a the last few years).  And his latest tweets (something about how using a car to commute is like eating cake) makes me think he is completely out of touch.  Or maybe just smoking too much of that legal Rocky Mountain high :)

Yep, I personally would feel better about giving to a real charity of my choice vs a personal injury attorney.  It would be a test of resilience and I think they would do fine.  It would make having his bike ripped off seem like a walk in the park.

dragoncar

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Re: MMM 2016 Budget
« Reply #338 on: June 07, 2017, 06:42:10 PM »

Can he?  He preaches all the time about hedonic adaptation and how once you are used to luxury you can't go back...
That is definitely not what hedonic adaptation means, and I'm 80% sure he has said nothing like that in the history of his blog.

Of course you can "go back" -- that's almost the entire point of the blog.  The vast majority of readers came from high-spending lifestyles and lowered their expenses after discovering MMM.  Hedonic adaptation works both ways, and many of us here have adapted to spending less.

obstinate

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Re: MMM 2016 Budget
« Reply #339 on: June 07, 2017, 08:27:20 PM »
I don't know, at least two people I know read the entire site after concluding it was nonsense, just to search out more things to nitpick at.  Not that I'm saying that's a majority of traffic, of course :)  I do think a fair amount of people may read the site as a curiosity, though, without really understanding that it can apply to them too.
Plenty of my friends decided it was nonsense when I first started reading it in 2013. So . . . I don't know what you want me to tell ya. He's clearly getting more attention and credit than ever. A few more people on the forum nitpicking his expenses, but that has also been going on for years. \_(ツ)_/ Meanwhile random people I talk to tell me about how they're following MMM's message without me bringing it up in the conversation.
« Last Edit: June 07, 2017, 08:33:50 PM by obstinate »

obstinate

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Re: MMM 2016 Budget
« Reply #340 on: June 07, 2017, 08:31:13 PM »
Can he?  He preaches all the time about hedonic adaptation and how once you are used to luxury you can't go back...
That is definitely not what hedonic adaptation means, and I'm 80% sure he has said nothing like that in the history of his blog.
He definitely insinuates, if not outright claims, that you don't go backwards in lifestyle. 
No, he does not. It honestly makes me wonder if you've really read much of his stuff that you're claiming this. What would be the point of the blog if he believed that? To catch college kids before they get into bad habits? That is so clearly not what happening that if you think he believes that's his work, then you're basically calling him a fool, since the message obviously appeals more to people once they've been working for a few years and know the horror that is the modern job.

Also he very explicitly talks about getting people to downsize, ran a number of case studies at various points . . . I dunno. I get that you're reading something into this, and that's your right, but where you see implications in one direction, I see explicit statements and action in the other.

EscapeVelocity2020

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Re: MMM 2016 Budget
« Reply #341 on: June 07, 2017, 11:17:31 PM »
I don't know, at least two people I know read the entire site after concluding it was nonsense, just to search out more things to nitpick at.  Not that I'm saying that's a majority of traffic, of course :)  I do think a fair amount of people may read the site as a curiosity, though, without really understanding that it can apply to them too.
Plenty of my friends decided it was nonsense when I first started reading it in 2013. So . . . I don't know what you want me to tell ya. He's clearly getting more attention and credit than ever. A few more people on the forum nitpicking his expenses, but that has also been going on for years. \_(ツ)_/ Meanwhile random people I talk to tell me about how they're following MMM's message without me bringing it up in the conversation.

I'm still interested to see how the community fares in an inevitable bear market.  None of the Mustachian philosophy has really been stress-tested since it has all ultimately been bull market from day one.  I'm sure those that can will tighten their belts another notch and figure it out.  Others that have never seen 20% or more of their net worth vanish on paper might also begin to think all this FIRE stuff is 'nonsense'.  I know exactly what to expect (although I don't look forward to riding the roller coaster down for a third time...) but I'm not so sure all of the 90 - 100% equity folks do.  I'm sure we'll get a few of these posts - http://www.mrmoneymustache.com/2012/05/09/houses-and-stocks-are-going-up-who-cares/ - but that might not be so effective when it is a downturn.  Time will tell I guess...
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DavidAnnArbor

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Re: MMM 2016 Budget
« Reply #342 on: June 08, 2017, 07:45:55 AM »

I'm still interested to see how the community fares in an inevitable bear market.  None of the Mustachian philosophy has really been stress-tested since it has all ultimately been bull market from day one.  I'm sure those that can will tighten their belts another notch and figure it out.  Others that have never seen 20% or more of their net worth vanish on paper might also begin to think all this FIRE stuff is 'nonsense'.  I know exactly what to expect (although I don't look forward to riding the roller coaster down for a third time...) but I'm not so sure all of the 90 - 100% equity folks do.  I'm sure we'll get a few of these posts - http://www.mrmoneymustache.com/2012/05/09/houses-and-stocks-are-going-up-who-cares/ - but that might not be so effective when it is a downturn.  Time will tell I guess...

I think that's the value of having this forum, is to help each other to cope and get the bigger picture when the downturn comes. I didn't have that forum in 2008/2009 though I was able to withstand selling, and I even bought some more (though not a lot more) stock index funds. Nonetheless, it would have helped to have the data that is found from posters on these forums.

EscapeVelocity2020

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Re: MMM 2016 Budget
« Reply #343 on: June 08, 2017, 09:02:39 AM »
I frequented Early-Retirement.org and Bogleheads back then.  It was very interesting in real time.  You can still read the posts if you search, but it's not the same.  You just had to have investments when TARP failed to pass (a blank cheque to Wall St. really should have failed, but it passed the second time around), then the markets really tanked, money market funds breaking the buck, Lehman declaring bankruptcy, and too big to fail banks being unable to cover their short term obligations...  It is helpful to have seasoned experts around for sure, but still to tough to stay the course.  You really do begin to wonder how long it will take to get back to even from the day after day losses...
« Last Edit: June 08, 2017, 09:05:47 AM by EscapeVelocity2020 »
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tooqk4u22

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Re: MMM 2016 Budget
« Reply #344 on: June 08, 2017, 10:36:39 AM »
I'm still interested to see how the community fares in an inevitable bear market. 

This will be interesting for sure, not just for this community but for all of the FIRE blogosphere.   I had some money when the last downturn happened and it did not feel good....but I was nowhere near or even really thinking about FIRE, so was more job-income focused.  I have quite a bit more now and probably could FIRE if a tightened up a bit, but still not perfectly sure how I will feel about a big downturn (bc those would be much bigger losses now - although my AA is also quite different now).

That said, I have prepared myself mentally for a 25% portfolio decline (which is really larger loss on equities due to bond/cash allocation). Of course I am also in the 3% SWR camp so my 25% decline will translate into a 4% SWR after the fact - kind of cheating I guess but I am good with it.

Not that I want to experience a big decline but I really do look forward to the blogosphere when that happens.  It is so much easier to SAY you will be ok during a downturn when you are in a rising tide environment than actually living through a decline, especially for those that have never even been through any downturn with a meaningful asset level - translation....pretty much anyone who is under 30 has no f'in clue whatsoever bc they would have been still in school or on parents dime and anybody in the 30-40 group would likely have seen it, lived through it, but probably didn't have significant assets in the market so they probably don't know what the f*ck they are talking about either.  Bc for both age groups it has been a rising tide since they either started or got to a point of having meaningful assets. 

FWIW....I am just over the upper range and pretty convinced I still don't know what the f*ck I am talking about when it comes to how I feel if it happens again. 

But as you said.....

Time will tell I guess...
« Last Edit: June 08, 2017, 10:39:45 AM by tooqk4u22 »

tyort1

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Re: MMM 2016 Budget
« Reply #345 on: June 08, 2017, 11:06:33 AM »
Re: downturns - I take the same view as I do with my house valuation.  It's not "real" money until I sell.  So my house value going up or down has no affect on my as long as I'm still living in it.  In the same way, VTSAX going up or down has no effect on me until I'm ready to retire.  Which is 12 years from now, at the earliest. 
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BeanCounter

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Re: MMM 2016 Budget
« Reply #346 on: June 08, 2017, 11:32:24 AM »
Re: downturns - I take the same view as I do with my house valuation.  It's not "real" money until I sell.  So my house value going up or down has no affect on my as long as I'm still living in it.  In the same way, VTSAX going up or down has no effect on me until I'm ready to retire.  Which is 12 years from now, at the earliest.
I totally agree, and this is how we handled the last downturn. It didn't matter because we were still a long way off from FIRE and we knew we had enough time for our stache to bounce back. Plus that meant we were buying everything on sale.
But it's not so easy if you HAVE to draw from your stache in a downturn. This is why it is so important to allocate your stache appropriately with a few years of draw downs in cash and bonds so your current portion is stable and the rest can ride out the downturn.
Or at least that's my plan.

tyort1

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Re: MMM 2016 Budget
« Reply #347 on: June 08, 2017, 12:05:26 PM »
Re: downturns - I take the same view as I do with my house valuation.  It's not "real" money until I sell.  So my house value going up or down has no affect on my as long as I'm still living in it.  In the same way, VTSAX going up or down has no effect on me until I'm ready to retire.  Which is 12 years from now, at the earliest.
I totally agree, and this is how we handled the last downturn. It didn't matter because we were still a long way off from FIRE and we knew we had enough time for our stache to bounce back. Plus that meant we were buying everything on sale.
But it's not so easy if you HAVE to draw from your stache in a downturn. This is why it is so important to allocate your stache appropriately with a few years of draw downs in cash and bonds so your current portion is stable and the rest can ride out the downturn.
Or at least that's my plan.

It's also why I plan to have a paid off home before FIRE.  Other expenses are easy to dial up or down, but mortgages, not so much.  And I don't want to have to tell my family "Oh, market's down, we have to move".
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tooqk4u22

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Re: MMM 2016 Budget
« Reply #348 on: June 08, 2017, 12:57:23 PM »
In the same way, VTSAX going up or down has no effect on me until I'm ready to retire.  Which is 12 years from now, at the earliest.

That's exactly how I viewed it during the last down turn...as I said, I didn't like how it felt but just left everything alone and kept adding along the way. 

The question is how will you feel in 12 years, because when you start withdrawing I am certain it will feel like real money.
« Last Edit: June 08, 2017, 12:59:04 PM by tooqk4u22 »

tyort1

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Re: MMM 2016 Budget
« Reply #349 on: June 08, 2017, 01:15:23 PM »
In the same way, VTSAX going up or down has no effect on me until I'm ready to retire.  Which is 12 years from now, at the earliest.

That's exactly how I viewed it during the last down turn...as I said, I didn't like how it felt but just left everything alone and kept adding along the way. 

The question is how will you feel in 12 years, because when you start withdrawing I am certain it will feel like real money.

I have a few things I'm planning on using just in that case.  First, 4% will be $50k for me.  And I'll have a paid off house.  $50k and no house payment is pretty ridiculous, we can cut that down to $30k pretty easily.  The other thing - I plan to keep 1 year of living expenses in cash.  I also don't mind picking up a part time job if the market is taking a hammering. 

The other thing - I'm close to 90/10 stocks/bonds right now, but I'm going to shift more toward 70/30 so I could cash out the bonds if we see a truly extended downturn.
Frugalite in training.