The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: MoneyGoatee on June 17, 2019, 06:23:50 PM
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I'm a fairly new member, and I was trying to find info on MMM's investment history. We know he retired at age 30. He said in this 2015 interview (https://www.youtube.com/watch?v=vvJ4bwnAHnE) that he had $600k when he retired. We know he spent $25k a year. In this 2018 interview (https://www.youtube.com/watch?v=RyF40JydVNU) (at 1:47), he said he had 1.1 million at the time. So I went into Excel to see if all the numbers bear out. Sure enough, they do. Assuming 8% annual return and 2.5% inflation, I adjusted his $25k annual withdrawal to inflation, and compounded his savings annually with 8%. He started with $600k at age 30 when he retired, and my calculations below show he would end up with about 1.1 million in 2018, just like he said. Of course, annual returns would not have been the same every year. But still he gave us what seem to be correct numbers. Except that in all likelihood he is not withdrawing $25k a year anymore, but $35k.
(https://i.imgur.com/9xVl6n7.jpg)
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In the video, he says it would be about 1.1mil in today's dollars (today = date of interview), so I read that as being inflation adjusted, not stock returns adjusted and not his net worth in 2018.
If I recall correctly, he earns around 400k/yr from this website, so his net worth would most likely come under the "shitload of money" level, and not 1.1mil
If you're doing it out of interest whether it would have worked so far, you need an extra column "Inflation adjusted balance" because 1.1mil today doesn't tell you anything about your purchasing power compared to the start date.
I just checked and
$1,119,724 / ((1.025)^15) = $773,130
So his inflation adjusted worth has increased in this example.
The problem comes in of course that this ignores sequence of returns.
Try it with S&P or US total stock market returns for each of those years (you need to find total returns, not share market price), and it would be more realistic - and very interesting - with the GFC in there!
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If memory serves, a big part of his initial investments were in real estate.
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Everything in this thread so far is true! :)
If you want to refine your model, you could look up the article on when he sold his rent house. Then use his portfolio of 100% VTI for the portion not invested in the rental property, inserting actual values of VTI. More detail don't add much value after that IMHO because you should already be able to see he had "enough".
Sure, I've occasionally noted the income from the blog, added it to a mental model of their stash, and so on. Real results are hard to model because of details in his personal life and business life, but it's pretty clear that his initial assumptions were reasonable based on the lifestyle of the day, and that the family has remained secure.
House article:
https://www.mrmoneymustache.com/2015/06/20/how-to-sell-a-house/
His personal standard investing, apparently:
https://www.mrmoneymustache.com/2013/02/22/getting-rich-from-zero-to-hero-in-one-blog-post/
https://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/
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His wife was also working in the early years of his ER.
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I wonder how his divorce, splitting all the money, and buying a new house for himself has influenced the numbers . . .
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Anyone know the detail of his student loan(s), if any? Principal amount, interest rate, date paid off, etc.?
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I'm pretty sure in his A Brief History of the Stash post he wrote that he didn't have any. His college was paid for with PT jobs from HS through college and scholarships.
Remember he graduated college in the 1990's. I got my first bachelors degree in 1998 and I had maybe 4K in student loans, because it was still possible to mostly pay as you go with low paying jobs back then. The educational-industrial complex is relatively new.
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Anyone know the detail of his student loan(s), if any? Principal amount, interest rate, date paid off, etc.?
He's from Canada, tuition was probably under $5000/yr