South African Mr Money Mustache?? early retirement guru

[air]

<no thread derail> -> buy vs rent, very smart guy -> http://www.rollingalpha.com/2016/09/27/rent-or-buy-the-calculator/

 

[cerebus]

I wonder how much money MMM makes from his presentations. He seems to spend a lot of time constructing his videos and stills. I think this is his only income and his job.

He makes a significant income from being MMM, which was never anticipated by him. He just started it to get the message out and it took off. He doesn't make additional content directly but he has obviously become a lifestyle guru who travels a lot, gives interviews and so on. The main thing is, he doesn't earn money for an income, it's just what he does and the money was an unexpected benefit. The MMM output went down quite a lot recently as well, i guess he's been traveling a lot more and not too bothered about the blog.

It is true what he says about lifestyle spending. Me and wife never had a single account for ~18 years and rented. Had an old Conquest that we drove into the ground.

We managed to save R475k after the 2008/9 crash but made it up back to 7 figures within 3 years and retired early. Since we retired our worth has increased by R220K even after withdrawing for our monthly cost of living over the past 4 years.

I am not bragging but simply stating that buying a big house and car with all the bling will make you work longer and perhaps never retire.

Nice going!

 

[cerebus]

I probably said this much earlier in this thread, but MMM really makes retirement look like very hard work. To me it looks like more of a "how not to have a traditional boss", than anything I would consider retirement.

MMM is a pretty active guy by nature, he reminds me of my brother in law who retired a few years ago as a wealthy businessman age 52 but because he can't sit still he's ended up founding and mentoring a whole group of companies that's become a brand in itself. Some people are just unable to lie back and drink mojitos all day; some people live nomadically; others engage in the community and volunteer. There's no prescription for how early retirement should look.

 

[cguy]

MMM is a pretty active guy by nature, he reminds me of my brother in law who retired a few years ago as a wealthy businessman age 52 but because he can't sit still he's ended up founding and mentoring a whole group of companies that's become a brand in itself. Some people are just unable to lie back and drink mojitos all day; some people live nomadically; others engage in the community and volunteer. There's no prescription for how early retirement should look.

Sure, there are many definitions of retirement, but I don't consider working for a living as one of them.

 

[cerebus]

Sure, there are many definitions of retirement, but I don't consider working for a living as one of them.

What is he doing that constitutes 'working for a living'? His retirement lifestyle is fully based off the money that he got from the time they retired. Whatever activities you choose to do in retirement don't mean you're earning a living from them. If he wanted to he could spend his days sitting on the porch playing with his dog.

Early retirees in the MMM lifestyle tend to all do the following activities:

1) Managing their investment portfolios
2) Living frugally to ensure that their withdrawal rate doesn't exceed their projections
3) Continuing to be active in whatever direction they choose, whether or not money accrues from it.

To me that sounds like any other normal 65 year old retiree, except that they get ~30 years more to live that way.

 

[>Reaper<]

Sure, there are many definitions of retirement, but I don't consider working for a living as one of them.

^^ This!

Depends on what your definition of retirement is.

MMM has obviously done what has worked for him.

What I took from that video is to find what makes you happy.
More money doesn't mean happiness (It may for some people).
eg. If you are a guy who doesn't mind living off 10k a month. Or doesn't want kids then your retirement goals change.

If you can figure out now what makes you happy and what you are comfortable with then you can come up with a plan of how to achieve it faster.

 

[cguy]

What is he doing that constitutes 'working for a living'? His retirement lifestyle is fully based off the money that he got from the time they retired. Whatever activities you choose to do in retirement don't mean you're earning a living from them. If he wanted to he could spend his days sitting on the porch playing with his dog.

Early retirees in the MMM lifestyle tend to all do the following activities:

1) Managing their investment portfolios
2) Living frugally to ensure that their withdrawal rate doesn't exceed their projections
3) Continuing to be active in whatever direction they choose, whether or not money accrues from it.

To me that sounds like any other normal 65 year old retiree, except that they get ~30 years more to live that way.

The last time I read his blog was a few years back, but things that stuck in my mind, were that he had to learn how to build a house, and then actually built their house. I believe that he also did work, helping others to build their houses (for money). All maintenance is done by him. They spend a lot of time "couponing", searching for specials, overstock, good quality second hand stuff (and learning how to properly determine this). They cycle for transport mostly - this saves them petrol and gym membership, and means that they don't need a second car. They had to learn how to repair their car and how to maintain it. They spend a painstaking amount of time optimizing their budget, and tracking their expenditure to the cent.

This is all working for a living - it's "work", because it is time spent that is necessary for them to maintain their standard of living. It's "for a living", since they can not choose not to do this, they cannot spend their time at their discretion. If they enjoy this, then great, but it is really not so different from enjoying one's 9-to-5 job.

 

[diapason]

Sure, there are many definitions of retirement, but I don't consider working for a living as one of them.

In think what he's doing should be called financial independence rather than retirement. It's the sort of thing that many of us would have wished for, but didn't have access to the information before the internet age. It's the difference between HAVING to work for a living, and CHOOSING to work because one wants to.

 

[cguy]

In think what he's doing should be called financial independence rather than retirement. It's the sort of thing that many of us would have wished for, but didn't have access to the information before the internet age. It's the difference between HAVING to work for a living, and CHOOSING to work because one wants to.

He's not financially independent by definition, since during his "retirement", he has no choice but to trade his time, actively doing tasks for payment (not necessarily money).

 

[cerebus]

The last time I read his blog was a few years back, but things that stuck in my mind, were that he had to learn how to build a house, and then actually built their house.

No, the first house they lived in they bought. Last year they moved to a smaller home which he built as a project.

I believe that he also did work, helping others to build their houses. All maintenance is done by him.

He does a lot of stuff like that, yeah. Again, I don't know how much of it is paid or unpaid. Since when does doing your own maintenance on rental properties disqualify you from being retired? Seems like something lots of retirees do.

They spend a lot of time "couponing", searching for specials, overstock, good quality second hand stuff (and learning how to properly determine this).

I don't think they coupon or spend hours searching for specials.

They cycle for transport mostly - this saves them petrol and gym membership, and means that they don't need a second car.

Yeah the biking is a lifestyle thing and also a cost saving thing. Bicycling ftw! But they did buy a second car recently, a Nissan Leaf .

They had to learn how to repair their car and how to maintain it.

And?

They spend a painstaking amount of time optimizing their budget, and tracking their expenditure to the cent.

Not at all:

If you aren’t familiar with my budgeting style, it is “I Don’t Have a Budget“. Since we know there’s no chance of running out of money at this point, we make spending decisions based on our values rather than splitting up a fixed stream of income into categories every month.

While this is a hazardous approach for beginners*, it works very well once you have trained yourself with my alternative point-of-purchase approach. In short, whenever you feel like buying something, ask yourself the following questions:

Will buying this really improve my overall lifetime happiness?
Is there another, more efficient way to meet this same need?
Can the same benefit be had if I delay the purchase?
While I still follow these rules because they have become a habit, the application can be sloppy at times due to the fact that we are still just ordinary flawed humans.

This is all working for a living - it's work, because it is time spent that is necessary for them to maintain their standard of living. They can not choose not to do this, they cannot spend their time at their discretion. If they enjoy this, then great, but it is really not so different from enjoying one's 9-to-5 job.

They can choose to live however they want. The last year I think they spent mostly traveling around and doing talks and whatnot. Bear in mind they're also hardcore environmentalists and minimalists so a lot of this stuff is what they would do in any case, with just the added benefit of it being a cost-effective lifestyle. These guys do nothing more than travel full time.

 

[patrick]

Hey Patrick

MMM says in the video that his talk applies to people in rich countries? Does SA qualify as rich in your opinion and with regard to the video contents? What modifications or caveats would you add to the video for people in SA?

I would have said yes up until the Zuma era. We had a good income to expense ratio, things were cheap relative to a middle class salary. We also had monstrous growth in our stock market. If you could have invested well from 2008 onwards you would have been very very rich by the time Zuma started screwing things up.

Now we're not nearly as well off, but it's still possible to live extremely cheaply in SA while earning a very large salary. A couple in lucrative fields, law, accounts, medical, plumbing, business owners etc in SA make massive amounts of money, and can live on very little. A couple like that could earn R100k a month quite easily, even R150k, and could still live on R20k a month. That would mean a savings rate after tax of over 70%, making it possible to reach FIRE in under 9 years.

 

[cguy]

No, the first house they lived in they bought. Last year they moved to a smaller home which he built as a project.

Sold house, did a ton of work, increased net worth == not retired.

He does a lot of stuff like that, yeah. Again, I don't know how much of it is paid or unpaid. Since when does doing your own maintenance on rental properties disqualify you from being retired? Seems like something lots of retirees do.

When you need to do it to afford your current lifestyle. Working because you have to is not retirement, and it is not financial independence.

I don't think they coupon or spend hours searching for specials.

It looks to me that they do. The below links are completely ridiculous in terms of effort:
http://www.mrmoneymustache.com/2012/07/02/hacking-home-depot-to-save-big-bucks-on-renovations/
http://www.mrmoneymustache.com/2013/12/20/shaving-the-costly-edges-from-a-major-renovation/

Step 2: Play the stores against each other:
Not everyone knows this, but Lowe’s and Home Depot have a policy of always honoring each other’s coupons and matching prices. Got a 15% off coupon for HD? It will work just as well at Lowe’s. Found a lower price on an identical item at Lowe’s? Take a picture and show it to HD, and see what they do.

Yeah the biking is a lifestyle thing and also a cost saving thing. Bicycling ftw! But they did buy a second car recently, a Nissan Leaf .

It may be a lifestyle thing now, but there was a point that they needed to do it to keep to their expenditure goals. Now, I expect that they can increase their expenditure (since that is so recent, this is also possibly due to the success of their blog - once again, they've worked for this).

And?

Last time I checked, "auto-mechanic" was a job. Once again, sure plenty of retirees may do things like this, but if it's out of necessity to maintain their lifestyle (i.e., "for a living"), you're not FI, and you're not really retired.

Not at all:

He's just saying that they don't need to spend time drawing up a budget anymore (as a formal list), because they're so used to having a super strict budget, that they're not going to wanderer. This is a result of a lot of work and a lot of conditioning. Their expense tracking is still rigorous, in a fully itemized spreadsheet to the cent.

They can choose to live however they want.

As long as they continue to "want" to run back and forth between Home Depot and Lowes taking pictures of prices to play one store against the other, then yes. Seems like a very strange thing to want.

The last year I think they spent mostly traveling around and doing talks and whatnot. Bear in mind they're also hardcore environmentalists and minimalists so a lot of this stuff is what they would do in any case, with just the added benefit of it being a cost-effective lifestyle.

I wonder if they get paid for those talks? Regardless though, whether they go travelling or not, it's because they can afford to do so - and they can afford it, because they work most of the time. I also suspect that every aspect of the travel from transportation to accommodation to food is thoroughly and time consumingly researched - also work.

You seem to be missing the big picture - because something is "what you would have done anyway", doesn't mean it's retirement, and it certainly doesn't imply financial independence. It is only either of these if it isn't done out of necessity.

Perhaps you've heard the saying: "Find a job you love, and you'll never work a day in your life." - this doesn't actually mean that you've "retired" once you've found it -- if your job is building your own house, writing blogs, or running back and forth between Lowes and Home Depot, taking pictures of each others prices, etc., this is still work even if you love it (although, over here, I think they're talking themselves into believing that they love it, more than anything else). There's also a huge difference between "work" and "working for a living" - the latter implies necessity. Even if the actions are the same, the mental and financial state one is in, is completely different.

These guys do nothing more than travel full time.

I haven't looked at this site yet, but please note that I support taking a minimalist frugal approach to early retirement. I don't think it's something that's impossible (I could easily have retired in my early 30's myself). In this particular case (of MMM), I find it annoying when someone blogs about "How I retired at 30", and then proceeds to describe in detail how their retirement is actually a massive time sink, needed to maintain itself, while everyone cheers them on.

I appreciate strategies to maximize income, and live frugally, and even actively minimizing expenditure (by doing their own maintenance, cutting coupons, taking buses for travel, working in exchange for rent on holidays, etc.), up until the point of retirement, not beyond - beyond retirement, it should all be about passive strategies to live cheaply, and if one wants to work actively, it should not be done out of necessity.

 

[Pakka]

^ good post. I think one has to find the balance between frugality and work.

I don't believe anyone really wants to have absolutely no work whatsoever (even if it's just cycling between Home Depot and Lowes). You might think you do, and at first you might, but not in the long run. Everyone needs to work at something, even if just a project of your own, or charity, or writing a blog, or part time consulting or whatever.

My point is that you have to find something you enjoy, be frugal, up your savings rate, and hopefully reach a point where you don't have to work out of necessity.

 

[cerebus]

Sold house, did a ton of work, increased net worth == not retired.

Oh so when my 82-year old father in law sold his house a couple of years back and downscaled to a place they renovated, he came out of retirement?

When you need to do it to afford your current lifestyle. Working because you have to is not retirement, and it is not financial independence.

Who says they need to do any of it? Their annual budget is around $25,000 and it hasn't increased at all since they retired (unless they're just lying about it all). Any additional money they brought in is quite incidental to their retirement needs, and came about because MMM became a celebrity, but none of it was required or solicited by them. They've managed to remain 100% within their originally projected budget that was set when they retired in around 2004/5. You're the one making the assumption that all this extra money was needed to fund their retirement, but what are you gonna do if your blog brings in money - shut it down? Or if you fill your days by doing handyman work and it generates income?

It looks to me that they do. The below links are completely ridiculous in terms of effort:
http://www.mrmoneymustache.com/2012/07/02/hacking-home-depot-to-save-big-bucks-on-renovations/
http://www.mrmoneymustache.com/2013/12/20/shaving-the-costly-edges-from-a-major-renovation/

Haha yeah that's MMM, he is pretty ridiculous in terms of the effort he makes to do something manually or at zero cost, I find it over the top sometimes as well. The bike riding in deep snow to get groceries is a bit too hardcore for my tastes. But that's just the kind of person he is, not all early retirees are as extreme as him by any means. Like I say, I showed you a blog of a couple who basically do nothing but travel, and there's tons of people out there who do the same.

Last time I checked, "auto-mechanic" was a job. Once again, sure plenty of retirees may do things like this, but if it's out of necessity to maintain their lifestyle (i.e., "for a living"), you're not FI, and you're not really retired.

You can't tell a retiree that because they fix their own car, or clip coupons to save money, that they aren't really retired; that's obnoxious and elitist. The majority of retirees don't have a whole lot of means, and they struggle to get by, and they're very careful with their expense tracking. Sure, the MMM picture of retirement isn't how you envisage it, and it takes more effort than having $10mil+ in the bank and being able to have someone drive you everywhere or never look at your portfolio and expenditures, but it's still legitimate retirement.

I appreciate strategies to maximize income, and live frugally, and even actively minimizing expenditure (by doing their own maintenance, cutting coupons, taking buses for travel, working in exchange for rent on holidays, etc.), up until the point of retirement, not beyond - beyond retirement, it should all be about passive strategies to live cheaply, and if one wants to work actively, it should not be done out of necessity.

There's no work that MMM has done out of necessity to bring in extra income; there's plenty of work that he does to save money though. Like I say, your idea of retirement is cushy and elitist, and if you have to make a trade-off between 10-30 more years of work versus making the additional effort to live within your means, it seems to me that either option is perfectly acceptable and if you choose one over the other, it's quite arrogant to look at the other guy and say they aren't 'really' retired.

 

[cguy]

Oh so when my 82-year old father in law sold his house a couple of years back and downscaled to a place they renovated, he came out of retirement?

Who says they need to do any of it? Their annual budget is around $25,000 and it hasn't increased at all since they retired (unless they're just lying about it all). Any additional money they brought in is quite incidental to their retirement needs, and came about because MMM became a celebrity, but none of it was required or solicited by them. They've managed to remain 100% within their originally projected budget that was set when they retired in around 2004/5. You're the one making the assumption that all this extra money was needed to fund their retirement, but what are you gonna do if your blog brings in money - shut it down? Or if you fill your days by doing handyman work and it generates income?

Haha yeah that's MMM, he is pretty ridiculous in terms of the effort he makes to do something manually or at zero cost, I find it over the top sometimes as well. The bike riding in deep snow to get groceries is a bit too hardcore for my tastes. But that's just the kind of person he is, not all early retirees are as extreme as him by any means. Like I say, I showed you a blog of a couple who basically do nothing but travel, and there's tons of people out there who do the same.

You can't tell a retiree that because they fix their own car, or clip coupons to save money, that they aren't really retired; that's obnoxious and elitist. The majority of retirees don't have a whole lot of means, and they struggle to get by, and they're very careful with their expense tracking. Sure, the MMM picture of retirement isn't how you envisage it, and it takes more effort than having $10mil+ in the bank and being able to have someone drive you everywhere or never look at your portfolio and expenditures, but it's still legitimate retirement.

There's no work that MMM has done out of necessity to bring in extra income; there's plenty of work that he does to save money though. Like I say, your idea of retirement is cushy and elitist, and if you have to make a trade-off between 10-30 more years of work versus making the additional effort to live within your means, it seems to me that either option is perfectly acceptable and if you choose one over the other, it's quite arrogant to look at the other guy and say they aren't 'really' retired.

I'm not sure I can really make this any clearer - my exact point is what you wrote in your last paragraph: "there's plenty of work that he does to save money though". If you're "doing plenty of work", you're not actually retired. Yes, this exists along a spectrum, and many retirees will opt to do a bit of handywork themselves in order to stay within budget (technically, becoming a little less retired in the process), but when the extra work is, to quote you, "pretty ridiculous in terms of the effort", and the effort to remain "retired" is "extreme" or "hardcore", to quote you too, one should really be asking oneself if the "life" side of one's work-life balance wouldn't be far better if one perhaps had a job instead. You call this "cushy and elitist", but I just call it common sense.

 

[cerebus]

I'm not sure I can really make this any clearer - my exact point is what you wrote in your last paragraph: "there's plenty of work that he does to save money though". If you're "doing plenty of work", you're not actually retired.

Yes you are. You're not earning money and you don't need to earn money to maintain your livelihood hopefully forever; that is retirement. There isn't any other definition. Cost-saving and retirement are not exclusive at all. And like I say the amount of work that MMM puts in to save money is totally disproportionate to what most early retirees in that kind of lifestyle do, because he's just more of an extreme guy.

Put it this way - let's say that after year 9 of working at age 30 they had enough to retire on with a budget of $25000 a year, but they look at the sacrifices they'd have to make versus the lifestyle they would want to have and decide nope, they need two cars and a bigger food budget and none of this electricity saving and environmentalism and handyman business for them, so they recalculate and decide they'll need another $1000 a month before they can quit their jobs. All they need to do is work another say... 4 or 5 years and they can do that easily; and since retiring at 30 or 35 is pretty much the same thing, the fact that they didn't do it indicates that they were quite happy with the lifestyle that they could have. So whether you think they'd have been better off having a job instead, they obviously weighed up their options and made a rational, personal decision that they wouldn't.

I can't say I blame them, either. If I could get up tomorrow at 9:30, go for a hike until lunch, come back and cook myself a plate of fish I caught the day before, then spend a while gardening, get on the bike and go to the shops for an hour, come back and spend a couple of hours tiling the roof, then lie down and read till dinner, and hang out with my family for the rest of the evening I think I'd consider the effort spent doing my own roofing and bicycling to the shops a fair trade-off for all the rest of it. You're vastly overestimating the sacrifice and effort they have to make.

Yes, this exists along a spectrum, and many retirees will opt to do a bit of handywork themselves in order to stay within budget (technically, becoming a little less retired in the process)[

No technically retirement means stopping from paid work; that's all. There's nothing technically less retired about doing handiwork to stay in budget. My brother in law is only 'technically' retired because he actually oversees some more companies and he's so active now that I have to question whether he can really consider himself retired anymore. But getting on your ladder to clean your own drains is something that probably 90% of retirees do.

 

[cguy]

Yes you are. You're not earning money and you don't need to earn money to maintain your livelihood hopefully forever; that is retirement. There isn't any other definition. Cost-saving and retirement are not exclusive at all. And like I say the amount of work that MMM puts in to save money is totally disproportionate to what most early retirees in that kind of lifestyle do, because he's just more of an extreme guy.

Put it this way - let's say that after year 9 of working at age 30 they had enough to retire on with a budget of $25000 a year, but they look at the sacrifices they'd have to make versus the lifestyle they would want to have and decide nope, they need two cars and a bigger food budget and none of this electricity saving and environmentalism and handyman business for them, so they recalculate and decide they'll need another $1000 a month before they can quit their jobs. All they need to do is work another say... 4 or 5 years and they can do that easily; and since retiring at 30 or 35 is pretty much the same thing, the fact that they didn't do it indicates that they were quite happy with the lifestyle that they could have. So whether you think they'd have been better off having a job instead, they obviously weighed up their options and made a rational, personal decision that they wouldn't.

I can't say I blame them, either. If I could get up tomorrow at 9:30, go for a hike until lunch, come back and cook myself a plate of fish I caught the day before, then spend a while gardening, get on the bike and go to the shops for an hour, come back and spend a couple of hours tiling the roof, then lie down and read till dinner, and hang out with my family for the rest of the evening I think I'd consider the effort spent doing my own roofing and bicycling to the shops a fair trade-off for all the rest of it. You're vastly overestimating the sacrifice and effort they have to make.

No technically retirement means stopping from paid work; that's all. There's nothing technically less retired about doing handiwork to stay in budget. My brother in law is only 'technically' retired because he actually oversees some more companies and he's so active now that I have to question whether he can really consider himself retired anymore. But getting on your ladder to clean your own drains is something that probably 90% of retirees do.

Sigh. To say it again in different words, my point is that work making money vs. work staying on budget are actually fungible costs. You can pretend that they aren't all you want, but then you're missing the salient qualities of being retired.

 

[cerebus]

Sigh. To say it again in different words, my point is that work making money vs. work staying on budget are actually fungible costs.

There is some fungibility of course, that much is obvious. But working to stay within budget is common to all retirees and is a spectrum, and doesn't make you any less retired for having to do so. I think if the real effort needed to stay within budget was comparable to a job - and I can certainly imagine scenarios where it would be - then the marginal benefit of retirement isn't worth it. I suspect that if you had some insight into the lifestyle and real effort that MMM makes to stay in budget, you'd probably conclude that it's a reasonable trade-off. If you're a mid-30s, healthy, capable person with no obligations in your life, you kind of also need to find things to fill your time; lots of people like you who COULD retire early choose not to because they don't know what to do with their time and they aren't good company for themselves. I don't think I'd have that problem.

you're missing the salient qualities of being retired.

There are no salient qualities of being retired; there is just a dictionary definition and a subjective evaluation. As long as you meet the criteria of the first, you can choose how to define the second.

 

[cguy]

There is some fungibility of course, that much is obvious. But working to stay within budget is common to all retirees and is a spectrum, and doesn't make you any less retired for having to do so. I think if the real effort needed to stay within budget was comparable to a job - and I can certainly imagine scenarios where it would be - then the marginal benefit of retirement isn't worth it. I suspect that if you had some insight into the lifestyle and real effort that MMM makes to stay in budget, you'd probably conclude that it's a reasonable trade-off. If you're a mid-30s, healthy, capable person with no obligations in your life, you kind of also need to find things to fill your time; lots of people like you who COULD retire early choose not to because they don't know what to do with their time and they aren't good company for themselves. I don't think I'd have that problem.



There are no salient qualities of being retired; there is just a dictionary definition and a subjective evaluation. As long as you meet the criteria of the first, you can choose how to define the second.

MMM: White bread is unhealthy, we're giving it up. We've decided to only eat white rolls instead.
Cguy: They're pretty much the same thing.
Cerebus: No, the one is bread, the other is a roll.

 

[Oopsie]

I probably said this much earlier in this thread, but MMM really makes retirement look like very hard work. To me it looks like more of a "how not to have a traditional boss", than anything I would consider retirement.



What do you think your position would be if you had bought a house? Assuming you paid it off before retirement, I would expect it to be much more than your savings. I definitely agree that buying a "big" house (i.e., beyond one's means) is a terrible idea, although a reasonable house is generally a good mechanism for "forced savings".

I don't know if you've see the "tiny house" craze in the US (google it if you want to see some crazy ****), but it seems like a terrible idea to me. Most of these people won't save their money, and will only have a $10k house at the end of the day to show for it.

If I had bought a house I would not have been able to get over 1 000% plus return in 3 years.