Reader Case Study: Punch a Lucky Budding Mustachian in the Face

[schuldav]

Greetings, Fellow Mustachians,

I am a recent convert to Mustachianism, that has enjoyed a host of advantages throughout my life. As a result, I am way, WAY ahead of where I should be financially by my own rights at this point in my life. That said, I have decided to leverage these advantages for good, rather than squander them, as many people in my similar situation do. I still find that from time to time I notice myself "being born on third base and thinking that I hit a triple," as they say. Because of that, I thought it would be constructive for some hardcore Mustachians to take a look at my picture, see where I'm overspending, and give me a good old punch in the face when necessary. Have a look, and thanks in advance:

The Vitals:
Gender: M
Age: 25
Net Worth: ~550k
Income: ~75k after tax (95k pre-tax)
Spending: ~22k per year (hard to nail down since I only have about 3 months of "Mustachian" expenses, but has never been higher than 30k per year or so)

I am a lucky SOB:
 I recognize this. I would estimate that about 3/4 of my net worth has come more or less directly from my parents. (No college debt, ~100k in "reimbursed" tuition for choosing state school Uva over Duke, paid grad school, assorted subsidies.) My dad has set me a great example by living a relatively Mustachian existence on a non-Mustachian high finance salary. He could have retired 20 years ago, but loves his job and will not retire until my mother forces him to. However, this is the same as if I had walked in with $500k of debt in that it doesnt matter how I got here, merely how I handle myself moving forward.

Investments:
 Let's glaze over this section for now. I'm not here for investment advice, and I'm trained very well in this area (it's my profession). For our purposes, we'll just assume the normal 5% growth rate and move on. We can revisit this if anyone would like greater detail of course, but it's not my focus.

Spending:
 Here's my best guess for what my categories of spending are: (again, this is based on roughly 3 months of data, so is reasonably variable still. Any earlier spending data was just based on a principal of "live below your means")

Rent: $525 / month (I split the bottom floor of a duplex with 3 roommates, and we live in a low rent area. Huge win, as I just moved from New York City!)
Car insurance: $65 / month (2013 Ford Fiesta, bought used for $10k cash. Probably a bit more car than I need, but reasonable. I only have liability insurance.)
Gas: $40 / month (I commute the 4 miles to work. Yes, I know this is a textbook face punch, but for me the 10 minutes saved each day are worth the $4 of car costs.)
Utilities: $0 / month. (Included in rent!)
Cable: $0 / month (Not looking to dole out easy face punches)
Cell Phone: $0 / month (Still on the family plan so let's budget in $50 for once I'm no longer on it)
Internet: $15 / month ($60 plan split 4 ways)
Food: $500 / month (The most obvious offender! I am still weaning myself from the habit of eating out always. Chipotle is moving from diet staple to occasional luxury purchase, and I am cooking now.)
Entertainment: $400 / month (Mostly spent on alcohol at bars with friends or tickets to events. Above the approved MMM alcohol budget, I know.)
Misc: $200 / month (Includes travel to visit friends in other cities and all other discretionary purchases: clothes, games, dry cleaning, etc)
Total: $1745 per month*12 + wiggle room = ~22k per year

Ok, so that's the picture. For me, the big offender is Food, and it's something that I'm working on. One could also quibble with the entertainment budget, but I think on the balance it's fine. My entertainment budget is certainly lower here in Richmond than it was in New York, plus I'm single (We'll also briefly mention then ignore that this was $1000 a month when I had a long distance girlfriend). I'm happy to go into more detail on these categories, and this is just based on my recollection, so if there are any categories that you are surprised I've missed ask. And, again, please punch me in the face where I need it!

The more discerning among you may have looked at this and thought "Wait a second, you could retire right now!" Technically you are right, sure. However, I'm also taking into account the fact that I am single, and enjoy my job. I don't know what I would do with my life if I retired, since I wouldn't have a family. I suppose I could try to start my own company or something, but I'd prefer to stay with my current employer to taking that route. However, if you have a particularly strong opinion on this feel free to share it. For now, I will continue building up a more comfortable margin of safety, so that I might be able to afford my children some of the same advantages I have been provided.

All thoughts, questions or suggestions are welcomed. Thanks in advance, and get to punching!

[Grid]

You have an impressive net worth for being so young!  I'm your age, so obviously I'm a bit envious.  You've already pinpointed your greatest expenses - Entertainment + Food = $900, which is over half of your entire monthly budget!  Rein it in where you'd like to, or not - you're practically FI. 

Find out what forms of entertainment can be substituted for cheaper ones.  For example, I enjoy concerts, but when I thought about it, I could get the social enjoyment out of it from just visiting friends, while truthfully the music is less jarring when you listen to it at home.  Live performances rarely live up to recordings (for me).  Perhaps that's a principle you can apply to your entertainment expenses.  Good luck!

Also, when you're no longer on a family plan, get some info from the forums about various wireless providers.  I switched from my parents' plan earlier this year, and I found Republic Wireless to be a good buy.  $12 a month, not the $50 you describe.

[forestbound]

I really like your attitude! Yes, you are way ahead of your age demo. Acknowledging that and not living the "high life" makes you WAY ahead! Food is outrageous for a single guy. You know that. Entertainment is high too, but knock down the food first.

And a FOUR mile commute?? That's nothing, walk or bike! I don't see a gym membership. You need to work off some of that food budget somehow. Otherwise you are doing great and you know it!

[thedayisbrave]

Thanks for posting! I'm in a very similar situation but prefer not to lay all the details out there, as it is mostly "stealth wealth" and I don't want anyone I know in real life to potentally come on here and figure it out.  So I totally admire the courage it took to put this out there!

Yes, you are FI but I'm glad you're not thinking of retiring.  There are still many unknowns and it's likely you'd want a family one day? The more cushion you build now, the better off you'll be later on in life.  Of course you have to still live a little while you can though!

You can definitely cut food and entertainment.  I'm a huge Chipotle buff myself but I started re-creating their bowls at home for so much cheaper.  Just a can of beans, rice, salsa, meat, and lettuce and you're good to go.  I have guy friends who seem to be buying sports tickets every week so I can see how that would get up there... but $400/mo is a little excessive.  Can you limit yourself to a certain # per month? 1 or 2? Can you tailgate or pre-game before so that you're not buying expensive alcohol/food at the game (with a DD of course)?

To put it in context, I budget $50 for miscellaneous and $20 for entertainment spending and frequently stay under.  If a friend wants to go to a movie, I suggest grabbing a Redbox and staying in and bringing over snacks.  I entertain myself by watching videos on Youtube, reading, running, attending free social/networking events (which usually have nibbles too, sweet!) etc.  This is clearly the biggest hole in your budget and can be optimized.  But you have to WANT to optimize them, so maybe the underlying issue here is that you need to set out a clearer plan for what NW you want to reach and when.  I know as someone who was already "born on 3rd base" that is tough because it seems like you're being greedy - at least that's how I felt.  You do need an outline or game plan though because it'll help you stay motivated/focused rather than knowing you could cut stuff, but not really having much incentive to do so.

[dunhamjr]

The Vitals:
Gender: M
Age: 25
Net Worth: ~550k
Income: ~75k after tax (95k pre-tax)
Spending: ~22k per year (hard to nail down since I only have about 3 months of "Mustachian" expenses, but has never been higher than 30k per year or so)

Spending:
 Here's my best guess for what my categories of spending are: (again, this is based on roughly 3 months of data, so is reasonably variable still. Any earlier spending data was just based on a principal of "live below your means")

Car insurance: $65 / month (2013 Ford Fiesta, bought used for $10k cash. Probably a bit more car than I need, but reasonable. I only have liability insurance.)
Gas: $40 / month (I commute the 4 miles to work. Yes, I know this is a textbook face punch, but for me the 10 minutes saved each day are worth the $4 of car costs.)
Cell Phone: $0 / month (Still on the family plan so let's budget in $50 for once I'm no longer on it)
Food: $500 / month (The most obvious offender! I am still weaning myself from the habit of eating out always. Chipotle is moving from diet staple to occasional luxury purchase, and I am cooking now.)
Entertainment: $400 / month (Mostly spent on alcohol at bars with friends or tickets to events. Above the approved MMM alcohol budget, I know.)
Misc: $200 / month (Includes travel to visit friends in other cities and all other discretionary purchases: clothes, games, dry cleaning, etc)
Total: $1745 per month*12 + wiggle room = ~22k per year

Ok, so that's the picture. For me, the big offender is Food, and it's something that I'm working on. One could also quibble with the entertainment budget, but I think on the balance it's fine. My entertainment budget is certainly lower here in Richmond than it was in New York, plus I'm single (We'll also briefly mention then ignore that this was $1000 a month when I had a long distance girlfriend). I'm happy to go into more detail on these categories, and this is just based on my recollection, so if there are any categories that you are surprised I've missed ask. And, again, please punch me in the face where I need it!

The more discerning among you may have looked at this and thought "Wait a second, you could retire right now!" Technically you are right, sure. However, I'm also taking into account the fact that I am single, and enjoy my job. I don't know what I would do with my life if I retired, since I wouldn't have a family. I suppose I could try to start my own company or something, but I'd prefer to stay with my current employer to taking that route. However, if you have a particularly strong opinion on this feel free to share it. For now, I will continue building up a more comfortable margin of safety, so that I might be able to afford my children some of the same advantages I have been provided.

All thoughts, questions or suggestions are welcomed. Thanks in advance, and get to punching!

You are in a great place already.
25yo and making nearly $100k/yr but only spending $22k... plus the $550k net worth. 
You are in a good spot.

With that.  I also think you have a good handle on where your money is being spent.  IMO, cutting more is about really cranking down on spending more then any sort of real need.

And those places you could cut, you seem to have already identified pretty well.

What I see:
Car insurance at $65/mo seems maybe a little higher than it could be.  Shop around, check your coverages.  Location, car, driving history, age... all play a part of course, but I am currently insuring 2 cars (2004 Saab, 2013 VW)/2 drivers (39) near Seattle with Progressive for $88/mo, and am looking to change and it seems like I can get down to around $65/mo for 2 cars.

Gas $40/mo.  If you REALLY want to cut this will drop off when you buy a bike. ;)  You live 4 miles from work. You should be riding your bike to work.  As was mentioned, no gym membership mentioned... so maybe this is some needed exercise as well.

Cellphone $0.  Great that you can jump on the family plan, but in your spot, I would have my own account.  Depending on needs you can get cricket, ting, republic for $5-40/mo.  $50/mo is a little high, but reasonable.

Food $500, you already know this is your week spot.  Time to brown bag at work most/all days.  Make food at home.  Stash some less perishable snacks at the office, in the car... so that you don't need to buy convenience foods.

Entertainment at $400/mo is quite a large amount.  You have the cash for sure, but that is nearly $5k per year on beer(or whiskey) and music.  That is more than I paid for my 2004 Saab, which was a 1 time purchase that can carry me, my wife, and our 2 kids anywhere a road will take us... not a recurring yearly expense that goes in one end and ends up in a toilet 4 hrs later. ;)

Misc $200.  Doesn't seem bad depending on what it contains.  If you are comfortable with it, it seems fine.  But if you want to cut, look to itemize this a bit more to determine what MISC really means.  Until I got into my wife's CC accounts, I never realized how much she spent on coffee and e-books. :doh:

[surfhb]

Posts like these crack me up

You're fine with your spending.   You're young, you're dating(?) and keep your savings rate well over %50!    Why do you feel you need to cut spending.....I'm just curious?

Clearly, you've already won or close to winning the game.    What's your true motivation for this case study?   

You're not a budding mustachian.....you already kick the pants out of %95 of the people on this forum Bro!   

The only change I would make would be to cook and eat at home because it's healthier

[neil]

$1100 includes food but it is really a lot of miscellaneous spending.  But other than criticizing the number, the first step is just thinking about what you are spending on.  It's easy to spend on what is in front of you, but you are at an age where you should really start to reflect on what value you are getting out of it.  It is common for a bunch of friends to go to the theatre, but I almost always pass on that.  If I am going out to be social, I intend to be social, not sit quietly and stare at an oversized television for $15 a pop.  There are probably things you feel the same way about.  Poker and gaming nights (as long as the expense is shared among friends) can be more fun than simply going out to a bar.

If some of that budget is dating, this is not an area I would necessarily cut to a bare-bones number.  You don't want to give the impression that you are cheap.  Be thoughtful and reasonable about how you spend so you don't give the impression that it is an expectation either.  There are also plenty of things to do which are basically free.  Once you find someone you are serious about, bring her into the fold and explain your lifestyle and that you aren't interested in inflating that.  You don't have to be completely in sync, but you'll want someone who is at least in the same ballpark.

More importantly, use the time to think about what you want in life.  That might be your current career path, but it might be something else.  The first stage of FI is not retirement but being able to do what you like without significant risk because the stash can support you.  Do a lot of reading and see what is available for you.  Depending on how much your parents supported your college expenses, you might want to keep them in the loop.  It sounds like they wanted to give you this opportunity, but they probably want to see you have a plan for it rather than doing the math and "retire" because you are capable.  It also sounds like they would have a lot of input to provide and guide you through the process.

[schuldav]

Grid - thanks, and you're absolutely right about the entertainment. For example, we recently instituted a weekly poker night to replace a guys night out at the bar (I also gain the benefit of winning money on the margin in the poker games.) But yeah, the entertainment is an affordable expense and provides for countless... entertainment. It's not a priority for me to cut it materially.

Forest - Thank you! I will push back a small bit on the commute, however. I need to be in the office a little after 8:00, and my morning routine is currently wake up, shower, change, and drive to work (I don't even eat breakfast, I wait till lunch for my first meal). If I biked I'd need to wake up earlier, or go to bed earlier, and for me the saved time is worth it, even if I'm being a bit of a wussy pants. I save about 5 minutes each way, so 10 minutes a day, and incur about $4 of car costs. At $25 / hour, that's a slight win for driving!

Brave - Thanks, it's weird how having a high net worth can become a point of personal "shame," right? Not to say that I'm ashamed by any means, but I'm always reticent to speak on the topic. I liken it to when I had a job lined up in my senior year of college, I would never ask my peers about post grad plans in case they didn't have one.

Bang on about the no retiring. I don't see a point to retiring now, and might as well build more cushion for future family. As to food and entertainment, I'm actively working on the food budget, rice and beans are a new staple! The entertainment is a secondary concern but can be worked on. One challenge in that is the size of my group of friends. It's a "core group" of 6, with another 12 or so that come and go. We do a number of cheap things like poker nights, floating down the river on our own tubes, or watching football games in each others apartments, but I think it would be penny wise / pound foolish for me to say no to the assorted bar nights that people suggest on weekends.

Great suggestion on planning for more long term NW goals. I briefly made a spreadsheet and looked at some of the numbers, but I think it's a very good exercise to look at how different levels of spending now would affect the levels I'd be able to provide 10 years down the line, thanks!

Great stuff so far guys, thank you!

[ADK_Junkie]

I agree with surfhb...

You really don't need any advice or face-punches.  OK, definitely one:  walk or bike to work (for both your health and the environment, but not for saving money).

Otherwise, you are young and probably having fun.  Your friends are probably a lot poor than you and this is the best of all scenarios since you can "participate" without stressing out about money.  Just watch out for lifestyle inflation once your friends start making more money.  Same thing goes for when you become smitten with a girl.

One possible place to save some money is probably lunches with co-workers, but you can try to shift the socialization from eating out to going for a walk together (and encouraging everyone to brown bag it).

So, I say, don't worry about cutting your expenses down, just be watchful for when they start to rise.  Obviously, you are already FI if you can keep these expenses low.  Your costs will definitely rise in the future (i.e., when you purchase a home), so maybe you need some additional goals for motivational purposes, like reaching FI with an income of $60K or even $90K.  Maybe think of your current $550K as unearned, and you won't be satisfied until you've earned it (so keep the $550K in a separate account and your "earnest" contributions/savings in another). 

[schuldav]

surf - yeah, you're kinda right. I recognize that I don't have a huge need to cut spending. I guess in the same way MMM could spend a lot more than he can but chooses to spend the same amount. I want to become a touch more badass while reap the extra benefit of increased security.

More to the motivation, the transition from dating to singlehood just made me look a bit more closely at my finances and how I could improve them. I mentioned the entertainment expenses dropped a bunch, by default, and I wanted to see where I could improve that momentum, so that I have even more slack for the "lifestyle inflation" that comes with dating a non trained mustachian. And thank you for the kind words!

[Villanelle]

If biking is intimidating, consider biking only one way.  On Monday, drive in with the bike and bike home.  Tuesday, bike in and drive home with the bike.  Repeat.

[surfhb]

Like mentioned before, your main obstacle in the future will be to avoid lifestyle creep.   Finding a girl (or guy) who shares your financial values will be NÚMERO UNO!   Purchasing a home and raising kids will also test your MMM muscles so it's great you're already have the attitude you have!   

[RangerOne]

    I would only tighten your spending if you enjoy min maxing your money which it appears you do. But otherwise you are saving a lot. You should be able to enjoy some wonderful life experiences while still building wealth since your nest egg can essentially grow itself.

    Also if you have a specific goal, like owning a home in a few years or growing your nest egg to a point where you don't need a traditional career maybe more financial scrutiny could benefit you.

    In a pinch you could take a year off work to travel probably and meet some wonderful people.  I would use your extra cushion to really make sure you are doing work you love because lets face it, you can afford to take a lower salary initially to do something you really want to do or live somewhere you would rather be.

    Other than that keep going out and meeting new people. Being young single and done with school is an exciting time.

[iwasjustwondering]

If you really want to be mustachian, then go big.  What do you do for a living?  Do you love it (love love love it)?  If not, what would you rather do?  Quit, and then go do that.  You have the financial wherewithal to live the life you want. 

[UnleashHell]

one thing that you might give consideration to as you have a high net worth already - buying the duplex and continue renting it out. that could boost the income considerably.

[Fuzz]

Switch to cheaper booze, unless you're already drinking PBR. And get a bike for the health reasons. But yeah, basically you're crushing it.

[schuldav]

justwondering - yes, I do love my job, and I'm definitely in the correct industry. I guess one pie in the sky goal for me would be to run my own firm, but it would be a much more stressful, high leverage play. I have thought about it, but I think it's better to choose the low stress, high job security position over the high stress, low job security bet. It's still a possibility that I have down the road, but at least for the time being I'm happy here. Maybe it will go on the long term goal list!

Unleash - Yes, I have definitely given that a thought! I am still doing research and running numbers on it, but if you have any suggestions for resources I'm all ears.

Fuzz - Unfortunately, most of it is PBR! (Busch Lite technically) I normally get bourbon gingers at bars, but that probably adds only $30 / month over the cheap beer option there. (Call it 15 drinks a month at $2 each)

Thanks again guys!

[Patrick A]

Avoid lifestyle creep.  Learn to cook delicious meals. 

Are you in good shape physically?

[Capsu78]

I think one of the best "investments" I made in life was to stay single until I was 27- I never felt in my now 30 years of marriage that I missed out on being a single guy.  I did everything on the non cheap - lived in a high cost area (SF), regular concerts, season tickets to the 49ers/Cal, snow skiing, lake sailing, lost weekends with the Lost Boys.   While I was doing all that, I was not in that crappy first marriage a number of my HS buddies and college friends were in.  I have rewatched that movie as the friends of my adult children whom we have known since soccer league are in various stages of crappy first and even second marriages.
Id say you were doing pretty well and your biggest hurdle might be finding a life companion who truly shares your interest in living well below your means.  That, my friend, is the biggest challenge I would see in your future.