"If we can save money, we don't need to work until the age of 65 before retiring. In fact, if we manage our money properly, we can retire at the age of 37 with financial freedom." Do these words sound far-fetched? Well, this is Mr. Money Mustache's blog manifesto. I decided to spend my weekend reading Mr. Money Mustache's articles on personal finance and summarizing what I learned. The core principle of Mr. Money Mustache's approach is to reduce expenses and increase income streams.
Intercepting expenses means reducing living costs while still living a happy life. Cost-saving and happiness should go hand in hand. While the frugal lifestyle may not be suitable for everyone, Mr. Money Mustache's blogs offer guidance on how to understand this lifestyle and overcome the common middle-class dilemma of working hard, spending too much, chasing desires, and retiring late. Some practical suggestions include:
Talking about early retirement, we must find the answer to the question of when we can retire. The famous 4% rule or "The 4% Safe Withdrawal Rate" is discussed. The Safe Withdrawal Rate is the maximum rate at which you can spend your retirement savings, such that you don't run out in your lifetime. The 4% rate comes from assuming a 7% annual investment return with a 3% inflation rate which leaves a 4% withdrawal each year. If we spend 100K per year, then the 4% requires 100K/0.04=2.5M saving.
Intercepting expenses means reducing living costs while still living a happy life. Cost-saving and happiness should go hand in hand. While the frugal lifestyle may not be suitable for everyone, Mr. Money Mustache's blogs offer guidance on how to understand this lifestyle and overcome the common middle-class dilemma of working hard, spending too much, chasing desires, and retiring late. Some practical suggestions include:
- No debt: this means no credit card debt, paying off the mortgage, avoiding borrowing money to buy a car, and saving for education or picking an education that minimizes the need for a student loan. It's making ends meet. Save for emergencies and retirement.
- Live close to work: this reduces the commenting time, so more time for personal life.
- Move to a city with a lower cost.
- Walk and ride a bicycle to work to stay healthy.
- Cancel TV service
- Limit purchases each time to avoid waste and Limited demands. Focus on essentials, limit the nonessentials and avoid junk. Needs: food, clothes, housing, utilities, phones, insurance, cars, gas, transportation, internet, reasonable, education, family travel. Nonessentials: entertainment.
- Avoid impulsive spending. Saving and investing in yourself.
- "Learn to appreciate the life-enhancing joy of getting things done with your body."
- "Learn to laugh at convenience." Interestingly, some of our pleasure comes with high costs, such as a luxury trip or restaurant dinner. Can we be happy in a different way?
- Be Grateful: In Stonic's philosophy, we should be more grateful for what we currently have (learn to want the things you already have rather than other things). Curb unnecessary and never-ending desires. The Stoics believe that our primary purpose in producing energy is to fulfill all the obligations of our lives to the best of our ability and to help our fellow human beings.
- Rental Property
- Index Funds and dividends.
- YouTube Channel
- Blog with Affiliated Marketing or their Monetizing Methods
- Brokerage Company
- Online store
Talking about early retirement, we must find the answer to the question of when we can retire. The famous 4% rule or "The 4% Safe Withdrawal Rate" is discussed. The Safe Withdrawal Rate is the maximum rate at which you can spend your retirement savings, such that you don't run out in your lifetime. The 4% rate comes from assuming a 7% annual investment return with a 3% inflation rate which leaves a 4% withdrawal each year. If we spend 100K per year, then the 4% requires 100K/0.04=2.5M saving.
Resources:
- A Guide to the Good Life: The Ancient Art of Stoic Joy by William B. Irvine, 2008
- The Magic of Thinking BIG, by David J. Schwartz, Ph.D., 2018
- Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk, by William J. Bernstein, 2000
- FIRECalc: A different kind of retirement calculator
