The Money Mustache Community
General Discussion => Welcome and General Discussion => Topic started by: aleks41 on September 13, 2017, 11:51:48 AM
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Should you save? Absolutely!
Should you invest in low cost index funds ? Of course!
I understand that keeping up with the Joneses when you're barely making 6 figures annually is stupid but why take this to the other extreme?
Take myself as an example - I'm a 26 year old male, got a girlfriend but no kids. I own multiple businesses (100% ownership) and on average I bring in around €400k/month after taxes (paying only 5% on dividends with a tax haven setup). While I do save most of my money and invest it, I also spend around €30k-€40k/month on my lifestyle.
I like driving in my new S-class, I like dining in fancy restaurants, I like sailing on a yacht every once in a while. These are the things that motivated me to work my ass of in the first place. These are the things that I sacrificed much of my social life for the last 4-5 years.
Life is very, very short. I have no interest in wasting away my youth living way below my means just for the sake of frugality. Even if my businesses go under I have enough savings and passive income streams to pay the bills and build up new business ventures.
Please enlighten me - why the extreme frugality?
Aleks
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So why are you here? To brag? Troll?
If it needs to be said -- which, clearly, it does not, you're a smart guy -- 99.9%+ of people do not have the option to make $400K/year over their entire career, much less every month, much less after 4-5 years of "sacrifice."
So for that 99.9%+, the answer to your question is: freedom is more important than stuff.
If that is not self-evident to you, then you're in the wrong place. Thanks for coming.
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Extreme frugality is a myth. Extreme overspending is the truth.
I'll give you an example. I drive a car that costs less than my single paycheck. I own my house with a very low interest rate.
Am I extremely frugal? You could say that I am. However, would it shock you to know that I had to spend $14k on new AC units, and $18k on a new roof this summer? That's $32k out the door.
You may think you're living it up, while the actual cost of living is far higher than you actually expect. Sure, enjoy your S-Class and all the fancy dining... you'll realize too late that you've vastly over-spent what you anticipated.
One can never live in extreme frugality, if you live in a first world country in the modern age. There are countless bills to be paid and surprises that pop up.
According to anyone's metric I live in "extreme frugality", but to me I live in vastly over-spending life-style.
So what's great about the perceived extreme frugality? You get to pay for surprises that pop up without sweating it like crazy.
The biggest luxury in my life? That I can pay $32k worth of expenses in a month without breaking a sweat.
You can go show off in your S-class... I'll show off with a nice bank account and do whatever I want to do without fear.
Oh, and here's MY brag - aside from paying $32k in expenses, I'm going to loan $50k to a friend as a personal loan. To me, that's FAR flashier than any stupid automobile or eating out in over-priced restaurants.
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I found this place just a few hours ago while surfing around the interwebs. Read through a couple of the blog posts and while I agreed with a lot of the content, the whole shaming people who like to spend money on luxury items and services rubbed me off the wrong way.
If it came out of the mouth of some bitter middle-class guy who's just trying to cope I'd shrug it off but this doesn't seem to be the case with Mr. Money Mustache. So I actually went through the trouble of signing up on here and asking this question directly in order to figure out if I'm missing something and I really should change my spending habits or it's just some dogma that's being pushed regardless of the context.
@Laura, I agree with you - freedom is #1.
@Valhalla - Yes, good point. I do realize that as I get older and decide to have a family my expenses will go up and I'll need an even bigger buffer. Also, absolutely - everyone has their own tastes and preferences. Some like to buy flashy cars, some like to be able to give a friend a loan for 50 grand. My question is - why not try and have both?
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Aleks41 - A few points of MMM that you are probably missing:
1) Environmentalism - A large number of members here believe that climate change and increasing pollution is real and it is being driven by over consumption (yours truly included). We push back on mindless consumerism where is does not add value to one's life. Does buying the new version on the S-class over last years model really add that much extra value to your life? Could you be doing something more productive with that money (charity, etc)?
2) Challenging yourself (also referred to as Badassity) - Just because you can afford to drive around in an S-class doesn't mean that it will bring you the most happiness. Read up on Stoicism and hedonic adaptation. I can afford to do most (not all) of what you listed, I don't because, for me, I find more value in growing NW that will ultimately be set up as a perpetual 'endowment' for certain charities.
3) True happiness typically comes from self improvement and the relationships you have with people around you. Not with having the latest & greatest cool toy (car, boat, etc.) Many of us realize this and focus on these parts of our lives vs. living large.
Overall, you've accomplished what most haven't: built a decent sized business with sizable cash flow and saved 80-90% of it. I wholeheartedly agree with you that people should focus on both parts of the equation, income and expenses, and not just get stuck on expenses. I personally have always put more effort on income than on lowering expenses. However, not everyone has the risk tolerance or business acumen to create what you've created or land a $250K+/yr corporate job and therefore, putting a heavier emphasis on frugality makes sense for them.
I suggest you read a few of the posts as well as checking out his Tedx talk: https://chrisguillebeau.com/mr-money-mustache-wds/
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Please enlighten me - why the extreme frugality?
Because we're happy with our lives.
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You earn alot. So much so, that I can only assume a certain amount of luck or help was involved. Not to say that you didn't work hard, but there are plenty of hard-working people who don't come near to the earnings that you have. Consider yourself lucky and try to be empathetic that people in the majority have to pick and choose what they spend on. Don't you think that if the decision were that easy more people wouldn't choose both? It's not a matter of making the decision, it's about having the means. Some people don't want to trade the freedom of having to pursue additional education, and work harder/ take on more risk and responsibility, to reach that level. Frugality does buy them something; in lieu of nice things, it buys them time, which in my opinion is more valuable, simply because you can't earn it back.
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Please enlighten me - why the extreme frugality?
Because we're happy with our lives.
+1.
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Should you save? Absolutely!
Should you invest in low cost index funds ? Of course!
I understand that keeping up with the Joneses when you're barely making 6 figures annually is stupid but why take this to the other extreme?
Take myself as an example - I'm a 26 year old male, got a girlfriend but no kids. I own multiple businesses (100% ownership) and on average I bring in around €400k/month after taxes (paying only 5% on dividends with a tax haven setup). While I do save most of my money and invest it, I also spend around €30k-€40k/month on my lifestyle.
I like driving in my new S-class, I like dining in fancy restaurants, I like sailing on a yacht every once in a while. These are the things that motivated me to work my ass of in the first place. These are the things that I sacrificed much of my social life for the last 4-5 years.
Life is very, very short. I have no interest in wasting away my youth living way below my means just for the sake of frugality. Even if my businesses go under I have enough savings and passive income streams to pay the bills and build up new business ventures.
Please enlighten me - why the extreme frugality?
Aleks
Some of us feel like because life is very short we'd rather spend it doing something other than working 40+ hours a week.
Extreme frugality is a subjective term. To someone who spends as much in a month as many around her spend in a year, it probably seems like everyone here is extremely frugal. But most of us feel like we can live a pretty good life at our current level of spending and that fancier cars, dinners, boats, etc. while nice, won't actually make us any happier, so why spend our lives at work to attain those things?
In your particular case, your level of income is so high compared to your spending that you could reach financial independence fairly quickly even without cutting back your spending. Most of the world, and users of this site are not in that position.
I'm not sure if you've seen this blog post http://www.mrmoneymustache.com/2013/04/25/why-should-i-be-frugal-when-im-so-rich/ but it addresses your question pretty well.
You may also benefit from some reading on stoicism and the hedonic treadmill.
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I found this place just a few hours ago while surfing around the interwebs. Read through a couple of the blog posts and while I agreed with a lot of the content, the whole shaming people who like to spend money on luxury items and services rubbed me off the wrong way.
If it came out of the mouth of some bitter middle-class guy who's just trying to cope I'd shrug it off but this doesn't seem to be the case with Mr. Money Mustache. So I actually went through the trouble of signing up on here and asking this question directly in order to figure out if I'm missing something and I really should change my spending habits or it's just some dogma that's being pushed regardless of the context.
@Laura, I agree with you - freedom is #1.
@Valhalla - Yes, good point. I do realize that as I get older and decide to have a family my expenses will go up and I'll need an even bigger buffer. Also, absolutely - everyone has their own tastes and preferences. Some like to buy flashy cars, some like to be able to give a friend a loan for 50 grand. My question is - why not try and have both?
Welcome to the forum!! You are still very young, making a great amount of money. Here's one life lesson - never count your eggs until they hatch, and change will be constant. If I were you, I'd be socking away as much as possible for a rainy day, because you never know when that sunny day will end. If you run businesses, chances are the businesses will stop generating cash someday. There is a lot of volatility and risk in the world, it never hurts to sock away money for that rainy day.
Enjoy the knowledge here, and if you care to share, it would be interesting to find out what types of businesses you run and how you generate so much cash. One point of clarification - what's your net income monthly / annually? I tend to gloss over revenue numbers because it's what you get to keep at the end of day that counts.
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I prefer minimalism, simplicity, low environmental impact, and spending as much of my life as possible doing whatever I want with my time. Your high consumption lifestyle sounds honestly horrifying to me.
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If I have the conversion rates close, it sounds like you’re spending about $500,000 per year. That is WAY more than a Mercedes and a boat. I won’t bring up the fact that your current income is by no means guaranteed to be future income (I’m sure others will cover that topic in this thread). I will ask you this: Is that spending aligning with what your values are? For example, if you consider yourself a person who cares deeply for his community, how is that reflected in your spending choices? Could the money you are spending on another car, or another piece of jewelry or another trip be used in a way that further benefits your community?
If your spending choices DO align with your values, then I would challenge you to reevaluate those values. If you spent, $250k/year or even “as little” as $100k/year, think of the good you could do in the world with that difference. Would your life be made so much worse that it would offset all of that good?
Here we focus on having gratitude for what you have, maximizing the value of what you have, and prioritizing freedom and community. None of those things are made better by a new Mercedes or a yacht.
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What's so great about "extreme" frugality? Here is what...
People living extremely frugal don't feel as if they're living extremely frugal. They're as happy as they can possibly be living well below their means. They're happier compared with those spending lavishly every month on new "things". They realize that happiness isn't bought, it comes from being content with everything you already have in life. The things lavish spenders purchase this month will fail to bring them the same level of happiness the next month.
Extreme frugality? I think the correct term is joyful happiness.
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If your income is 400k per month and you are spending 40k per month, I guess that is pretty frugal :)
Maybe you should stop being so mean to yourself and up your spending to 80k/month.
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What's so great about "extreme" frugality? Here is what...
People living extremely frugal don't feel as if they're living extremely frugal. They're as happy as they can possibly be living well below their means. They're happier compared with those spending lavishly every month on new "things". They realize that happiness isn't bought, it comes from being content with everything you already have in life. The things lavish spenders purchase this month will fail to bring them the same level of happiness the next month.
Extreme frugality? I think the correct term is joyful happiness.
that's so true. I'm miserable when I spend too much, even though I could easily afford it. I'm extremely happy with the simple pleasures of life. My colleagues all drive big honking trucks, luxury vehicles, own multiple homes, boats, etc. I'm the oddball with a beater car and an average home.
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OP, try reading this one
http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
If you genuinely earn 400k a month after taxes, spend only 40k of this a month and invest the rest then you have a 90% savings rate. You most likely have the need to work one more year or less. Sell the businesses or employ people to manage them for you, reducing your hours to nothing or at most a bare minimum. Well done, you have won the game of life.
If your story is real, or at least can be presented as believable, then you could make a fare few quid selling your story as a side income too. There would be interest in how a 26 year old built up an empire that brings in near double digit millions a year and then retired at 27 to sail his yacht.
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I prefer minimalism, simplicity, low environmental impact, and spending as much of my life as possible doing whatever I want with my time. Your high consumption lifestyle sounds honestly horrifying to me.
This, exactly. For me it has almost nothing to do with the money and almost everything to do with living life according to my values. I had the same spending on a six-figure salary as I do now on a low five-figure salary.
With your income I'd invest enough to draw on for daily life and use the rest to 'do good' in the world. But that's me -- my passions and priorities are completely at odds with your lifestyle.
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Don't feed the trolls, people.
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My question is - why not try and have both?
1. Most people cannot earn the amount of money you're discussing. Most people aren't entrepreneurs and/or don't have the skill set to earn that much ... but everyone can be frugal.
2. Money earned and invested early in life is more valuable than money earned later -- compound interest; you know what I'm talking about.
3. People who DO earn large salaries (without a frugal attitude) seem never to have "enough". Rather, every time they begin to earn more, they up their spending -- without increasing happiness.
4. Downturns do happen -- no one is immune. Businesses disappear (remember, somebody owned Blockbusters). Jobs are lost. Ageism in the workplace is a real thing. Disabilities happen. If you have money saved and are able to live comfortably on less, you're somewhat immune to those problems.
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400k per month? That's nothing, I earn 400k per second!
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In "spacebucks."
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(https://1835441770.rsc.cdn77.org/splitsider.com/wp-content/uploads/sites/2/2016/08/zappbrannigan-640x359.jpg)
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I found this place just a few hours ago while surfing around the interwebs. Read through a couple of the blog posts and while I agreed with a lot of the content, the whole shaming people who like to spend money on luxury items and services rubbed me off the wrong way.
Is there a wrong way to be rubbed off?
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EFFICIENCY - that is the key to the Mustachian lifestyle. Living well in the lowest profile possible. Results in lower environmental impact, peace of mind, greater personal adaptability, and overall happiness.
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I found this place just a few hours ago while surfing around the interwebs. Read through a couple of the blog posts and while I agreed with a lot of the content, the whole shaming people who like to spend money on luxury items and services rubbed me off the wrong way.
Is there a wrong way to be rubbed off?
Abrasively.
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Also, consider the future. While living it up may be so glamorous right now while you're 26 and impressing your lady, one day you may have children and a wife. One day those children and that wife may mean way more to you than slaving away to make money to sail on fancy yachts. One day you may not want to work so hard so that you can spend parts of your precious, short life filled with people you love rather than fancy things. Just my thoughts coming from someone with three children and who is beyond thankful to be in a situation where both my spouse and I have enough income to live (not luxuriously because that is NOT important to us). But at the same time can spend a lot of quality time with our kids.
One day, as you mature a bit and become more selfless, it will click. All I thought about was myself in my twenties. Then I had children and that changed drastically.
Congrats on your business so far. That's very impressive.
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For the security of not having to worry for the rest of our lives. My parents were wealthy although nowhere near the extent you are. Now my father is 69 and didn't even have enough spare money to feel comfortable flying ( granted it was an expensive flight) to visit me for a vacation (and I was paying for the bulk of the trip!). Thankfully, my stepmother bought his plane ticket at the last minute as a surprise and he came.
My father had been at the top of his (large) company for most of my life. After retiring, he made big bucks consulting. It still blows my mind that he had to worry about spending a few thousand dollars!
The reason? I'm not privy to his finances but I know he is no longer consulting for the same company. For now, he is trying to set up his own consulting company. My guess is he spent the vast amount of his high income on high living. He was never a saver (didn't even have the cash for my college tuition and had to borrow as his income was temporarily low that year).
My mother is a saver - but that didn't help her either. She retired and then had expectations of a big chunk of money coming in. She counted her chickens before they hatched and spent a crazy amount of money in just 3-4 years. Mostly on lavish parties and taking her siblings in vacations. My jaw dropped when she got in too deep and had to tell me what she owed. So now instead of the comfortable retirement she had planned, she will be relying more heavily on me and has had to cut so many corners that she says retirement stinks if u don't have the money to do what you want. I am used to spending little so it isn't that hard to have enough money to do what I want. So that's my safety net.
My guess is we will receive a much larger inheritance from my frugal, low-income FIL than we will get from my once - wealthy parents.
You are not in the same boat since you have an extremely high income. Still, u hear constant stories of how it is possible to blow through vast sums of money so some caution is warranted.
As for me, I like my simple life. I will never make the kind of money my parents made simply because I have no interest in it. No real interest in climbing the ladder particularly high either. I have more than enough for my needs and am very happy to have the time and energy to focus on my family and my interests outside of work.
Sent from my STH100-1 using Tapatalk
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If I won the lottery... I don't buy tickets, but if someone else bought me one... I would donate 99% of it to charity. The remaining 1% would be for instant FIRE.
I'm happy with my frugal life. I don't want a giant house or a fancy car. Neither of those things would improve my life in any way. Fancy cars tend to need more specialized maintenance, you have to take them to the specific dealer or mechanic, that means driving further away for an oil change. Bigger house = a whole bunch of unused useless space. Why? Why would I want to burden myself with that? All that time and mental energy worrying about my stuff could be better served on an activity I actually enjoy. I would rather have a tiny house within walking distance of awesome hiking trails than a giant penthouse in NYC.
It isn't about money. It's about living a life you enjoy, and you don't need things beyond the basics to enjoy life.
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Money is a tool that you can use for the freedom to live happily. I think that a lot of us have come to the realization that spending money is less important to happiness than living well. Living well is surprisingly cheap to do for most people. This tends to be true if you make 20,000 a year or 5 mil.
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1) Environmentalism - A large number of members here believe that climate change and increasing pollution is real and it is being driven by over consumption (yours truly included). We push back on mindless consumerism where is does not add value to one's life. Does buying the new version on the S-class over last years model really add that much extra value to your life? Could you be doing something more productive with that money (charity, etc)?
I come from a relatively poor background (was born in an eastern european country during the soviet collapse) and due to the scarcity I experienced as a kid I probably value luxury and excess more than if I would've been pampered. Caring about the environment is important, however in this regard I think a lot of people are either misinformed or live in cognitive dissonance. For example if you look at the studies and data - eating a meatless diet makes a far bigger positive impact than driving an S63.
2) Challenging yourself (also referred to as Badassity) - Just because you can afford to drive around in an S-class doesn't mean that it will bring you the most happiness. Read up on Stoicism and hedonic adaptation. I can afford to do most (not all) of what you listed, I don't because, for me, I find more value in growing NW that will ultimately be set up as a perpetual 'endowment' for certain charities.
Any good reads you would recommend regarding Stoicism?
Overall, you've accomplished what most haven't: built a decent sized business with sizable cash flow and saved 80-90% of it. I wholeheartedly agree with you that people should focus on both parts of the equation, income and expenses, and not just get stuck on expenses. I personally have always put more effort on income than on lowering expenses. However, not everyone has the risk tolerance or business acumen to create what you've created or land a $250K+/yr corporate job and therefore, putting a heavier emphasis on frugality makes sense for them.
True, I realize that my risk tolerance is way higher as a guy with no kids in my 20s compared to someone with 3 kids and in his 40s. For someone in his 20s with even an ounce of ambition I would recommend focusing on the earning part of the equation though rather than eating noodles and cutting coupons.
Some people don't want to trade the freedom of having to pursue additional education, and work harder/ take on more risk and responsibility, to reach that level. Frugality does buy them something; in lieu of nice things, it buys them time, which in my opinion is more valuable, simply because you can't earn it back.
But what is that time worth if it's just idled away? I guess it comes down to personal preference..
I'm not sure if you've seen this blog post http://www.mrmoneymustache.com/2013/04/25/why-should-i-be-frugal-when-im-so-rich/ but it addresses your question pretty well. You may also benefit from some reading on stoicism and the hedonic treadmill.
Thank you, checking it out.
Here's one life lesson - never count your eggs until they hatch, and change will be constant. If I were you, I'd be socking away as much as possible for a rainy day, because you never know when that sunny day will end. If you run businesses, chances are the businesses will stop generating cash someday. There is a lot of volatility and risk in the world, it never hurts to sock away money for that rainy day.
Thank you and yes I've been trying to keep that in mind.
Enjoy the knowledge here, and if you care to share, it would be interesting to find out what types of businesses you run and how you generate so much cash. One point of clarification - what's your net income monthly / annually?
100% of them are online businesses. Most of them are based on a rebill model. Price points vary though from low $xx to mid $xxx. Once I had the blueprint down I scaled to multiple markets (mainly health related) and eventually to multiple geos. In 2016 I cleared roughly ~4m in profits. In 2017 it'll probably be in the ~6m range.
I prefer minimalism, simplicity, low environmental impact, and spending as much of my life as possible doing whatever I want with my time. Your high consumption lifestyle sounds honestly horrifying to me.
I'm not the one to judge.
If I have the conversion rates close, it sounds like you’re spending about $500,000 per year. That is WAY more than a Mercedes and a boat. I won’t bring up the fact that your current income is by no means guaranteed to be future income (I’m sure others will cover that topic in this thread). I will ask you this: Is that spending aligning with what your values are? For example, if you consider yourself a person who cares deeply for his community, how is that reflected in your spending choices? Could the money you are spending on another car, or another piece of jewelry or another trip be used in a way that further benefits your community?
A lot goes on travel. If I finally settle down I would probably save at least another €10-€15k/mo. I also financially support my family (paid off parents mortgage, bought them new cars and give them a monthly allowance for occasional travel, hobbies etc.). I have a few causes I donate to and yes part of what motivates me to work these days is so I could further contribute to these causes.
They're happier compared with those spending lavishly every month on new "things".
Are they really? How do you know? Sure, overspending and living above your means is one thing but if your NW is €100m+ and the new "things" you buy are only a fraction of your NW then what's the issue? Who are you to say that they're miserable and wrong?
2. Money earned and invested early in life is more valuable than money earned later -- compound interest; you know what I'm talking about.
I agree with the compound interest part, the earlier - the better. But again no need to take it to the extreme, I would rather die as a relatively poor man who lived a great life full of adventure than someone who has millions stacked away but lived like a miser.
400k per month? That's nothing, I earn 400k per second!
Jokes aside, I know a guy in his late 20s doing relatively stable low 6 figure profit days in media buying.
Also, consider the future. While living it up may be so glamorous right now while you're 26 and impressing your lady, one day you may have children and a wife. One day those children and that wife may mean way more to you than slaving away to make money to sail on fancy yachts
Thank you for the insight. I'm trying to have both though.
One day, as you mature a bit and become more selfless, it will click. All I thought about was myself in my twenties. Then I had children and that changed drastically.
I suspect you are right. I can only comment in 20 years.
Anyway, thank you for all of the insights!
I think my main take-aways have been:
- Financial Freedom > Keeping up with Joneses. Duh.
- Security > Living the high-life and overspending.
- However if you can save enough while still being able to spend in the NOW then why not do it? Frugality depends on the context.
- My values and spending habits will probably shift as I get older.
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At first, I thought this was just another troll, but I'm going to give you credit.
You answered questions very level-headed and reasonably. And for someone who has created such a large income for yourself, a seemingly reasonable to be expected mindset.
I'm glad you found our little forum, even if just to make you think. Maybe you sock away an extra 10 or 20k in the market every month, who knows.
But I agree with increasing earnings, especially for the people on here with a lot of freedom. If I could increase my income by 10k a month, I would do a lot of things to get there. I'm young (23) and have no responsibilities (no kids, gf, etc).
Maybe it is time I try a little harder looking at different options. I have a good job making good money (75k per year), but sure would love to run my own company.
Best of luck to you. And thank you for a little excitement on the forum
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Please enlighten me - why the extreme frugality?
Aleks
(1) Because you don't want to be a douchebag. http://richkidsofinstagram.com/category/rkoi/ (http://richkidsofinstagram.com/category/rkoi/)
(2) Because we are literally burning down the planet with excess energy consumption
(3) Because the friends you make spending half a million a year are not going to be sticking with you when that little lump in your testicle turns into a nasty cancer-octopus
(4) Do you really want to have to call someone because you don't own or know how to operate a screwdriver?
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You asked for a reference on stoicism - I recently read the book referenced in this article and really enjoyed it: https://www.mrmoneymustache.com/2011/10/02/what-is-stoicism-and-how-can-it-turn-your-life-to-solid-gold/. The book is A Guide to the Good Life: The Ancient Art of Stoic Joy, written by William Irvine.
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What's so great about "extreme" frugality? Here is what...
People living extremely frugal don't feel as if they're living extremely frugal. They're as happy as they can possibly be living well below their means. They're happier compared with those spending lavishly every month on new "things". They realize that happiness isn't bought, it comes from being content with everything you already have in life. The things lavish spenders purchase this month will fail to bring them the same level of happiness the next month.
Extreme frugality? I think the correct term is joyful happiness.
+1
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I don't think anybody's posted this yet, but this is a good read: http://www.mrmoneymustache.com/2014/11/23/not-extreme-frugality/
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Because most people, not all, have their values change as they get older. When you are younger and feel like you have unlimited time, money is more important. When you get older, you realize time is the ultimate scarce resource and money becomes irrelevant. When I was in my 20's I dreamed of becoming a hotshot CTO, driving fancy cars and living in a big house. Now...all I care about is spending time with friends & family, hiking in the woods, reading, and taking care of my health. Mandatory work is in direct competition with that endeavor. For most people in their 20's this is just near impossible to grasp. It's not something that can be told and adsorbed. Most of us don't feel that way until their 30's, 40's or later. But this is advice for the masses...you do you
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1) Environmentalism - A large number of members here believe that climate change and increasing pollution is real and it is being driven by over consumption (yours truly included). We push back on mindless consumerism where is does not add value to one's life. Does buying the new version on the S-class over last years model really add that much extra value to your life? Could you be doing something more productive with that money (charity, etc)?
I come from a relatively poor background (was born in an eastern european country during the soviet collapse) and due to the scarcity I experienced as a kid I probably value luxury and excess more than if I would've been pampered. Caring about the environment is important, however in this regard I think a lot of people are either misinformed or live in cognitive dissonance. For example if you look at the studies and data - eating a meatless diet makes a far bigger positive impact than driving an S63.
Not actually true. The carbon impact of a meat diet vs. a vegetarian diet is an extra ~1.5 tons CO2e. Driving an S63 vs a Prius will cost about 3 tons CO2e over 10k miles. (http://shrinkthatfootprint.com/food-carbon-footprint-diet vs. http://shrinkthatfootprint.com/calculate-your-driving-emissions). And air travel is far worse than any car, unless you're driving many tens of thousands of miles per year.
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I found this place just a few hours ago while surfing around the interwebs. Read through a couple of the blog posts and while I agreed with a lot of the content, the whole shaming people who like to spend money on luxury items and services rubbed me off the wrong way.
The Mr. Money Mustache persona is in jest, it's not meant to be taken literally. The blog was designed to add humor to a problem many people don't know how to solve, namely financial independence to develop the ability to leave the rat race when you're ready. Many people have offered reasons why *they* want to leave, but everyone is different. Some people enjoy their jobs and lifestyle, and that's fine, but it's just plain prudent to have a backup plan when the party suddenly stops being fun.
Look at the dot com bubble in the early 2000's. Many people were living high on life enjoying radical wealth increases year after year. However, they adjusted their lifestyle to a point that they weren't saving anything. When the bubble burst, those who didn't develop a backup plan were desperate. Many jumped off a building instead of having to face their families.
Financial independence is a tool, nothing more. There is a lot of philosophy behind the specific MMM flavor of this tool, but that's not the only way to live. It sounds like you're trying to find out the "why" behind this, and many here have offered their reasons. Watered down, my take on the message is, "Enjoy your life with slightly less now, so that you can continue to enjoy your life later when you want a change." People change priorities, and there is nothing worse than being trapped because you lived paycheck to paycheck up to the point when you realize you want something different out of life.
A cliche that applies to this is, "Today I will do what others won't, so tomorrow I can do what others can't." You've figured that out with your pursuit for income, this is just the other side of the coin.
"However if you can save enough while still being able to spend in the NOW then why not do it? Frugality depends on the context."
You can, and there's nothing wrong with that. I'd argue everyone here does that. Compared the most people historically, the average household income provides countless amounts of luxury. If you can't appreciate some nice AC on a hot day, or all the fresh produce you can eat from your magical ice box, you're probably the type who also won't appreciate a personal butler and chef catering to your every need. It's all relative.
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Didn't read everything here, but I'll take a stab at answering it:
MMM is almost a caricature. It is a recipe, and it has a lot of ingredients. You don't need to make the exact same recipe, but hopefully you can recognize what the goal is, and hopefully you'll take some ingredients home with you.
It is about recognizing what really gives you happiness and what brings value into your life. Be honest with yourself: Do you need another shirt/pair of shoes if you have 20 already? Do you need the newest iPhone when the old one does the same exact things?
Now, sometimes the answer to these questions is yes. And sometimes, the frugal option isn't always the cheapest option (I buy $300 shoes because they last 10 years). But the point that I'm trying to make, and what I get out of MMM, is that with nearly every purchase I try to ask myself if I *really* need it, or really want it, or if it is just consumerism.
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You make 400K a month and spend 30K a month? Sounds pretty frugal to me.
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You know, I'm glad you weren't actually a troll; good responses. And in your own way, you are already being "Mustachian" by spending only @10% of what you make. ;-)
So the real answer, for me, is that looking around at the world demonstrates that no amount of money is ever "enough" to satisfy every need. Just here in the US, millionaires think they are poor, because they are comparing themselves to people with $10M, who are in turn comparing themselves to people with $100M, and on up the food chain. I'm doing very well, thanks very much, and enjoy the hell out of a stupid car. But I'd be stupid to think that if I had $100M, my expectations might not change with my income -- maybe instead of lusting after the $100-150K car, I'd want a Bugatti Veyron for a couple million. Or maybe I'd move past cars entirely into private jets. If your vision of success and a happy life is "better stuff," then you will never, ever be satisfied, because someone always has a bigger yacht or a newer plane.
But the other side of it is that obtaining all of that stuff has a major tradeoff: even if I were running in the kind of pack where a big-ass yacht was an achievable goal, I'd still have to spend years of my life working to afford it and continue paying the maintenance costs. Which is fine if you love your job and are doing well -- but not so hot when the economy crashes, or your boss changes, or you just never found a field you really loved.
So given that you can't ever have everything -- and that even attempting to have everything has a cost in time/freedom -- the key is to figure out what matters the most, and to align your spending around that. For most people here, time and freedom matter much more than more stuff; we generally have a level of stuff that is quite sufficient to cover our needs and a fair number of wants, and so we'd rather save the rest to buy more years of freedom via early retirement. But where that particular balance is is different for everyone. IMO, it boils down to planning and thinking it all through and making those decisions consciously, so you are spending money in ways that add the most value to your life, and not wasting money on shit that doesn't matter just because it's easy -- and making those decisions with full understanding and acceptance of the down sides of each choice, instead of just getting caught up in the rampant consumerism you see everywhere.
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You make 400K a month and spend 30K a month? Sounds pretty frugal to me.
No!
Frugality should be completely decoupled from income. If can comfortably live on 30k a year, then it doesn't matter if your salary is 60k a year or 6 million, spending more than 30k is a waste.
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You make 400K a month and spend 30K a month? Sounds pretty frugal to me.
No!
Frugality should be completely decoupled from income. If can comfortably live on 30k a year, then it doesn't matter if your salary is 60k a year or 6 million, spending more than 30k is a waste.
To be more technical, frugality is more about prudent spending and lack of wastefulness. So technically it has nothing to do with spending levels. Theoretically, he could be spending $400K a month and still be frugual.
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@Valhalla - Yes, good point. I do realize that as I get older and decide to have a family my expenses will go up and I'll need an even bigger buffer. Also, absolutely - everyone has their own tastes and preferences. Some like to buy flashy cars, some like to be able to give a friend a loan for 50 grand. My question is - why not try and have both?
You're a smart person - I think you can reason out that the obvious answer is "because resources are not infinite." Yours are an order of magnitude larger than the typical person's, but they are still limited. What would you say if I said to you, "I don't understand why you would be so extremely frugal that you wouldn't have a spaceship AND a castle. Are you just bitter? Do you not like nice things?"
I like driving in my new S-class, I like dining in fancy restaurants, I like sailing on a yacht every once in a while. These are the things that motivated me to work my ass of in the first place. These are the things that I sacrificed much of my social life for the last 4-5 years.
This is a little unrelated, but please don't fall into the trap that some affluent people do in assuming that anybody could be as wealthy as you if they just worked hard enough. There are literally thousands of people who work literally every waking hour, working 2-3 full-time minimum wage jobs. Those people work fucking hard, and many have done it longer than you have been alive, much less the past 4-5 years. You may have sacrificed some fun weekend time, but apparently still can make room for yachting and fine dining.
You have had the good fortune of being able to combine hard work with an apparently unusually marketable skill set, a thriving economy, and probably a gigantic dose of luck. Good for you. Do not pretend that your experience is easily replicated; it is a fact that the value of one hour of your hard work is remunerated at 10x or more what a different person's hard work is.
This leads back to your original question - for the rest of us, faced with finite hours and finite per-hour earning capacity, it is not worth the sacrifices that would be required to have BOTH a flashy sports car and the ability to loan a friend $50k. It would take more than just sacrificing 4-5 years of social life, it would take sacrificing all quality time with family and friends for potentially decades. People are trying to tell you that they do not think a sports car is worth that kind of sacrifice to them. It's not bitterness, it's realistically evaluating tradeoffs and finding a balance that makes one happiest.
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The biggest luxury I allow myself is getting up every morning, looking in the mirror, and not having the person staring back at me be someone who goes on the internet to (either pretend, or in actuality) flaunt wealth and excess in a minimalist, anonymous, online community.
This is the thing that motivated me to work my ass off to begin with. ;)
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Take myself as an example - I'm a 26 year old male, got a girlfriend but no kids. I own multiple businesses (100% ownership) and on average I bring in around €400k/month after taxes (paying only 5% on dividends with a tax haven setup). While I do save most of my money and invest it, I also spend around €30k-€40k/month on my lifestyle.
(400-40) / 400 = 90% savings rate.
'Why the extreme frugality?' indeed.
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Because the future is unknown and anything can happen. A year from now you might be earning nothing at all, and not capable of earning. I guess it's less about extreme frugality and more about not wasting the resources you have NOW on rubbish you may regret later. No one ever said you can't spend money on things you enjoy. Just make sure they ARE things you enjoy.
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You make 400K a month and spend 30K a month? Sounds pretty frugal to me.
No!
Frugality should be completely decoupled from income. If can comfortably live on 30k a year, then it doesn't matter if your salary is 60k a year or 6 million, spending more than 30k is a waste.
To be more technical, frugality is more about prudent spending and lack of wastefulness. So technically it has nothing to do with spending levels. Theoretically, he could be spending $400K a month and still be frugual.
I suspect that it would be difficult to argue that 400K a month of spending was prudent and lacked wastefulness. With a straight face at least . . .
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Assuming that this is not just a troll post, your income-to-spending ratio is actually quite financially responsible. You can save a very high percentage of your post-tax income every month. So you're certainly not guilty of poor financial planning.
But spending a lot of money gives rise to other problems. We become psychologically dependent on the luxury we enjoy as a result of spending money. We begin to fear losing that luxury. Rather than training ourselves to be mindful and present and find joy and satisfaction throughout everyday life, we naturally gravitate to the easier path of momentary pleasure through constant stimulation by novel luxury. In the end, this is far less rewarding that training oneself to be mindful and building rich relationships with family and friends. The upshot is that frequent spending typically hinders rather than helps us as we try to spend our limited years in a way that we will be able to look back on with satisfaction. Of course, the right balance of frugality is different for every person and available resources certainly play a role in finding that balance.
I view spending a bit like food in this respect. Complete abstinence is impossible, and moderate, mindful consumption is one of the keys to living a happy and healthy life. But too much consumption makes you weaker and less happy. The right balance is different for everyone, but the vast majority of people in the developed world (and I include myself here) would benefit from more careful consideration and moderation.
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I doubt many people here would consider themselves "extremely frugal".
Frugality is about a way of life as much as it is a tool to reach goals. It can be both. It can be one or the other. It's great either way. A life full of luxury is pretty plain, boring, and empty.
The thing about spending 30k a month is that you're used to that level of spending and you eventually become numb to it. It's likely not the level of spending that's making you happy as much as being able to do work on something you like around people you like and go home to people you like as well.
If you really do make and spend at the level you claim, you would know that you're top 0.1% and 99% of people make far far less than you. So not only is asking how people are happy spending 30k a year vs a month an incredibly stupid thing to ask, it just doesn't make any sense why you'd even have to ask it.
I also think that if you're really only working to make money and spend it on excessively wasteful things then one day you will wake up with a huge reality check wondering what you're even doing on this planet. Hopefully you at least enjoy what you do and have people in your life that sincerely care about you.
If nothing else, you should read much more of the blog. MMM easily meets or exceeds your income level at this point in his life and still spends about $3k a month. It doesn't matter that you "can" spend > $X a month. The question is - would it make you any happier? The same reason people wouldn't work harder for the purpose of gaining more money is pretty much the same reason people wouldn't spend any more in an effort to be happier.
The blog itself serves a dual-purpose by answering two different questions as alluded to earlier:
1. What are the best ways to retire early?
2. How can I live my life so that I can maximize happiness forever?
I don't consider the blog as much about frugality and early retirement as much as I do a philosophy towards money and life. It's more of stoic blog disguised as an early-retirement one. Again, frugality is both a "way of life (coinciding with stoicism)" and a tool.
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I prefer minimalism, simplicity, low environmental impact, and spending as much of my life as possible doing whatever I want with my time. Your high consumption lifestyle sounds honestly horrifying to me.
+1
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....
1) Environmentalism ....
2) Challenging yourself (also referred to as Badassity) - ....
3) True happiness typically comes from self improvement and the relationships you have with people around you. ...
I agree with Liberty Stache (except for point 3). Zikoris echoes "minimalism, simplicity, low environmental impact".
I'm frugal for the above reasons and two others.
Anxiety
If I buy lots of things, my home is crowded. A few years ago I had a miniature panic attack. Cold sweats. Heart palpitations. Dizziness. For my own health, I can't buy or be given a large quantity of items (all at once or even incrementally over a period of time).
Efficiency & Stewardship
My mother bought a 2-dollar can opener. It works horribly. I bought a 12-dollar can opener. It is magical. Frugal isn't about spending less money. It is about using the best and most sensible tool for the job (https://www.mrmoneymustache.com/2012/10/24/frugal-vs-cheap/).
My view of money is one of a steward. The money I earn is not my own. Modern Western culture presupposes that money belongs to an individual. I don't take that view. For my family, I need to manage money wisely and respectfully. For others' good (ex charity), I can't consume all my money for my self. It's not for me to consume for myself. It is for me to manage until its distribution to others. I merely get a stipend out of it.
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"Ahh, money. The more you have of it, the more you get to spend, right?" No:
Why Should I be Frugal, When I’m So Rich? (https://www.mrmoneymustache.com/2013/04/25/why-should-i-be-frugal-when-im-so-rich/)
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Not everyone here is into "extreme" frugality - there are plenty of us who balance living well:) whatever that may mean to each one of us with our values and our own ideas of frugality. MMM is a lifestyle, not a cult:) and it does not have to mean "extreme" frugality either.
I don't particularly care for anything that is extreme, but there is a large segment here on MMM, that came from a blog/site called ERE which is rather hard core.
Extreme frugality may serve it's purpose on a temporary basis for people who are just beginning to see the light and are revamping their financial life or because it is the only way to make something happen, because lord knows there is no chance of the current income going up in the near future for whatever reason...
Many live extreme frugality to make up for lost time, lost opportunities, tough circumstances, ill health/divorce or stuffing the mouth of the debt monster - so they can breathe again and start their (financial) lives over from scratch.
High student debt and a low or average paying job will do that to you.
None of that applies to you. You did well for yourself. Your numbers show you live on 10% of your income - nothing wrong with that in my world.
However, I will point out two things - you must be considering your values or your monthly expenditures in a new light and at least vaguely re-evaluating them or you wouldn't be here poking about, looking for answers from a different perspective.
Also, while I hate to admit it, Steve made an (almost:) valid point about your monthly living expenses, if you can live comfortably on 30K, then 40 or 60K a month is excessive. Of course, I cannot quite agree with that point, even if it sounds sensible and righteous and will save our planet/species from extinction - I lean toward the idea that growing up poor does entitle you to enjoy the fruits of your labors (or rather intellect:), you do have some catching up to do in the form of toys and fun.
You are already sharing the wealth (which I think everyone should do - no matter how little or how much one has) giving to good causes and your family, perhaps doing your bit to make this a better world, so I don't see the point in criticizing your current level of spending.
However, maybe it is simply time for you to re-evaluate your personal values and outlook and consider a few changes going forward. Maybe you have reached a turning point in your life?
This may not be a popular view on MMM, but I think living on 10% of your income at $40K is a good thing. Perhaps at some point in the future however, that 10% might become so outrageous (as your income goes up), that it will indeed become a life of such indefensible excess - that it is hard to applaud and justify, when your tip at a high roller restaurant is higher than a week's groceries for a single mom and child ... just saying, that it is a good idea to draw the line somewhere.
Perhaps it is simply an exercise in self discipline or refusing to give in to greed and excess. I think in your shoes I'd play a while too, but eventually I'd know it is enough and it would be time to shift perspective and move on.
I think ordinary people, like in the book the Millionaire next door, have an easier time to find and maintain a balance than someone who experienced poverty as a child. It skews your perception of money for the rest of your life.
The trick is to find the right balance, to live according to your own values and decide on your own lifestyle - something which bears reviewing from time to time as your life and perspectives change - which they will as you grow and change yourself.
Welcome to MMM - I hope you find the insights you are looking for:) Since your situation is rather unique and enviable it may not be easy for you to see clearly what your next, best move should be to live a good life - not just financially. You are smart - you'll figure it out - challenge yourself and voila, you've joined the club:)
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Wow -- what a lot of patient, well-considered, thought-provoking responses!
from Zikoris: I prefer minimalism, simplicity, low environmental impact, and spending as much of my life as possible doing whatever I want with my time.
Undercover: How can I live my life so that I can maximize happiness forever?
I'd venture to say that most of us don't actually practice "extreme" frugality. What this site encourages us to do is clarify our values, and put money toward those things. Having a community helps reinforce that there's no need to spend much on things or activities that aren't consistent with our (personal) values and that it's OK not to, even when society says we should. And there's constant encouragement to know how to care for your own stuff, and help finding instructions to fix and maintain your things. It's practical advice to go with the high-minded "be environmentally conscious" rhetoric. There's encouragement to use your own muscles to do stuff, rather than burning fossil fuels for every damn thing. (And look! Bike commuting extends your life! http://www.bmj.com/content/357/bmj.j1456 (http://www.bmj.com/content/357/bmj.j1456) and you're probably happier when you arrive!)
Actually making things and fixing things and doing things tend to make people happier: even though there's a huge industry out there devoted to convincing you that "buying stuff" is the route to happiness, there's plenty of evidence that's not the case.
Plus, there are endless tips here about how to navigate the world besides throwing $$ at it.
Look, you make your own choices. But one major point of this site is that you should make them on purpose, rather than by default because society/advertising/the guys at the golf club tell you what to do, implicitly or explicitly. And one thing that saving a bunch does is provide the flexibility for future-you to make different choices.