Author Topic: MMM 2016 Budget  (Read 69556 times)

Kay-Ell

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Re: MMM 2016 Budget
« Reply #400 on: September 18, 2017, 12:31:44 PM »
Come on guys...

The Studio is an investment.  It's no more "spending" than purchasing stocks or buying the new house is "spending."  He built a 50k shed for 30k by DIY-ing a lot of it.  Whether it was a financially good investment or not remains to be seen (I think it probably was), but there is no denying that it is an appreciating asset that increases the over all value of his property.  He sold one asset (his larger house), bought, renovated and enhanced another like-kind asset (his new house + studio) and still came out ahead.  How is there any confusion on whether this represents $30k of additional spending in his 2016 budget?

The car was spending.  Sure, he can deduct is as a business expense on his taxes if he wants to.  But it replaced his personal car.  We can argue that it's anti-mustatchian all we want but, we'd only be half right.  There's zero way that buying a brand new Leaf is the most cost effective vehicle for his family.  But finding the cheapest way to do something has never been the entire MMM philosophy.  The equation balances living the good life, with finding the most cost effective short cuts.  He wanted a leaf and he mustache'd the hell out of the transaction to bring the cost of the car down as low as possible.  So he spent $9000 somewhat unnecessary dollars, to replace a car that was still good.  It's a depreciating asset that, if past habits hold true, should probably be amortized over 12 years, increasing his spending by roughly $750 a year.  That's not even counting what it will be worth when he does eventually sell it, or any income the Leaf generates in his new Uber hobby.

I feel like the 2016 budget is leaving a lot of people with a sense of betrayal.  That maybe you can't cut your spending down to the bare bones, making no provisions for future purchases, leave yourself no safety margin and expect the 4% rule to take care of you.  But when has that ever been the MMM message?  Does anyone here really think that his ability to replace a 12 year old car with one costing under 10k, or sell his old house for a profit that was more than enough to covers the cost of buying a new one (and building a studio) is because he's a celebrity blogger? Does 2006 Pete get no credit for building a safety margin into his calculations, long before the blog was a factor?  Sure he gets invited to speak at various places now, and travels to Ecuador sometimes.  Those are perks of writing a one in a million blog.  I guess I missed the part where the blog ever suggested we could/should be just like him with all of the exact proficiencies and opportunities.  Is there a post someone can link me to that says "you can retire early, live comfortably on 25k per year, AND fly around the world speaking at events because of your hugely popular blog, if you just get your savings rate up to 50%."  It's never been part of the deal.  It won't be a part of most of our lives.  And I, personally, don't see any reason why that should be disheartening to anyone here.

I'm a red panda

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Re: MMM 2016 Budget
« Reply #401 on: September 18, 2017, 12:40:38 PM »
Come on guys...

The Studio is an investment.  It's no more "spending" than purchasing stocks or buying the new house is "spending."  He built a 50k shed for 30k by DIY-ing a lot of it.  Whether it was a financially good investment or not remains to be seen (I think it probably was), but there is no denying that it is an appreciating asset that increases the over all value of his property.  He sold one asset (his larger house), bought, renovated and enhanced another like-kind asset (his new house + studio) and still came out ahead.  How is there any confusion on whether this represents $30k of additional spending in his 2016 budget?


If I replaced my ugly carpet with hardwood floors, would that be spending? Or investing?   
I mean, probably my house will sell for more with the wood floors, but maybe not. So I guess it remains to be seen if it was a good investment or not.  I'd spend LESS because we'd DIY it, but I'd still be spending.

Nope, not buying it.  The shed was an expense.  He spent $30k. It's awesome that he didn't spend $50k.

If he can later sell it for more, awesome.  But can't I say that about anything?  I just sold a video game for 3x what I paid for it in 1990. Does that make it an investment when I bought it? Can I call all my video games investments now instead of spending. I guess it will just remain to be seen which ones were good investments.

I'm not saying the guy is a consumerist sucker. He spends on pretty reasonable things. But it is still spending.

mizzourah2006

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Re: MMM 2016 Budget
« Reply #402 on: September 18, 2017, 02:18:36 PM »
Come on guys...

The Studio is an investment.  It's no more "spending" than purchasing stocks or buying the new house is "spending."  He built a 50k shed for 30k by DIY-ing a lot of it.  Whether it was a financially good investment or not remains to be seen (I think it probably was), but there is no denying that it is an appreciating asset that increases the over all value of his property.  He sold one asset (his larger house), bought, renovated and enhanced another like-kind asset (his new house + studio) and still came out ahead.  How is there any confusion on whether this represents $30k of additional spending in his 2016 budget?


If I replaced my ugly carpet with hardwood floors, would that be spending? Or investing?   
I mean, probably my house will sell for more with the wood floors, but maybe not. So I guess it remains to be seen if it was a good investment or not.  I'd spend LESS because we'd DIY it, but I'd still be spending.

Nope, not buying it.  The shed was an expense.  He spent $30k. It's awesome that he didn't spend $50k.

If he can later sell it for more, awesome.  But can't I say that about anything?  I just sold a video game for 3x what I paid for it in 1990. Does that make it an investment when I bought it? Can I call all my video games investments now instead of spending. I guess it will just remain to be seen which ones were good investments.

I'm not saying the guy is a consumerist sucker. He spends on pretty reasonable things. But it is still spending.

How it's accounted for in an accounting budget is different from how it is accounted for in cashflow. It can be an investment with regards to networth changes, but the cashflow is certainly impacted until you sell. The issue I and it seems you also have is that FIRE is based on a safe withdrawal rate and hence is a cashflow based model.

Building the shed may improve the value of his home and thus be a networth neutral move, but that doesn't change the fact that it requires cash to do it, so it is an expense as far as outgoing money is concerned.

If you retired with 1 million as a nest egg and used a SWR of 4%, but you made upgrades to your house and rental properties of $15-$20k/yr would you calculate your expenses as a 4% withdrawal rate or a 6% WR?

The only reason he can do this is because he doesn't have any long term concerns about cashflow issues. It's similar to people here that compare themselves to living like they are working poor. Sure you can have expenses of $20k/yr, but if you had an emergency your cashflow could easily cover another $5-$10k in a few months if even your emergency fund could not.

Kay-Ell

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Re: MMM 2016 Budget
« Reply #403 on: September 18, 2017, 02:34:19 PM »
The only reason he can do this is because he doesn't have any long term concerns about cashflow issues.

I would say the only reason he could do this is he sold his larger, more expensive house and used the profits to buy a smaller house, renovate it and build a studio, while still coming out ahead.  It goes without saying that if a 4% SWR gives you $25,000 in annual income you can't afford to retire with a $25,000 per year budget, let alone build a 30k shed.

Kay-Ell

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Re: MMM 2016 Budget
« Reply #404 on: September 18, 2017, 02:41:04 PM »
If I replaced my ugly carpet with hardwood floors, would that be spending? Or investing?   
I mean, probably my house will sell for more with the wood floors, but maybe not. So I guess it remains to be seen if it was a good investment or not.  I'd spend LESS because we'd DIY it, but I'd still be spending.

I buy houses and use them as rentals.  I put wood floors in all of them.  It's always been a good investment :-P

mizzourah2006

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Re: MMM 2016 Budget
« Reply #405 on: September 18, 2017, 02:44:05 PM »
The only reason he can do this is because he doesn't have any long term concerns about cashflow issues.

I would say the only reason he could do this is he sold his larger, more expensive house and used the profits to buy a smaller house, renovate it and build a studio, while still coming out ahead.  It goes without saying that if a 4% SWR gives you $25,000 in annual income you can't afford to retire with a $25,000 per year budget, let alone build a 30k shed.

IMO that's still an expense. If I had 1.2 million in investments and a $200k mortgage and tomorrow I decided to pay off the $200k mortgage with $200k from my investment portfolio would that be an expense in your opinion? It's actually a networth neutral move and I had specifically saved the extra $200k above my SWR for that purpose, just like he was able to build the shed because he bought a cheaper home and thus had additional money left over from the sale of his old home. Again it depends on how you look at it and from an accounting perspective, sure, it may have been neutral, but the cash did have to leave his pocket and I would consider that an expense regardless of whether or not you had the extra cash from a profit elsewhere.

I'm a red panda

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Re: MMM 2016 Budget
« Reply #406 on: September 18, 2017, 02:47:11 PM »
If I replaced my ugly carpet with hardwood floors, would that be spending? Or investing?   
I mean, probably my house will sell for more with the wood floors, but maybe not. So I guess it remains to be seen if it was a good investment or not.  I'd spend LESS because we'd DIY it, but I'd still be spending.

I buy houses and use them as rentals.  I put wood floors in all of them.  It's always been a good investment :-P

Our last house it didn't help the value, sort of. I mean, the house sold for more than the house next door- but there was a major market drop, so we didn't recoup the cost.

moof

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Re: MMM 2016 Budget
« Reply #407 on: September 19, 2017, 12:31:04 PM »

tooqk4u22

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Re: MMM 2016 Budget
« Reply #408 on: September 19, 2017, 03:13:41 PM »
Come on guys...

The Studio is an investment.  It's no more "spending" than purchasing stocks or buying the new house is "spending."  He built a 50k shed for 30k by DIY-ing a lot of it.  Whether it was a financially good investment or not remains to be seen (I think it probably was), but there is no denying that it is an appreciating asset that increases the over all value of his property.  He sold one asset (his larger house), bought, renovated and enhanced another like-kind asset (his new house + studio) and still came out ahead.  How is there any confusion on whether this represents $30k of additional spending in his 2016 budget?

The shed may or may not add value to the house just like adding a $50k pool may or may not (BTW typically doesn't unless you are in places like AZ, SoCal, etc).  But I agree 100% with the bolded part - yes its spending but he did it by selling a house and redeploying it into a smaller house that he made some improvements to - my guess is he still has a surplus for the house sale.  The only caveat is that when he got on his soap box about downsizing for the greater good only to retrench and build a $0k shed for more room....oh and now a commercial property for more room.

tooqk4u22

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Re: MMM 2016 Budget
« Reply #409 on: September 19, 2017, 03:19:09 PM »
How it's accounted for in an accounting budget is different from how it is accounted for in cashflow. It can be an investment with regards to networth changes, but the cashflow is certainly impacted until you sell. The issue I and it seems you also have is that FIRE is based on a safe withdrawal rate and hence is a cashflow based model.

Not necessarily, from an accounting view it could be argued that the cash went out today but the accrual is spread over 30 years.  Personally, I funnel $400/month into an account just for home repair/upgrades and don't count it in my net worth.  Some years I have had $10k in costs come up and others very little.  I take the money out of the account to pay for it and that's that so my cash flow year in year out is only impact by $4800 even though I may have spent $10k.  That's kind of what he did here with the funds from his other house.


mizzourah2006

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Re: MMM 2016 Budget
« Reply #410 on: September 19, 2017, 04:17:49 PM »
How it's accounted for in an accounting budget is different from how it is accounted for in cashflow. It can be an investment with regards to networth changes, but the cashflow is certainly impacted until you sell. The issue I and it seems you also have is that FIRE is based on a safe withdrawal rate and hence is a cashflow based model.

Not necessarily, from an accounting view it could be argued that the cash went out today but the accrual is spread over 30 years.  Personally, I funnel $400/month into an account just for home repair/upgrades and don't count it in my net worth.  Some years I have had $10k in costs come up and others very little.  I take the money out of the account to pay for it and that's that so my cash flow year in year out is only impact by $4800 even though I may have spent $10k.  That's kind of what he did here with the funds from his other house.

Now we are getting into semantics. I would argue regardless of whether or not you count it as part of your networth it still counts. A sinking fund is still your cash. You either count it as an expense as it goes into your sinking fund or an expense when it all comes out, but it is an expense at some point down the line. We did the same thing when we redid our kitchen counters last year. I saved money up in a savings account and then when the contractor needed money I paid him. I counted it as an expense the month the bill came to me, but I could have just as easily counted each month's savings as an expense and never counted the bill in its entirety. The bottom line re-doing kitchen counters will almost certainly add more value to my home than a shed in my backyard would. I still counted it as an expense, it my be recouped later, it may not, but when I sell my home or if I get it appraised and it is valued higher then I would increase my networth, but it does nothing to increase my ability to produce cash at until I sell the asset, which is very illiquid in the first place.

The way I look at this and why I see this as 'fabricating' is that we are all working on the premise of a SWR which will produce a certain amount of income for us each year. To say that upgrading your home or buying a new car isn't really a cost, but is actually an investment ignores the fact that it takes some of your income regardless if it is networth neutral or not. If you are living off of $40k/yr (1 million invested) and a $10k expense comes up, like re-doing your bathroom, you can't just ignore the fact that for that particular year your withdrawal rate is 5% because it is actually networth neutral or slightly networth positive given a new home appraisal. Now he did say he had the additional money leftover from downgrading his house, but I would still consider that an expense, just as I would consider taking $200k out of your 1.2 million in investments to pay off the remaining $200k of your mortgage an expense to leave you with no mortgage and a $40k/yr SWR. You definitely could afford that expense given that it will still remain networth positive, but it is still an expense in my book. If you are saying that building the new shed with a profit from the sale of his old home isn't an expense then using $200k from your profits on your investments to pay off your mortgage isn't really an expense.  Thus really the only expense in a mortgage payment is the interest. I consider the payment in its entirety an expense (part of which is networth neutral) because I know at the end of the day I can't tell the mortgage company I'm not going to pay the principal this month. The bill still comes due.

But again, I'm thinking about it from supporting all expenses that come due on a specific SWR, so I count all one time expenses as an expense (even things like child birth) and I separate out recurring 'lifestyle' expenses from total expenses, but I still count them all. Given that at this point MMM doesn't even need to use his nest egg he has the luxury of not worrying about it, he's essentially still employed, but many of us won't end up in his situation. I say that with no ill-will at all, I think it's awesome what he has done and am happy for him that he has gotten even a little bit back for everything he has provided most of us, including a community to discuss this with like-minded individuals.

obstinate

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Re: MMM 2016 Budget
« Reply #411 on: September 19, 2017, 09:48:00 PM »
Hard to re-read this post:
https://www.mrmoneymustache.com/2011/04/19/how-to-come-out-way-ahead-when-buying-a-used-car/
Why? Even supposing MMM's mindset has changed, does that invalidate the mindset he had three and a half years ago? Is anything in that post less true than it was the day it was written?

Kay-Ell

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Re: MMM 2016 Budget
« Reply #412 on: September 21, 2017, 10:35:16 AM »
Hard to re-read this post:
https://www.mrmoneymustache.com/2011/04/19/how-to-come-out-way-ahead-when-buying-a-used-car/
Why? Even supposing MMM's mindset has changed, does that invalidate the mindset he had three and a half years ago? Is anything in that post less true than it was the day it was written?

This is the problem with idolizing a person instead of utilizing their message in a way that works for you individually. I've learned a lot from MMM, I've enjoyed finding a community of people who view money and lifestyle in a similar way to me.  I think Pete sounds like a cool guy that I'd enjoy being friends with.  And if he decides to move to a tropical island and hire a staff of people to change his catheter and bed pan, so be it.  I've still gotten a ton of enjoyment and value from reading the blog and forum.

dougules

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Re: MMM 2016 Budget
« Reply #413 on: September 21, 2017, 10:43:15 AM »
Hard to re-read this post:
https://www.mrmoneymustache.com/2011/04/19/how-to-come-out-way-ahead-when-buying-a-used-car/
Why? Even supposing MMM's mindset has changed, does that invalidate the mindset he had three and a half years ago? Is anything in that post less true than it was the day it was written?

This is the problem with idolizing a person instead of utilizing their message in a way that works for you individually. I've learned a lot from MMM, I've enjoyed finding a community of people who view money and lifestyle in a similar way to me.  I think Pete sounds like a cool guy that I'd enjoy being friends with.  And if he decides to move to a tropical island and hire a staff of people to change his catheter and bed pan, so be it.  I've still gotten a ton of enjoyment and value from reading the blog and forum.

Also it seems like people forget that MMM is a persona/caricature.

rweba

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Re: MMM 2016 Budget
« Reply #414 on: September 22, 2017, 06:57:31 AM »
Obviously plenty of people are upset, and I thought about it and i think I understand why.

I think this is partly MMM's own fault. He created this exaggerated persona of MMM, denounced consumerism and portrayed himself as "The Ultimate Frugal Guru" (although he has always admitted that people like Jacob Lund Fisker of ERE spend much much less than him).

So he built this expectation that people should see him as a role model. In this light it's understandable people are going to say "You're a hypocrite! You make $400,000/year, go on fancy foreign trips, buy brand new cars and build $30,000 sheds that you don't count as expenses, and call yourself frugal! You're a fraud and a liar!"

But I would argue that IT DOESN'T MATTER WHAT MMM DOES!

What matters is how sound the ideas are and how effectively you can apply them to your life.


There are a couple of ways you can evaluate the principles independent of what MMM does:

(1) Check the Math

It ultimately boils down to a simple math problem:

Under reasonable assumptions, can an "average/typical middle class American/Westerner" save up enough assets so that within 10-20 years the long-term income from their assets is greater than their typical spending?

You can evaluate this math completely independently of what MMM does and see if it makes sense to you. A lot will depend on what kind of assumptions you are willing to make, your risk tolerance and your personal circumstances.

http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

(2) Look at others
There are many people other than MMM who have achieved FI at an age less than 50. Some of them post in the MMM forums and others have blogs. If you can't relate to MMM maybe you can relate to them.

https://forum.mrmoneymustache.com/post-fire/

http://rootofgood.com/zero-to-millionaire-ten-years/

So maybe MMM isn't relatable to the average person anymore. That doesn't mean the basic principles aren't still applicable.

moof

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Re: MMM 2016 Budget
« Reply #415 on: September 22, 2017, 02:16:49 PM »
He financed a new car, then hand waved away any accounting of it.  He did major work on his home and hand waved the cost away.  We're I too do the same with how I calculate my annual spending I would be FI now by this insane logic/accounting.

Fomerly known as something

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Re: MMM 2016 Budget
« Reply #416 on: September 23, 2017, 06:04:35 PM »
The only reason he can do this is because he doesn't have any long term concerns about cashflow issues.

I would say the only reason he could do this is he sold his larger, more expensive house and used the profits to buy a smaller house, renovate it and build a studio, while still coming out ahead.  It goes without saying that if a 4% SWR gives you $25,000 in annual income you can't afford to retire with a $25,000 per year budget, let alone build a 30k shed.

IMO that's still an expense. If I had 1.2 million in investments and a $200k mortgage and tomorrow I decided to pay off the $200k mortgage with $200k from my investment portfolio would that be an expense in your opinion? It's actually a networth neutral move and I had specifically saved the extra $200k above my SWR for that purpose, just like he was able to build the shed because he bought a cheaper home and thus had additional money left over from the sale of his old home. Again it depends on how you look at it and from an accounting perspective, sure, it may have been neutral, but the cash did have to leave his pocket and I would consider that an expense regardless of whether or not you had the extra cash from a profit elsewhere.

I recently changed houses.  I didn't really change sizes but I did on value.  I have a portion of the profit set aside to cover the expenses of a planned renovation.  Will I get 100% of my "investment" back if/when I go to sell, maybe but it's still a budgeted expense for the year.  I could have put the difference in more Total Stock Market shares, or made a down payment on a rental property, but I didn't.  I'm choosing to spend it.  If it was a flip or a rental I'd likely have a different opinion but like MMM this is my primary residence.   

tooqk4u22

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Re: MMM 2016 Budget
« Reply #417 on: September 25, 2017, 03:42:33 PM »
How it's accounted for in an accounting budget is different from how it is accounted for in cashflow. It can be an investment with regards to networth changes, but the cashflow is certainly impacted until you sell. The issue I and it seems you also have is that FIRE is based on a safe withdrawal rate and hence is a cashflow based model.

Not necessarily, from an accounting view it could be argued that the cash went out today but the accrual is spread over 30 years.  Personally, I funnel $400/month into an account just for home repair/upgrades and don't count it in my net worth.  Some years I have had $10k in costs come up and others very little.  I take the money out of the account to pay for it and that's that so my cash flow year in year out is only impact by $4800 even though I may have spent $10k.  That's kind of what he did here with the funds from his other house.

Now we are getting into semantics.

Maybe

I would argue regardless of whether or not you count it as part of your networth it still counts. A sinking fund is still your cash. You either count it as an expense as it goes into your sinking fund or an expense when it all comes out, but it is an expense at some point down the line. We did the same thing when we redid our kitchen counters last year.

Any money out is an expense/cost/investment etc.  but its about smoothing the cash flow.  You can't count a sinking fund in your net worth bc then you would be double counting - its effectively prepaid expenses.  So yes, I recognize the sinking fund payments as an expense but I also track the actual expense to be sure they line up over time.

I saved money up in a savings account and then when the contractor needed money I paid him. I counted it as an expense the month the bill came to me, but I could have just as easily counted each month's savings as an expense and never counted the bill in its entirety.

I think both might be wrong.....a big one time expense in a single month/year or even saving up for it in a short time for something that will last many many years and won't need to be redone...should be spread out over a period of time.  And its optional.  Even still, I estimated the remaining life of most of my big items (including some optional stuff like baths and kitchens) costs then started a sinking fund with that amount ($5k roof that should last 20 years from new but is 10 years old =$2.5k initial deposit)  then do monthly payment with the annual amount included in my FIRE calc spending.  I don't think homeowners think enough about this stuff even on this site.  Typically it just builds up but sometimes it gets drained and for the optional stuff it can always be pushed back if needed. 

The bottom line re-doing kitchen counters will almost certainly add more value to my home than a shed in my backyard would. I still counted it as an expense, it my be recouped later, it may not, but when I sell my home or if I get it appraised and it is valued higher then I would increase my networth, but it does nothing to increase my ability to produce cash at until I sell the asset, which is very illiquid in the first place.

Yeah I am not giving credit for possible value creation - people generally have no clue what that even means but yes your counters are probably better than a fancy shed.


The way I look at this and why I see this as 'fabricating' is that we are all working on the premise of a SWR which will produce a certain amount of income for us each year. To say that upgrading your home or buying a new car isn't really a cost, but is actually an investment ignores the fact that it takes some of your income regardless if it is networth neutral or not. If you are living off of $40k/yr (1 million invested) and a $10k expense comes up, like re-doing your bathroom, you can't just ignore the fact that for that particular year your withdrawal rate is 5% because it is actually networth neutral or slightly networth positive given a new home appraisal. Now he did say he had the additional money leftover from downgrading his house, but I would still consider that an expense, just as I would consider taking $200k out of your 1.2 million in investments to pay off the remaining $200k of your mortgage an expense to leave you with no mortgage and a $40k/yr SWR. You definitely could afford that expense given that it will still remain networth positive, but it is still an expense in my book. If you are saying that building the new shed with a profit from the sale of his old home isn't an expense then using $200k from your profits on your investments to pay off your mortgage isn't really an expense.  Thus really the only expense in a mortgage payment is the interest. I consider the payment in its entirety an expense (part of which is networth neutral) because I know at the end of the day I can't tell the mortgage company I'm not going to pay the principal this month. The bill still comes due.

So you pay off your mortgage to retire then you suddenly need $6,000,000 to FIRE ($200k mortgage + $40k Spending x 4%) - that sucks, I think I would rather keep the mortgage and fire off of $1.2-1.3mil (depends on interest rate) ;)

But again, I'm thinking about it from supporting all expenses that come due on a specific SWR, so I count all one time expenses as an expense (even things like child birth) and I separate out recurring 'lifestyle' expenses from total expenses, but I still count them all.

Oh, so you are fabricating like the rest of us. Your FIRE number shouldn't be based on a year with large one time expense or on a year with none of them - it should be matched with the expected number over the span of the FIRE period.  Say you have a roof and HVAC replacement in a single year above your $40k spend that could take that year to $50-60k and require $1.25-1.5mil vs. $1mil.  That doesn't make sense. 

If you downsize your house and pocket $300k then go and buy another house for $200k and put $100k into it then it is neutral to FIRE - did you spend the money sure but that's like saying every day I decided not to sell my house so I must be making a decision to buy my house....damn, I spend $300k every day.....I am never going to FIRE.

Again the 4% rule needs to cover inflation adjusted expenses for the period of your FIRE. 



Classical_Liberal

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Re: MMM 2016 Budget
« Reply #418 on: September 27, 2017, 02:04:36 AM »
If you downsize your house and pocket $300k then go and buy another house for $200k and put $100k into it then it is neutral to FIRE - did you spend the money sure but that's like saying every day I decided not to sell my house so I must be making a decision to buy my house....damn, I spend $300k every day.....I am never going to FIRE.

It's not neutral to FIRE because a buy-sell of equal value real estate transaction can cost upwards of 15% of the homes value.

mizzourah2006

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Re: MMM 2016 Budget
« Reply #419 on: September 27, 2017, 09:50:33 AM »
Oh, so you are fabricating like the rest of us. Your FIRE number shouldn't be based on a year with large one time expense or on a year with none of them - it should be matched with the expected number over the span of the FIRE period.  Say you have a roof and HVAC replacement in a single year above your $40k spend that could take that year to $50-60k and require $1.25-1.5mil vs. $1mil.  That doesn't make sense.

This doesn't make sense. If I had a roof and an HVAC repair the same year I would cut expenses elsewhere.

So you pay off your mortgage to retire then you suddenly need $6,000,000 to FIRE ($200k mortgage + $40k Spending x 4%) - that sucks, I think I would rather keep the mortgage and fire off of $1.2-1.3mil (depends on interest rate) ;)

I have no clue what you are trying to say here.

Where are you getting the needing 6 million to FIRE? If I have a $200k mortgage and 1.2 million and I pay it off I still have the 1 million remaining? Which would support a $40k/yr lifestyle, I'd just have more discretionary spending instead of paying my mortgage. Not sure where you got the 6 million from.

Again, my main point is I track all of my spending each year. I don't depreciate my couches lifespan. I just know that in X amount of years I might need a new couch, a new roof, etc. That might involve spending less in one year and having a bit more left over or it might involve not going on a couple trips, etc. but either way it is an expense that needs to be accounted for. Even using a sinking fund approach you would need to account for it as an expense at some point, would you not? You can count for it monthly over 24 months, or as a lump sum there really isn't a difference when it comes to looking at how much you spend. The only difference is developing arbitrary cut points (a month, a year, 5 years, etc.) and determining how much you spend during that given time period.

If you downsize your house and pocket $300k then go and buy another house for $200k and put $100k into it then it is neutral to FIRE - did you spend the money sure but that's like saying every day I decided not to sell my house so I must be making a decision to buy my house....damn, I spend $300k every day.....I am never going to FIRE.

We saved $10+k by not buying a house with granite countertops and instead putting in quartz in the one we wanted. So should I count that as a profit because it only cost us $5k?

I don't see the difference between realizing a profit on a home sale and realizing a profit on an index fund sale. So, to me it is not neutral. If it is to you then the same can be said about realizing profits in all investments to purchase something. So if you realize $90k in index fund profits to purchase a Tesla it is neutral, right?
« Last Edit: September 27, 2017, 09:53:09 AM by mizzourah2006 »

bufar

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Re: MMM 2016 Budget
« Reply #420 on: October 01, 2017, 12:15:19 PM »
Me personally yes, but I don't go around telling people but that I have the one true way of living and you're a consumer sucka if you don't agree with me.

MMM has been all about how his ideals are more important than money so there seems to be some cognitive dissonance there. Would MMM really have used some of these things if there wasn't the potential payoff down the road? As an earlier poster said, there's now no way to be sure so it does dilute his message.

I guess it might dilute his "message" in some people's minds, but I think those people are getting the wrong message. What I've gotten from MMM is that you don't need a lot to live fancy, and you don't really get any more happiness or much more fancyness past a certain level of spending. His message is aimed at the six-figure set: after $40-50k of spending, you're really just accumulating useless stuff that doesn't make you happy. So stop, save, and quit working in 10 years. If you want true frugal blogging for the average salary family, then there are way better options than MMM.

I honestly get the impression that Pete is a dude that writes some shit in a computer, and he got lucky that it became popular. Once popular, he monetized because, why not? Then he probably got bored with doing too much of that. Now, he barely writes shit in a computer anymore, but when he does, it seems to be whatever happens to be swirling around in his head, which is different in many ways from several years ago.

First, like I said, there is very little monetization. Really, he has like the least monetization I think reasonably possible for a blog other than zero. He's SUPER lazy on that side. Second, this blog has some massive expenses you don't see. He is probably paying several thousand dollars a month in server costs and technical support (which, it seems, some would expect him to include in his "spending"). He needs some minimal amount of monetization to cover those costs. And that pretty much is what he has. The traffic is just so large that that minimal amount of lazy monetization covers costs AND makes extra bank. And then the asshole has the audacity to write six-figure checks to charities with some of that extra bank.

Accept it: Pete is some random rich guy that started writing some shit in a computer at just about the perfect time and got lucky. Some of that shit may work for you, some may not.

Believe me, I've accepted it. I am very happy with my Prius for example, but am not planning to move into town or start riding a bike down my rural gravel roads anytime soon.  However, since Pete puts himself out there as Mr. Money Mustache, the expert on frugal and optimized living, I am also free to call out where he is not consistent with what he himself espouses. This site seems to be all about critical thinking other than when it touches on MMM/Mustachianism itself.

Overall, I think it might be time for Pete to hang up his MMM cape rather than getting more and more convoluted in his justifications for spending (or he could always just be more honest about when he's not consistent with his own past statements).

The other area is politics. You had better not espouse ANY political opinions which a certain political persuasion doesn't embrace.