This was interesting to me, since I know this couple well, and they are pulling in two very solid salaries while living in a modest house that cost under $200,000 back when they bought it. With similar incomes, Mrs. MM and I lived in and renovated a larger house, and still had enough left over to accumulate a retirement-sized investment pool over nine years – about the same length of time we’ve been friends with these people.

Using my secret identity as Mr. Money Mustache, I naturally began to look for clues as to how this might have happened. I noticed a Honda CR-V and a (financed) Honda Pilot in the driveway. Those are great vehicles if you run a rafting company and need to pull people and trailers up the forest access roads to get to the best rapids, but they are not suitable for commuting to work, and yet that was their primary purpose. Their jobs were in two different cities, and neither of them has ever worked in the city we live in – despite the fact that both job types are available here as well. The recycling bin was piled high with fast food containers, which my friend picks up when returning from late shifts at work, and empty Gatorade bottles. The modern wall-mounted TV displayed the razor-sharp images and broad channel selection that are telltale signs of a premium cable subscriber.

So while I had solved the mystery of where their money was going (to the endless stream of seemingly tiny budgetary leaks that are part of a middle class life), I still hadn’t figured out why these otherwise-intelligent people were continuing to burn money even while they obviously had higher priorities in their lives than Gatorade. I asked a few more questions:

“Say, that Honda Pilot is a pretty posh machine – what made you decide on that one?”

“Well, we’ve always liked Hondas, and when we had the second baby we just figured we’d like a bit more space”.

“That’s cool. Hey, you often mentioned you don’t like your morning commute – have you ever considered looking into getting a similar position here in Longmont?”

“Yeah, I’ve thought of that, and it would be great. It’s just that, you know, I’m in a groove and I like my coworkers at the company in Boulder. I just haven’t really looked around at the opportunities here. Plus it’s only really a 25 minute drive if you hit it at the right time.”

This conversation went on for a few more cycles, and it became evident that the main reason for most of these ‘stash-draining behaviors was not conscious choices that my friends made in search of a better life, but just things that had been locked in at one stage or another earlier in their lives, which never ended up being changed. They were a form of habits.

As I mentally put myself into their shoes, driving to and from work and buying Gatorade for myself, I started feeling uncomfortable. I felt the inefficiency and the daily drain, but I was not able to fix it. And this brought me to a realization of something I have always done, that is not widely practiced. But it is so important, I think it could be considered one of the Principles of Mustachianism:

Practice Constant Optimization in all areas of your life.

When I was younger, I was faced with the typical young person’s perpetual shortage of cash. I had wants and needs, but with zero net worth and minimal income I obviously could not meet them all. The solution for me was to try to meet them, in order of priority, at minimal expense.

But the thing is, your wants and needs change over time, along with the rest of your life situation your income level, and the world around you. Your original way of meeting needs will soon become inefficient, and if you stick with it after it is obsolete, you are wasting your own time and money.

For example, way back when I graduated and got my first engineering job, I needed a place to live. Knowing that driving cars costs money and time, I naturally wanted a place close to work. But I also wanted to share a house with three friends, so we could pool our rent money to afford a really nice house even while paying less than we would each pay for separate small apartments.

The problem was that certain members of the group were party boys who wanted to live within stumbling distance of downtown. I preferred to live near work (which was 20 miles West of downtown), figuring you go to work far more often than you go to the pubs. We settled and got a place in the middle. It was reasonable, as I could bike occasionally and carpool the rest of the time. But the next year when the lease expired, the party boys had matured slightly and were willing to live closer to work. So I took the initiative and found us a nicer house with a shorter commute. Optimization had been performed. One year later, we moved even closer. And so on.

As the years have gone on, I have always felt the nag of any monthly expenses, seeking to reduce or eliminate them. Borrowing money for anything other than a house was obviously out, since that would trigger a monthly interest expense – an easy thing to optimize away. But much more than that came under the microscope and continued on to the chopping block. I compared insurance rates at every policy renewal date. Looked for new ways to eat that would result in better nutrition and lower cost. Ditched my sports car as soon I realized I no longer used it regularly, with my fancy motorcycle following the same path. Both were fun to own at the time, but when the desire for them faded, they were optimized away. Even now, we always keep a creative eye out for ways to streamline our lives. The mobile phones were switched to prepaid plans. Mrs. MM recently cancelled her monthly Crossfit membership and started paying only for individual visits, supplemented by inviting friends to come join her for workouts in our home gym, saving $60 per month.  We’re keeping our eyes open for a smaller house, since we bought the current house when planning to have two kids, then subsequently decided that one is plenty.

When you practice constant optimization, nothing should be considered sacred, and all of your old assumptions should be challenged on a regular basis. Are there other people out there doing things in a smarter way than you are? Great! You can easily follow their lead. Have your needs or tastes changed as you got older, or new innovations come up since you last bought something? Ideal – another chance to optimize.

Constant optimization may sound tiring when you list two decades of steps out like I did above, but in reality it is incredibly simple and easy. You just have to keep your mind open, asking yourself occasionally, “Is there anything I could change for the better?”. Often, the answer is no, and you can go on in the old pattern. But sometimes your open mind will find things to improve, and you will be far richer for it.

Getting started with a new habit like this can be as simple as saying, “I like to experience new things.” Then back it up by doing it. Take a different route to work as often as you can, until you’ve tried and compared them all. Subscribe to automated updates on the housing and job markets in your areas, just so you always have a mental map of what is out there. Make a list of your ten biggest monthly expenses and tape it to your fridge, just so you know they are all there, constantly using up your money, so they had darned well be worth the resources they are consuming. If they are worth the expense, continue to enjoy them. If they are not, optimize them away. Look at your daily routine from an outsider’s perspective, and figure out if you are really getting the most value from each one of your hours.

An unexpected benefit of all this self-imposed change is that it helps protect you from forming bad habits, which are hard to change once you get them. In fact, change itself becomes the habit, which is a good one to carry with you through your life. The willingness to experience change brings opportunity, wealth, learning, and happiness for most of us who embrace it.

Little MM and I bought absolutely nothing (as usual) today, instead making an ambitious pebble dam in the creek all morning. Our perspective? Best way to spend a Saturday.

When it comes right down to it, this blog is really just here to change your perspective on things.

The exact same world can seem like an evil or beautiful place, based purely on how you choose to think about it. And paradoxically enough, changing the perspective (and thus the behavior) of enough people can even change the physical reality of the world for the better. That makes “just changing your perspective” into a pretty powerful tool.

My biggest secret to wealth is realizing just how little money it really takes to lead an extremely rich life. But the biggest battle I face in sharing it is the different perspective that is programmed into the modern rich-world consumer: the perspective that simplicity is deprivation, change is scary, and effort is something best paved over with convenience.

So this weekend, I thought we might review a pair of remarkable stories from readers about their own perspectives on their lives. In the first, a rich man wakes up to realize he has been sitting in a jail cell that was unlocked years ago. In the second, the awakening is yet to happen.

Pretty bold and happy moves, right? I offer the Quitting Laywer my heartiest congratulations. His perspective changed, and suddenly he was able to set himself free. Hopefully we can get this next man to feel the same way:

Dear Despondent (Millionaire),

I should first start with Congratulations! From a financial sense, you have done extremely well for yourself, putting yourself at the very top of a very tall pyramid even by US standards. With any reasonable management of that wealth, you and your wife are financially set for life, and any days of work for the rest of your life should be considered purely for the fun of it.

As a quick review, your $772,000 in stock assets can be invested in index funds to generate a relatively safe 4% withdrawal rate for the rest of your life (dividends plus a small amount of capital gains selling each year or even a managed payout fund), providing your first $31,000 of annual income. On top of that, your rental house will yield perhaps $10,000 more per year. Within the next fifteen years, you’ll also start seeing social security and medicare benefits to further pad your income and lower health insurance costs. Unless your living expenses are higher than $41,000 per year (which I would be surprised to hear, given your second mortgage-free home and your ability to save this much so far), you are more than set - for life!

But it’s time to begin an even bigger job, of changing your perspective on yourself and your life. The phrases you used to describe your own situation are the hallmarks of low self-esteem. “I can’t seem to find any work”. “I am unable to provide this lifestyle for my wife”. “Nobody seems to have any respect for me because I don’t appear to have a lot of money”.

Your story really jolted me awake, because in reality, our situations are similar, and yet our perspectives are completely different. We have similar levels of savings. I also haven’t worked much in the last eight years. I too might eventually run out of money if I suddenly moved into a $1M+ house to “provide a certain lifestyle for my wife”. And I wear old clothes most of the time, often building things in an old plaid shirt and ripped jeans that have been repaired with duct tape.

But yet somehow I am extremely happy about this turn of events! So excited that I started this blog to trumpet out the joy of a slightly-less-materialistic life to the entire world, which has turned into an entire movement. Millions of people are reading about it now, and they are excited about the lifestyle - our lifestyle – yours and mine! 

It’s often difficult to get a job if you feel down on yourself or desperate for work. But if you don’t need a job, your options are wide open. You can create your own work, by doing what you love. For me, this has resulted in additional unnecessary money and even some job offers. But even if this had not happened, it wouldn’t matter, because money is not the issue for either of us. Meaningful work is a great thing, but you don’t need to go chasing after a traditional job to find it these days.

And people don’t deliver or withhold respect based on your clothing or other manufactured accessories. They unconsciously sense something much deeper – your self respect - and that is what determines your social ranking when you enter a new scene. The readers all around you here are saying “you’re doing just fine, so enjoy it!” I respect you, and you are very worthy of your own respect too, starting right now.

As for the critics: Due to this website, I am sure I get more public criticism than you do, and yet for me it is a big part of the fun. It means real mental comfort zones are being stretched. Meanwhile in my real life, nobody has ever told me to get nicer clothes or find myself a job. You too can learn to ignore and mock misguided critics, while learning from the more thoughtful ones. But more likely, you’ll find they change their tune once you start living your own life with the amount of poise you deserve.

That’s the thing about perspective: in reality, it’s everything. And given this new power over everything, are you willing to consider the possibility that you, too, might have more control than you previously assumed?

If you’re a US resident with a short memory (or a young adult who only recently started making a living for yourself), you might be under the impression that we live in a country with permanently high unemployment, a slow housing market, and mortgage interest rates that never exceed 3.5%. Sure, you’ve seen the stock market double in price since 2008, but other than that there hasn’t been too much prosperity sloshing around.

The thing is, the ground is rising beneath our feet and we’re right in the middle of a great change. I can predict that with relative certainty, because the economic picture is always changing and cycling back and forth. You don’t always see it in advance, but you definitely see it when looking backwards.

US unemployment, 1947-present (source: Google public data)

In 1982, my parents moved us from an expensive suburban area to a cheap little town, to escape the variable interest rate mortgage that had suddenly exploded to 18% on them. As a boy, I remember buying a savings bond worth $1000, that paid out $120 (12% interest) for the next three years.

In 1987, one of my childhood friends told me his dad lost his job as a stockbroker, in the aftermath of the Black Friday crash. The father joked with us he had been unwise to buy his new Lincoln Town Car. But the stock market roared back from that crash rather quickly.. until the 1993 recession sliced a bunch of things in half, including property values in certain areas.

In 1997, I graduated with a Computer Engineering degree, and the job market was in fair condition. I was fortunate to get a good job lined up upon graduation, but some of my classmates had to search around for a few months and settle for lower salaries. However, by 1999 the headhunters were ringing the phones in every cubicle and I had an easy time upgrading my career, choosing from a bouquet of seven job offers around the US. After less than a year, I switched jobs again in 2000, enjoying a salary bump and watching the market valuation of Cisco Systems exceed $500 billion (even today after 13 years of revenue growth, the company’s value is about 75% lower).

All this was turned on its head in 2001, when the dot com boom ended, stocks collapsed, companies closed, and many of my software developer peers found themselves unemployed. The housing market in my area turned from fire to ice, with appreciation becoming depreciation and higher-end houses languishing on the market for years. The local high-tech scene was expected to forfeit its gains from the late 90s and remain quiet forever.

Until it wasn’t. By 2005, employment was rising rapidly, the stock market was on a tear, and mansions were being built and sold as fast as the custom house builders could complete them.

Until 2007, when the great financial crisis slammed the brakes on everything. House builders went instantly out of business, giant banks collapsed, millions of people stopped making their mortgage payments, and the entire US economy tipped over like a speeding school bus that missed a corner, screeched noisily along the shoulder throwing sparks and smoke, barely coming to rest in a teetering position at the edge of the Grand Canyon. Surely, THIS was the end of prosperity. Capitalism had failed, and we were in for permanent doom…

..Until now, when the stock indices are breaking records, IPOs are in plentiful supply, and house prices in some markets (including Denver metro) are back above their 2007 peaks. I’ve submitted five offers in on rental houses in my own area over the past year, being outbid mostly by people who, I thought, ended up paying too much for the house.

And we’ve had it pretty mild here in the US: Canada, Australia (and I hear Brazil too) have been in a much bigger boom for many years now, with average-income people stretching to mortgage $700,000 homes, just because that seems to be the thing to do these days.

Is there is a lesson in all of this craziness? Why yes, I believe there is. Since we’re getting started on yet another boom, I thought we might as well prepare ourselves for it, in order to get more out of it.

What to Do in a Boom

Jobs: You start hearing about job opportunities. Your friends get enviable new positions. Maybe some are even offered to you. In magazines and newspapers, you read about entrepreneurs who are making far too much money for doing things you could have damn well thought of and done yourself. Damn!

If you’re ambitious, this is your time. Instead of sitting tight, harvest some of those jobs yourself. Maybe fire out some resumes. Or get a raise. Jump into an expanding division of your company, taking on far more seniority than you’re qualified for. Or switch industries completely, to one where they just can’t find enough qualified people. Get a bunch of new skills, while somebody else is paying you do to it. Hang around with some of those entrepreneur-in-a-magazine-type people, and sniff up some of their contagious optimism.

Lifestyle: But then save those windfall earnings. This is not the time to buy the new Accord V6 or the 92″ television, or fight with your coworkers to buy a bigger house in a rising market. An economic boom is the time you maximize earning (because the money supply is high), but minimize spending (because prices are likely high due to competition from other buyers). If you have a big house that you’d like to downsize, this is the time to do it. The most avid housing optimizers might even move to a rental during this time.

Investments: Everyone is speculating vigorously on stocks, and the index is at a high valuation. You’ll want to continue your regular investing program, but your asset allocation rules will automatically make you buy fewer stocks and more bonds. And especially look into alternatives like paying off your mortgage early – this is the time to get out of debt, because the getting is easy.

For those interested in their local real estate scene as I am, this can be a frustrating time, as rental houses may become too expensive to provide appropriate returns (I look for monthly rent equal to 1% of the purchase price as a rule of thumb). But this opens up another opportunity: the fix-and-flip. In expensive markets, prices for the same house can vary by $100,000 or more just based on cosmetic condition. If you know how to create residential beauty out of ugliness on an efficient budget, the boom market is the place to ply this trade.

… And eventually, once everybody gets used to the good times, the next bust will arrive.

 What to do in a Bust

Jobs: Now you’re feeling pretty smart about the way you handled the boom. Your friends used it to sign up for car payments and new houses, and yet their jobs are suddenly unstable. You used the proceeds of the boom to pay down debt and invest more, so you are more financially stable than ever. The money may not be flowing so freely, but you are ready for it.  Your reduced stress level at work may even help you keep the job while others are let go, or give you the confidence to jump ship if your own company is sinking.

Lifestyle: The best time to buy a house (or move to a bigger house) is in a poor housing market. The pricing scale usually compresses, meaning expensive houses tend to drop more than cheap ones. So the premium to upgrade is lower. Note that this exactly the opposite of what most consumers do: upgrading whenever the “equity” due to appreciation is large enough to cover a down payment on a bigger house that has appreciated even more.

During a down-market upgrade, there should be no pain felt in selling your previous house at a loss: after all, you are buying the new one at a correspondingly bigger discount. But if your old house makes a suitable rental house, you might even keep it, using it to generate income until the next boom comes.

This is also the time to buy a great used car if you need one, take vacations that might normally be overbooked or overpriced, and get anything else done that is normally difficult when everyone is overbooked.

Investments: The best part of any bust is the spectacular stock market crash that goes along with it. Although this borders on the taboo practice of market timing, I feel every big market crash is a time to joyously go out and buy as many more shares of your index funds as you can. Increase the contributions. Drain the cash reserves. Enjoy the lower valuations and higher dividend yields.

And, man oh man, the rental real estate millionaires that were made during the 2008 housing crash, buying up houses at 75% off from the banks, will become legends of generations to come.

So there’s your Contrarian Soup for the day. You may already feel the boom roaring in. The old you would get excited and start clicking through the BMW website looking for a way to celebrate your promotion. But the new you realizes that the booms are not really there to get you more stuff. They are there to help you become wealthy.

If you spend away the wave of wealth that the boom brings, the eventual bust will feel painful. Instead, hang in there. Keep earning and learning, and ride the wave. The next bust is surely less than 10 years away, and this time, you’ll be ready for it.

I did, and here are the results:
Family Road Trip Driving: 1115 miles
Local Clown Driving: 13 miles
Walking: 107 miles
Biking: 111 miles

In the measure of “miles traveled by car”, we had a gluttonous month, because the MMM family happened to be in the middle of a big Southwestern road trip on April 1st. That night, we had to drive from Moab, Utah to Zion National Park, and the next day on to Las Vegas. And eventually, it was necessary to travel all the way back home from there.

But after that, the month was more respectable. Only two car trips were taken, for a total of 13 miles. They were both Clown trips, in the sense that they were within city limits and thus within biking distance. But at least they involved the whole family traveling together, and they were areas that are a bit of a stretch for little MM to ride to, especially since time was tight on those days.

There was some fun in it for me: we had a series of weekly record-breaking snowstorms in Colorado (Although this is normally a warm time of year here, you will still occasionally get beach weather in January, or deep snow in May).

During one of these storms, I happened to need groceries, so I threw on some snow gear and hooked the bike trailer up to my burly old full-suspension mountain bike. As the garage door rolled up, I was greeted with an apocalyptic blizzard: strong winds, huge flakes everywhere, and a deep crust of snow and ice on all surfaces. It was going to be an interesting ride.

The two miles to the store were no problem: downhill, on roads mostly melted due to the fact that it had been 70F just one day earlier. But inside the grocery store, I was confronted with amazing sales on many of my favorite foods. Obeying my own food shopping algorithm, I bought an enormous quantity of heavy stuff (85 pounds of it, as I discovered upon weighing it all at home). While this normally presents no problem for the bike trailer, I wondered how I would fare in the deep snow.

On the way home, I always cut through the park and ride along the creekside bike path. But halfway through, I discovered it had not been plowed, and the snow was getting deeper as I rode. I shifted down a gear and pedaled harder. The bike trailer’s narrow tires dug into the snowdrifts and presented increasing friction.

Eventually, I was in the lowest of my bike’s 27 gears, spinning the rear tire and pedaling with every bit of energy I could muster, shooting out steam clouds of breath, and moving slower than a very leisurely walking speed. My front tire slipped out, and I had to put my feet down and stop. And there was still a mile of this bike path left to travel. Snow was melting on my cheeks, icicles were hanging from my beard, and the 85 pounds of groceries were mocking me from behind the clear plastic window of the trailer.

I thought about you, and what you would think of me if I gave up. “Does Mr. Money Mustache talk about Badassity, or does he talk about Wussypants Convenience?” I asked myself.

“Am I going to go home and whine about this bike ride, or am I going to feel like I kicked some serious ass when I make it home from this?”

I waited for my breathing and my heart rate to recover. I looked around at the snow falling into the rapids of the creek, balancing on the tree branches, and floating straight down from the white abyss onto my face when I looked up. It was beautiful to be out here alone, when everyone else was safely hiding in their houses and cars. Even with ice on my cheeks, I felt warm, healthy, and even a little bit badass. I forced the bike and trailer to start moving again. The drifts were shallower as the trail progressed. I climbed the final 100 foot ascent to the neighborhood where I live. And rolled back into the luxury of my warm, dry garage, victorious.

That’s what the Anti-Automobile mentality is really about. It’s not about me whining, criticizing, or making America feel bad about its love affair with cars. It’s about all of us winning.

(For bored voyeurs, here is the full table of my transportation tracking for the month):

When confronted with a hardship, the standard consumer’s brain floods with negative emotion and shuts down, grappling for a remote control or a convenience product to dull the pain. In this scene, there is nothing but the consumer, and the problem.

But as a Mustachian, you’ve learned to step back immediately and survey the scene from a broader perspective. Suddenly there’s you, the problem, and all the other people who live in this world and those have lived before you. Some of those other people have solved problems just like yours, often with fewer advantages. With the narrow view, you might only see the bottom of a hole you just fell into. But zooming out, you see the flowers, grass, and overhanging tree branches you can use to pull yourself out.

So today we take a trip to London, where a young Mustachian-in-training wrestles with his savings rate, and we get to contrast the UK financial scene with our own.

Dear JL,

From what I can tell, you have very little to worry about. I can’t make fun of you for credit card debt, car commuting, or even the student loan, given that you pay only 1.5% interest on the balance and you are investing most of your savings at higher rates. Moreover, I commend you on being a Monevator reader, as that will keep you on top of the UK financial scene.

Your main “problem” is that you’re young and just starting out in your career. So your income is relatively low for a London finance worker, and you have no built-up investments compounding to push you ahead.

While it’s hard to tell the difference between a 25-year-old and a 38-year-old if you stand them up next to each other in a pub, there is an enormous difference in things like career progression and the amount of time they have had to amass the ‘Stash of cash we refer to as a Money Mustache. When I was 25, I had just arrived in the US, with savings very similar to your own. I had just barely made the jump from new-graduate salary to a solid middle-income one similar to your own.

With £2855 of after-tax income and £620 of savings per month, you’re at a 22% savings rate right now. That’s far better than average, although it still yields a 35-year working career, ignoring government subsidies and pensions for now.

But if you can eventually double your take-home pay while maintaining the same expenses, you’d be at a hefty 60% rate, which drops the working years down to 12.

By living in London, you are maintaining access to one of the world’s most productive money machines. To justify the high cost of living there, you either need to tap into it in order to get a suitably high income, or acknowledge that you are just there for the experience, and be willing to work much longer than you would in other cities with lower living costs.

And there’s still hope for you on the expenses side. I would never suggest that a young, single man curtail his nightlife too much while living in such a fun place. But as you get older and settle down a bit, this will probably happen automatically.  These days, my whole family can’t seem to spend even $700 US dollars per month on food and entertainment. It’s not that we don’t have lots of fun around here – it is just a different kind of fun than I had at age 25 in a big city.

Regarding housing, I think you have the right instinct. Always compare the price of owning with the price of renting, and don’t stretch uncomfortably to buy property in a hot real-estate market. Someday you may find a way to own, using renters as a way to subsidize your own cost. But building up a nice asset base first is a reasonable prequisite to property investing.

I always find stories of other countries interesting from my vantage point here in the US. I moved to this country partly because of the world-leading conditions for early retirement. High salaries, low taxes, and amazingly cheap food and consumer goods, on top of the beautiful landscapes and climates available. 14 years later, the US remains at the top of my list for get-rich-quick destinations, and I hope more of those born here will come to appreciate how good we have it.

With this perspective, spending less and investing more becomes a privilege – there are not many other countries where you’d have such a surplus available to buy yourself some freedom.

Part of the fun of a new bit of exposure like this is the controversy. Every time the surreal and happy world of this blog has a brush with the mainstream media, it triggers an explosive round of complaints, as well as a meaningful stream of questions.

The complaints won’t get us anywhere, because that’s pretty much the definition of a complaint: a whining statement of something you don’t like, without an accompanying proposal to fix it. But just to indulge ourselves, let’s review a few of them I came across:

I still get treats like that every day, and I collect them in a little secret website to share with other bloggers.  While it would be fun to do battle with people like that, it would use up the precious free time I’d rather spend writing to YOU, who probably have real questions about building a ‘Stash of your own.

So let’s begin – here are a few of the most frequently asked questions about the early retirement lifestyle. While they are often phrased as complaints or accusations, I’ve converted them into polite questions here to avoid accidental damage to your computer screen.

But what about Health Insurance? 

We’ve got it. At $237/month for the family, It’s not as expensive as most people assume. More on that here. I think this country could run more efficiently if workers were not held back from switching jobs, starting new companies, or retiring by fear of losing health insurance coverage. While the situation is still not ideal, I like to promote the idea that it is not scary to purchase your own insurance these days. Many of my entrepreneur friends are in the same boat, and they have been for many years.

But that has a $10,000 deductible! What do you do if someone gets really sick? 

When you have early-retirement-level savings (say, $1 million), taking a $10,000 hit is only 1% of your wealth. You could do it year after year, for over 30 years, and you’d still have $700,000 sitting around. In my mind, that is preferable to having a job, spending most of what you earn, and having lower-deductible health insurance. Meanwhile, as a saver you have plenty of time to decide if you want to go out and earn more money, or scale down your lifestyle by moving to a less expensive house, or (unlikely) move to another country where healthcare is much cheaper. Savings give you peace of mind and options, and this blog is really about spending less and investing more so you can have those life benefits.

What about a College Education for your Kid(s)? You could never pay for that on $25,000 per year!

This comes down to the savings issue again. People often read these interviews, and fixate on the fact that we only spend $25,000 per year. But we actually earn more than that. And even if we didn’t, an early retiree you have a heap of invested money that you can cash out and use for anything you like. As long as you have sufficient safety margin in your retirement ‘stashing, that is more than enough to cover any educational expenses while barely making a dent in the war chest. On top of that, I’m willing to bet that my son won’t need too much of my help by that time anyway.

Are you making this all up? These numbers don’t work out. Nobody could do this.

Every single thing I’ve written in the 336 posts of this blog is true to the best of my ability to write it. I don’t have any incentive to make stuff up: writing lies would ruin the fun of this blog for me. In fact, I believe the best way to make good things happen is by harnessing the sometimes-mysterious power of Honesty.

You’re a Prosperity Anomaly: you made money in the stock market and the housing market. That’s all luck.

Not true in my case, unfortunately. By owning mostly index funds, we’ve matched the market’s appreciation and dividend yield for all our stock holdings, which we built up since 2001. This hasn’t been a great time for stock appreciation. I did make some money on my first house, but that was mostly due to renovating it using my own weekends. Then I lost a bunch by starting a house-building company right before the housing crash. D’oh!

The real ‘secret’ to how my wife and I saved our first $800,000 over nine years of work was simply saving just over 65% of our income. Do the math right here, and you’ll see that saving at that rate adds up to financial independence in 9 years.

As one wise person on Hacker News wrote in defense of this strategy:

“His good fortune shaved years off of his retirement. Maybe even two of them.”

The bottom line is if you can live on 50% of your take-home pay and invest the difference, you will be weathy enough to retire in 17 years. Saving more gets you there even faster. No magic or unusual luck required.

But I don’t want to be frugal – I want to LIVE, and travel, and, and, … !!

First of all, we’re not all that frugal. We lead a pretty spendy life these days, live in a luxury house in a good neighborhood, and travel at least three months of the year. I’m ashamed to admit that I probably own almost as much fancy stuff as you do. And if we wanted to spend even more, we would. But by focusing on happiness instead of shopping, and working to make the spending we do more efficient, the annual total just ends up being lower. A big part of this comes from driving less, since cars cost more than you think they do. But more importantly, the sooner you let go of the belief that these things you want really bring you more happiness, the happier and richer you will be. Look into the philosophy Stoicism, it is freaky-powerful stuff.

You have a Rental House. Isn’t that still a job?

Not for me – first of all, because I’ve had the best tenant in the world for two years, and also because I enjoy it. But I’m doing a terrible job at it: My rental house is an expensive custom one that I originally built myself, to sell. But I got stuck with it in the housing crash and a messy business partner situation. I only clear about 5% of the value of the house in rent every year. I could do better by just selling the place and owning some REITs. Or buying a 4-plex that would deliver double the rent, even after hiring a property manager. So when you see “rental house”, just substitute the words “$500,000 of assets yielding 5% after inflation”.

Can you stop being a Smug Asshat? And stop swearing too?

Some people say they like the message here, but not all the judgmental opinions and the made-up words like Mustachianism. They want Mr. Money Mustache to write in the straight-laced style of newspapers and magazines. And to omit certain words, so it can be shared with the children of anti-swearing households.

I’m really sorry to have to say this, but this blog is a hobby and not a corporation. So in order to stay motivated to write, I have to write in the way that I enjoy writing. And I just happen to find this shit funny. If it’s any consolation, I don’t actually think I am even remotely badass in real life, so you can imagine a mild-mannered computer engineer doing the typing, rather than a Smug Asshat, whatever that looks like. And as a consolation to me, plenty of people seem to be reading all this smug asshatty profanity, so I’d say it’s a sign I should continue writing this way.

Why are you writing the blog at all? Is it to judge me and make me feel bad about my life choices? Or is it to make yourself feel better, or sell me stuff?

None of these things. It’s just one guy’s attempt to try to make the world a happier place, by sharing some things I was lucky to learn along the way. Most of the principles I write about here are at least 2000 years old, and yet they are not widely known in the modern world. And, so I can laugh at my own jokes.

Your plan is silly – consumers drive the economy. If everyone became frugal, we’d have no economy and we would all have to live in cardboard boxes.

I think this represents a misunderstanding of economic principles, confusing our productivity per hour with our chosen rate of number of hours to work and rate of consumption. I wrote about that more here: http://www.mrmoneymustache.com/2012/04/09/what-if-everyone-became-frugal/

You’re not really Retired! You just said you like working!

This blog is about how to build up the wealth required to make work optional. Mrs. MM and I reached that milestone in 2005, in order to start a family without the distraction of jobs. Since then, we’ve gone on to do some things that earn money, and lots of things that don’t. But that doesn’t take away from the original message: if you save and invest enough money, work will eventually become optional, which is a great thing to happen. If you don’t like my idea of retirement, you might prefer to get a job with the Internet Retirement Police.

I can’t ride a bike where I live!

Good! It sounds like you’ve at least identified the problem. Now, let’s work on a solution. Is it because of irrational fear? (if you see other people biking in your city, I’d be a bit suspicious). But even if you do live in some bleak cars-only location, my job is to at least plant the idea in your head that there is another way. You probably didn’t choose your current location with “minimize the need to drive” as a top priority. What would happen if you did? I can already tell you what will happen, since this has been my priority for all of the 12 addresses (spread across six cities and two countries) I’ve had over the past 19 years. The result? Over 20,000 miles of biking, almost no car-commuting, and over $200,000 in estimated life benefits so far. Rather than telling us all you can’t do it now, just consider it as a way to improve your own future.

I’m Way too late for Early Retirement. What approach can a late starter like me take?

Exactly the same approach as an early starter! Spend less than you earn. The math here is equal-opportunity: it does not care how old you are.  Older people often have the advantage of higher salaries, or things they can sell to get a head start. But even if you don’t have any of that, you still have your wisdom. And there is nothing to lose and everything to gain from starting now to improve your financial situation. I still get emails from people of all ages sharing inspirational stories of giant transformations for the better. I look forward to getting yours too, and sharing it on this blog for the next person who does not yet have the confidence to make a change.

You look sort of like the Dos Equis guy in that Washington Post picture!

Wow, really? That would be cool. I could see a Internet meme forming around this. You can take a picture of Mr. Money Mustache, and add your own words, just as people do with Dos Equis Man. Planting this idea may turn out to be a very good, or a very bad idea :-)

Any other frequently asked questions that I should add to this article? Let me know and I will make some updates, and then stick it up in the menu for permanent reference.

This is surely what people are thinking when they call Mr. Money Mustache “Extreme”.

“The triple M family retired with too little money for comfort, and that is why they are forced to live such a spartan lifestyle. They’re fooling themselves if they think they really are living well on $25,046 per year!“

To illustrate the point, let’s dive into the MMM Mailbag and consider a couple of recent letters from readers:

While this reader initially caught my fancy by throwing out words like ‘educated’ and ‘young’, the letter rapidly took a turn for the worse when it started talking about the $100k and the benefits. Because that transported me right back into the cubicle, with a thick layer of tinted glass between me and that expansive view of the Rocky Mountains and the accompanying fresh air that used to taunt me at work.

Why live a frugal lifestyle when I could instead go back to work in order to earn more so I could spend more? Because I love being free to do whatever I want… right now! Because I have a seven-year-old boy, my little pride and joy, who has way too many plans for us every day to ever let a job get between us. And because I couldn’t imagine spending any more money than we already do – our life is already an overwhelming conveyor belt of abundance and I can hardly keep track of all the tumbling boxes of luxury as it is.

Now let’s consider another email that offers an interesting counterpoint:

What’s going on here? Why would a man be frugal on a million dollars a year? And then seek out additional frugality measures to make his life more interesting?

Therein lies the whole reason this blog is useful to anyone. If I were telling you to spend less money just so you could get out of debt, save up a fortune, and then eventually spend loads of money (which I recall is a paraphrase of the Dave Ramsey slogan), the advice would be useless. Because that would imply that the lower-spending portion of your life is less good than the subsequent high-spending part. What if you never get to the high-spending part? What if you fail or die first? It would have all been a waste. Better to just keep spending all your money now, to get the most out of life.

While this has become the accepted wisdom of contemporary society, you and I are fortunate to have discovered at such a young age that it is all bullshit.

Spending more money on yourself can spare you from hardships. But hardship is just an unpleasant way of writing “effort”, and effort is really the only thing getting you out of bed in the morning. Effort is the spice of life. If you smooth over all possible difficulties with Benjamin Franklin Wallpaper, you end up with your enormous jello-like form sprawled in a hovering cruise-ship deck chair staring at an LCD screen while soft-spoken robots bring you drinks. Your life would be like playing a video game with infinite cheat mode enabled and the joystick taped to the right – you just coast through level after level perfectly straight while the bad guys explode as they touch you. Except in real life, you too die at the end.

Although I’ve never made a seven-figure income, I can still relate to the writer of that second letter. You see, a little-known fact about the MMM household these days, is that while we continue to live the lifestyle that many consider extremely frugal, we’re not actually short on income.

Try as we might to earn less money, our income has gone up almost every year since retirement in 2005. Rental income increases from the rental house, stocks pay dividends that are reinvested. People take up hobby occupations that end up delivering occasional windfalls. All in all, we are now at a point where we could probably triple our annual spending forever, without running out of money. And yet, I continue to ride my 2008 commuter bike everywhere, get filthy doing local construction projects, and buy everything used from Craigslist. Mrs. Money Mustache rides a 10-year-old mountain bike for her primary transportation, wears old clothes (that still look rather nice on her fine form) and spends about $50 per year on haircuts and beauty products. We’re even shopping around for a smaller house in the neighborhood, to downsize our space a bit. How could this possibly be?

It’s because our current life is already more than enough. We don’t want to lose the challenge and the spice that is part of life right now. I have only one digestive system, so I can’t eat any more spectacular food than I already do. My house is already big enough to hold everything I own, plus all my friends. My subcompact Scion hatchback can easily hold the whole family and our stuff, and exceed any legal speed limit. How could an even fancier car possibly make us any happier?

Another factor in happiness for me is the satisfaction that comes from efficiency. I love seeing things that are efficient, elegant, well-designed. And of course you’ve probably noticed my corresponding boiling rage for things that are not. Buying treats for yourself that aren’t truly necessary is inefficient. It’s unsatisfying.

Paul Allen’s 414-foot Octopus yacht has engines totaling 19,000 horsepower, which burn about 622 gallons of diesel fuel per hour at cruising speed. It’s currently off the coast of Australia, a journey which took about $780,000 of fuel to make. This is an inefficient way to have fun. A man skilled at having fun should be able to achieve equal bliss within walking distance of his own house. He could then invest the surplus funds to save a few lives, which are surprisingly affordable these days at only about $200 per human according to Peter Singer. Or you could start companies, fix cities, or even change countries. All challenging and effort-filled endeavors, that these days can be done just as effectively in thrift-store clothing as they can in Armani suits.

And so I’d like to issue a challenge that you consider deflating, rather than inflating your own lifestyle as you get richer. The desire for luxury, while very real and occasionally pleasant to satisfy, is actually a weakness that stands in the way of a happier life. Getting off of the path that society has beaten for you will lead to much better adventures. So I’d rather work towards strength as I get older, rather than striving for weakness.

After all,  which would you rather be, the man who requires 622 gallons per hour of diesel and a crew of 60 to have fun, or the one who can do it just by stepping out his front door?

A lineup of Clowns waiting to drive their kids a few blocks home from school, on a beautiful Hawaiian afternoon this January.

One of the weirdest things about this country is the way people use their cars.

I mean, it takes some serious effort to find a spot in our Three Million Square Mile land area, where you will not see endless lines of seated humans trundling meaninglessly back and forth in these giant and stupendously inefficient machines. Whether you’re on a rocky rural road in the desert, in a deep blizzard high atop the Continental Divide, walking up to the elementary school on a Friday afternoon to retreive your son, or sitting with your feet in the sand on the Windward shores of Oahu, those fuckin’ cars are right there with you – roaring, stinking, crashing, and impoverishing their owners.

All this would be excusable if all these cars were providing an essential service. If every car trip delivered great rewards to its driver, and by extension to society as a whole, I’d gladly toss down this keyboard and stand up so I could cheer on the heroic drivers as they passed by. Just as I solemnly accept that digging up a 27 kilometre tunnel of solid rock beneath Switzerland to build the Large Hadron Collider was a worthwhile wound to inflict on our planet because of the expected advancements to science, I could accept that paving over most of our cities to accomodate cars is Good.

But unfortunately, that’s not the case. After years of careful study, observations, and interviews with real car drivers, I have come to the conclusion that about 90% of the car use that occurs in the United States is Pure Bullshit. But don’t get out your boxing gloves and start knocking out motorists just yet, because the ridiculousness is baked right into our culture. Our people are victims rather than perpetrators, even if their suffering is rather comical and clown-like.

Luckily, today I’ll present a cure for the problem.

My town represents the ultimate laboratory for studying Car Clown disease, as it is sufficiently small and bike-friendly that car trips within town are completely unnecessary. Since groceries and kids are easily handled by a bike trailer, the only reason to drive would be physical impairment, transporting items too large for a trailer, or driving to another city.

Yet these intra-city trips are commonplace. When I see a car ease into a parking spot, I always run to assist the driver with getting out into their wheelchair, but I am stunned to find that they usually have working legs after all! People drive to the school to pick up and drop off kids. To the grocery store. To the restaurants. To the gym. To each other’s houses. Back and forth on Main Street to show off. Every road sees plenty of cars and personal trucks, some of them in dangerous numbers. And inside, every vehicle is equipped with a La-Z-boy recliner, upon which a tragic clown sits, pushing the soft-touch pedals, turning the power-assisted wheel, and talking on some sort of Clownophone.

The clowns have to wait in line when the traffic light turns red. They have to bumble though the parking lots and wait for each other to back out of parking spaces, because their machines are so bulky that two cannot pass each other in a space less than 20 feet wide. They line up at special events and fight for places to park on the streets. Then they line up at the gas station and the car wash and the oil change shop. And the machines make them fatter and poorer every time they use them.

And we haven’t even addressed the most clown-like invention of them all: the drive-through (or ‘drive-thru’ as it they spell it here, which is suitable because “thru” is not even a word, just as drive-through services should not exist). The clowns actually sit for several minutes in a self-imposed traffic jam, engines idling, just so somebody can hand them some shit through the window of their car! Mustachians like you and I view an idling engine like a bleeding wound or an overflowing toilet. It’s something to be alarmed at, and to correct immediately. But Car Clowns actually idle deliberately, sometimes to get something as ridiculous as a cup of expensive coffee in a disposable paper cup. When I see these lines of Drive-Thru Clowns, I find the urge to get off my bike and walk down the lineup systematically PUNCHING EACH DRIVER IN THE FACE through their open window to be almost overwhelming.

It sounds like a terrible fate when I describe it like that, but yet for almost everyone in the country, this is reality. Most Car Clowns will acknowledge that their lives are pretty inconvenient, but then claim that a car is necessary to prevent the even greater inconveniences of public transit, walking, or not going anywhere at all.

Well, here’s the good news: Car Clown Disease is not an unavoidable thing. It’s simply the product of bad habits. If you can reprogram the bad habits you’ve built around cars, you can slide into the cool camp of Conscious Car Users instead. It’s a land where traffic is sparse, the view out your window is breathtaking, and cost is negligible.

To cure the disease, you just need to change the way you feel about driving. Right now, you probably feel that it’s just something you do because it’s necessary. Maybe you even find it pleasant at times (hell, I sure do). You have the cozy seats, the climate control, the stereo, lights, knobs and buttons, and all that power. You can go anywhere with that thing.

But there’s more to it than that. When you use a 3500-pound car to transport your 150-pound self around, 96 percent of the weight of that clump of matter is the car. You’re moving 25 times more junk around than you need to, and thus using 25 times more energy to do it.

Imagine that you’re hungry for lunch, so you go to a restaurant. But you don’t just order yourself a blackened salmon salad for $15.00. You order twenty five salads for $375.00! Then, you eat one of them, and leave the other 24 blackened salmon salads, $360.00 worth of food, to get collected by the waiter and slopped unceremoniously into a big black garbage bag. All that fine wild-caught Alaskan Salmon, lovingly seasoned and grilled. All the fine crumbles of feta cheese, the mango salsa, diced green onion, shaved peppers, rich zingy dressing, and everything else the chef worked on for hours – plopped into the slimy garbage bag. This is exactly what you are doing, every time you drive!

And you’re not just wasting your own money, of course. You are wasting the gasoline that the rest of the world works so hard to produce, puncturing seabeds and spilling stadium-loads of oil into pristine wilderness areas as a necessary byproduct. Destroying coral reefs and flooding coastlines with your carbon emissions. Clogging roads and creating demand for roadway expansion, indirectly raising your own taxes. It’s a whole lot of badness we’re doing, every time we drive. It’s not just a matter of “Hey, it’ll only cost me ten bucks for the gas”. It’s a matter of choosing to be an asshole. I fully admit that I drive plenty of miles in cars too, and I too am being an asshole every time I do it. Other people think you’re being an asshole when you drive too, and you should be just a little bit embarrassed every time you are seen driving. I sure am.

The goal here is not to create negative stress in your life. Just acknowledge that whenever you turn the key, you need to say, “Here we go. I’m being an asshole again”. It’s a subtle change, but a powerful one once you embrace it. And of course, your assholism scales with the size and weight of the vehicle. If you’re considering driving a pickup truck or large SUV for personal transport, the asshole factor should be so overwhelming that you feel like running inside to cower in a closet every time you even look out at your driveway. Feel the pain. Embrace it. Over time, work to reduce it.

On top of that, every time you drive on a local trip that could be handled by bike, you are telling both the world and yourself, “I am already so physically fit and healthy, that I could not possibly benefit from an extra few miles of biking”. Occasionally this is true, like if you just returned from a mountain century ride and have raw butt cheeks, blistered hands, and absolutely no energy left to crank the pedals. In this situation, sure, go ahead and take the car out to get groceries. You deserve it. For the rest of us, what is your excuse? Unless you just rode 60 miles, you will probably benefit greatly by leaving the car at home.

So there you have it: 3 simple steps to automotive habit change. With every potential car trip, think of the 24 plates of wasted salmon. Ask yourself if it’s worth being a deliberate asshole, and ask yourself if you have any possible use for a bit more health and physical fitness. Do it every time, so it becomes a habit.

You may find your automobile travel being greatly reduced, which of course has massive financial benefits as well. And for those remaining trips that pass the Triple Anti-Car-Clown Gauntlet: well, those are probably some hella good car trips, so you will have such a good time that it will be worth the consequences.

Epilogue, 1 day later: As usual, this article has gathered its share of complaints from new readers. “Waah, Waah, don’t call me a clown”, “Biking is dangerous where I live”, etc.

Instead of continuing my usual bossy insensitive life coach routine, I’ll take a rare moment to remind those people what I’m really trying to accomplish with this article: It’s not to make you feel bad or to try to make myself feel good. It is just to raise awareness about how there really is an alternative to a nothing-but-cars lifestyle if you think about it when making future decisions.

Sure, you might have trapped yourself into a car-dependent lifestyle for now. But remember, you created that trap yourself. If you get in the habit of lightheartedly calling yourself a clown every time you drive, and imagining those 24 plates of wasted food, you’ll start thinking, “hey, maybe there’s another way”.

Then, you might try walking or biking (or hell, even taking the train) on a fair-weather basis. Just do it when it’s easy. Then, it will get easier, which means that soon enough, it will be easy most of the time.

Next time you move to a new house or a new job, suddenly the consideration of “I’d rather not be a car clown” will be in your mind. You will make more balanced decisions. The reason I took the job in Boulder instead of Petaluma way back in 1999 was because I could afford a house within biking distance of work here, but I couldn’t out there. Even if you live in the center of a NASCAR oval right now, and work 67 miles away, you don’t have to do that forever. You, too, have a choice of where you live and work in the future. I’m just planting a seed in your mind.

Only once this seed grows into the fruit of independence, can you wean yourself from the Poisonous Teat of the Automobile.

The biggest helpful shift for me has been the realization that “fat” (also known as “oil”) is not a taboo toxin that immediately sticks itself atop your nearest existing reserve of stored bodyfat if you accidentally ingest it. Quite the opposite, it is a pure and clean-burning fuel that your body will happily run on for great distances, much like an old Mercedes Diesel will burn unprocessed vegetable oil while creating only pleasant french-fry-scented tailpipe emissions. Fat is not fattening. Eating when you don’t yet need refueling is what makes you fat, and high-carbohydrate eating is what causes the craving to eat too often.

This change in dietary philosophy can be unintuitive to those who still eat according to the USDA’s grain-intensive food pyramid. At a recent breakfast at a friend’s house, someone noticed me cooking a pan of eggs for myself. I started by heating an obscene lake of olive oil, then added the eggs and grated on a thick layer of full-fat cheddar cheese and another of spicy curry powder. After this delicious smelling treat was sizzled properly, I served it onto a plate, added some almonds on the side, and sliced on an entire avocado over top to add even more Good Fat.

“Why are you adding so much fat to your breakfast?”, asked the friend.

“Because it adds more calories”, I replied.

“But don’t you want LESS calories rather than MORE?”

“No. If I eat fewer calories at breakfast, I’ll just need to eat again sooner in the day. A meal like this will keep me going until 2PM. But if I eat bread, juice, or other simple carbohydrates at breakfast, I’ll be hungry in just an hour or two.”

“This blows my mind.”

“Good! Maybe you should try it!”

This is a big meal designed to start an active day. If you’re just planning on writing some software after breakfast, you might scale down the ingredients accordingly. But the principle remains the same: a low-carb meal like this works better than one with juice, toast, bagels and other sugar-spiking ingredients. And it’s still relatively inexpensive, because there is no meat.

But won’t it give me a heart attack?

Again, quite the opposite. The most recent research on fat shows that it is not an artery-clogger or an abdomen-thickener. The proponents of this type of diet encourage you to get your own blood tested before and after the switch in order to see for yourself. I only have my most recent blood test on file, but the numbers are excellent after almost a year of eating this way. A friend of mine with past blood cholesterol problems switched to a low-carb, high-fat diet and saw immediate and complete improvement in his own blood test results – completely the opposite of his doctor’s prediction but exactly in line with the high-fat/low-carb research. Mark’s Daily Apple will entertain you for days if you are looking for more stories and research citations on the topic.

But perhaps even more relevant to you and me, being assembled today at this Personal Finance blog, is that this nutrient is extremely cheap. It is easy and land-efficient to grow, easy to store and ship, and easy to use in the preparation of delicious food. You can find most of the best oils (and nuts) in organic top-of-the-line form at Costco in huge quantities at great prices.

So nowadays I seek out fat rather than avoiding it. Homogenized rather than skim milk. Heavy unsweetened whipping cream instead of ‘lite’. Butter and bacon, and using bacon grease for additional cooking. Coconut and olive oils, used in cooking with no restraint. Nuts of all sorts.

But the key to all of this fat, is that it must replace, rather than supplement, your refined carb intake. I think of slices of bread as “weight gain squares”. Beer is “liquid belly expander”. A plate of pasta is “Ultra Mass-Up 2000″. Pizza is no longer my favorite dinner treat. I’ll still indulge in these things occasionally, but only as a tool to gain weight after a heavy workout.. not as part of a lazy vacation. And drinking sweet things is totally out – no fruit juice or soda, pretty much ever. Go for water, milk, unsweetened coconut or almond milk instead.

And while fat does the heavy lifting for me, I still eat raw and cooked vegetables freely with every meal, and plenty of fruit too. This is not the Atkins Diet or anything overly restrictive. Just a general “avoid flour and sugar” philosophy is all it takes.

Another breakfast I’ve been eating recently when I need quick calories in a lighter package:

It’s delicious, and rich. All the power of 3-4 bowls of cereal, but much longer lasting energy!

Shake this up and serve it over salads and many other things. Delicious and rich in calories. And of course, nearly free to make.

While the ideas above are only a few very simple examples*, I feel like a food revolution is happening here at the MMM household. Maybe it’s just our gradual growing-up, but we are now actually using cookbooks, improvising, and making good meals in a way I wish we would have started ten years ago. It’s a fine and luxurious ritual to sit down at a well-stocked table after a hard day of work, and I wish the same luxury upon you as well.

*Only slightly more complicated but amazing for dinner is “Fish Molee”.  Now that I’ve mentioned it, I cannot deny you the joy of eating this amazing curry dish:

It’s relatively easy and it is good enough for a young man to impress a young lady on his first time having her over for dinner. A truly handy recipe.

But I try not to repeat studies that are too similar to previous ones, and we’ve now covered a pretty wide range: minimum wage, new graduates, ambitious young ‘stashers, mega student loaners, middle-income families, high-income spenders, and even reformed spenders.

But today’s study covers a slightly different niche: a young couple of average income, saddled with heavy debts from earlier times and hoping to get ahead while living in an expensive area.

Dear Stashless,

While you’re not quite on the right track yet, I think you are teetering on the edge of it and will soon click in. You seem to have the desire to change, you’re doing research and starting to track the numbers, and reading Mr. Money Mustache. Even more importantly, you are applying some friendly self-mockery to acknowledge that things can be improved, and I detect no degree at all of complainypants disease. You are ready for the embrace of your fellow Mustachians.

On the bright side, you already have a pretty solid combined income. While either salary alone may sound rather average on its own, when added together you have a healthy number, which is the great financial magic of pairing up (whether it’s in a traditional relationship or taking on roommates for single people).  Also, you live close to work and probably close to many other amenities, which spares you from commuting expenses that can range into the thousands of dollars per month for the long-distance commuters you see streaming into your city on the interstates every morning. So, good job.

What needs fixing? I can see three main things:

1: The Mindset Regarding Debt. In case you hadn’t noticed, you are in an EMERGENCY!! right now. I like to describe financial life as having two stages:

• Escaping from any cauldron(s) filled with boiling lava and poisonous snakes.
• After the escape, choose your own pace of savings to continue building wealth until you reach financial independence.

While the second stage will vary depending on your own values (how much you value work vs. free time, your abilities and interests, etc.), the first one should be viewed as non-negotiable. If you have consumer debt (i.e. you borrowed money for anything that depreciates), you have fucked up. A car definitely falls into this category. So it is not Luxury Time, it’s Fix the Mistakes time. Student loans, while more noble in purpose, still need to be paid back before you go out and start hiring people to prepare food and coffee for you, so keep this in mind when making future decisions.

2: The Car: This seems to be a recurring theme in these case studies, but alas, I have to say it again: You can’t afford a car that is so expensive that even the remaining balance is $11,784. Even the Money Mustache family, with no debt and enough savings to last more than a lifetime, has a 2005 car worth less than $7500 – and it is only with a guilty sense of overindulgence that we keep this fancy brand-new thing in the garage, because we don’t really need it.

With your commute being 2 miles – a distance too far to short to consider driving, you can easily sell your car on Craigslist and buy, say, a 1994 Accord wagon (market value about $1700) or similar to accommodate you and the big dog for those rare trips out of town. Savings: About $350/month in payments, insurance, and gas.

 3: The Food: your food spending for two people shall hereby be reduced to a maximum of $300 per month. That’s about my own family’s spending, except scaled down by one person. This will keep you in the mostly-organic-luxury category, complete with grass-fed meats raised by fancy local hippie farmers, wine, beer, and the works, just like we eat here. But you’ll have to learn about Costco, home-cooking, and the concept of cost per calorie. And at least until the state of Emergency is lifted, you won’t be eating out. Because you’re in debt right now, anything you buy is effectively bought on credit. You won’t be borrowing for table service. Savings: $450/month

As for renter’s insurance and cell phones: you might want to at least do a bit of research on this. Does the insurance only protect your belongings in case of weird things like fire and theft? If so, you might want to drop that – your possessions are probably not so valuable that they need to be insured, and non-critical insurance is a bad bet. And ask about the cancellation penalty for your phone service. You could save about $110 per month by switching immediately to $10/month prepaid phone plans like we did, even while keeping our unnecessary fancypants iPhones. If your penalty is a few hundred dollars or less, you get an incredibly quick risk-free payback by making this switch. Potential Savings: $100+ per month.

$100+ per month cell phone bills are wise investments for CEOs who make back the cost with each phone call they make.. NOT for regular people with non-infinite money, and definitely not for people in debt!

As for the $723 per month you wisely say is “obliterated by stupid spending”, that is hard to address in detail other than having you re-read point #1. In a debt emergency, you don’t get to do any optional spending. You’re buying groceries, and any products required to allow you to do your job well. That’s it. No ringtones or iPhones, no purses or video games, and no lattes or salon treatments. There will be plenty of time for those things once you are a millionaire. The upside is that you do still have the right to get yourself a bike, which counts as a high-return investment rather than luxury spending.  Savings: $700+ per month

If you can make these changes, the total improvement to your cashflow will be $1400+ per month, or $16,800 per year. And all of it will get added to your existing $570/month to debt payoff, eliminating all debts within about three years. There’s no need to think about stock investment at this point, as the interest rates on your debt will provide plenty of guaranteed ‘return’, and the constant cashflow drain of debt payments puts a real crimp on your lifestyle options right now. To get the most out of your parenting plans (and avoid the biggest cause of arguments and divorces), you’ll want this stuff long gone with before the first child arrives.

And given Seattle’s high Price:Rent ratio there is no sense saving for a house downpayment while still in debt either – you’d be paying the high interest rate on your debt, while earning under 1% on your checking or savings account. For now, keep all green paper employees working for you, not against you.

At this point, you’ll have a cashflow surplus of $23,640 per year, which is close to 50% of your take-home pay. That puts you on track for financial independence in your late 30s or early 40s, even assuming neither of you ever gets a raise.

But of course, Ramit Sethi would not allow an analysis like this to slip past without pointing out that you can also earn more money. Much more. You live in a city that is sloshing with money and has a permanent shortage of skilled workers, which drives up salaries and demand for all services. Unless you are married to your current occupations, keep working the system and finding ways to earn more.

The benefit of living in a high-cost area is proximity to high-paying jobs. That’s what drove the costs up in the first place. So if you ‘re going to continue living in such an area, at least take advantage of its primary amenity – the money! I like to use $100,000 per person per year as the rule of thumb for when it is worthwhile to focus on earning more. Beyond this level, you reach financial independence so quickly (7 years or less) that there are not many years left to chop, and you can start making other preparations instead.

Building your skills with Treehouse as you are doing is one good technique. Working on resumes, job-switching, and entrepreneurship is another one.

Although the case study presented a few new tweaks, I can definitely hear some familiar ranting in my response. I hope this advice proves enlightening to at least the newer readers in the group, and I wish a Big Stash upon these new Seattle friends.

This was the first year that I had to report earnings on profits earned through Lending Club. I had been nervously looking forward to this step, since the topic remains shrouded in secrecy. Internet rumors of uncertain rules and 20-page documents of confusing numbers detailing every one of your $25 notes were circulating. Doing some research on other forums and blogs, I learned that the company’s reporting method started out quite primitive, requiring major manual effort on the part of investors. But for tax year 2012, things have improved considerably.

I had an extended conversation with a contact within the company, and could not get them to send me a statement of how to report loan income to the IRS – even when pressured with the prospect of public embarrassment on this blog. “Our lawyers won’t let us say anything, since we’re not legally allowed to give tax advice”, they said.

Luckily, I don’t have any lawyers myself, so I’m happy to give any tax advice I can.  So with no further delay, here’s how I handled my own Lending Club income tax reporting:

The company automatically generates the right reporting form for you. It’s called the 1099-OID, which stands for Original Issue Discount. The actual term itself is a bit of an obscure financial one, but for our purposes it is very similar to just the 1099-INT, which is how your bank reports interest paid on your savings account.

If you have a few hundred notes or more in your Lending Club account, this will be a long statement – the interest you received on every note throughout the year is detailed here. But luckily, they add it up at the end for you. Here’s an image from the last page of my own 1099-OID (with a few numbers changed for security), just so you can get the general idea:

Figure 1: Last page of Lending Club 1099-OID (click for larger)

So all you care about in this case is the total for “Box 1″, which is summed nicely at the bottom. For me, it was $301 in 2012. This number already factors in any service fees you paid, late fees collected on your behalf, etc.

Once you have that number, you simply plug it into Schedule B on your tax form (which in turn goes into box 8a), or in Turbo Tax under “Personal Income->Interest and Dividends->1099. Here you’ll see my little $301 again.

That covers the happy case of income received, but it does not handle the necessary evil of “charge-offs” – loans that have gone bad and been written off from your portfolio. I didn’t have any of these in my first year of Lending Club (and still haven’t had any as of mid-April in the second year), but a certain number are sure to come. The currently fashionable way to handle these is on IRS form 8949 (Sales and other Dispositions of Capital Assets). Turbo Tax handles that form automatically for you as part of the regular interview process as well.

In future years, it is possible that Lending Club may further optimize their 1099-OID to automatically factor in charge-offs as well, but for now, this is the deal as far as I can tell.

So it’s not exciting, but it’s not scary either.

In related news, I recently started a new headquarters page for the Lending Club Experiment, so I can post monthly updates to the progress of the investment, without having to spam you with monthly articles on the topic. That page can be found here:

The Lending Club Experiment

 Bonus! Need a free copy of Turbo Tax including the state edition? One of the company’s marketing folks sent me a single-use promotional code to give away to you that is good for any version of the software. I will email the promo code to the first person to write a comment requesting it. (And if you see another person has already requested before you, you can assume the contest has been won). 

(Update 4 minutes later: it has been claimed, thanks for all the entries.)

For the rest of us, you can always use the mostly-free basic federal filing edition if you have relatively simple taxes. I used the fancier “Home and Business” version because it helps me handle the rental house income and depreciation, Schedule K-1s from my LLC, and other stuff:

*A few readers wrote in warning me of my crazy tax irresponsibility and the accompanying dire consequences.. to be clear on this, we didn’t deliberately underpay the taxes, we just paid the same amount as last year (which resulted in a refund at the time) but earned a bunch of extra money near the end of the year while incurring smaller business expenses than forecast. Hopefully I don’t get in trouble from the IRS, but if I do, it’ll make yet another good story.

The ladies in the group were discussing their various Crossfit successes, while we men congratulated ourselves on improvements caused by switching to lower-carbohydrate diets and better weight training principles. The discussion broadened to the health plight of the Modern Human in general, and how the populations of rich countries are getting heavier and less healthy, even as the world makes progress toward lifting many of the poorest countries out of malnutrition due to poverty.

We wondered why with all the wealth and free information available out there, that most rich-country residents end up doing exactly what is worst for them: eating and drinking concentrated sugar, and remaining in a seated position for most of their waking hours.  And we marveled at some recent conversations we had had with off-duty nurses and doctors, who reported that the medical industry is still focused on medicines and “cures” for symptoms, rather than lifestyle changes that could eliminate the underlying causes of disease much more thoroughly.

As Mr. Money Mustache, you already know I have such an uncompromising stance on things that it is impractical to come to me with complaints. If you have an ache or pain or any other problem, and you’re not already a ripped, active, vegetable-chomping weight-lifting bicycle-sprinting dynamo with no major substance abuse habits, I’ll tell you to start by fixing those glaring health oversights first, then see if any problems remain that need real medical attention. Since most people (including me) don’t fully live up to this standard, there is always something to work on, and thus always hope and optimism that you can fix your own ailments.

But if you don’t believe me, you might want to just start with a simpler prescription, like this one from a well-spoken doctor named Mike Evans:

In this cute little sketchy-marker whiteboard video, he explains the power of a prescription “medicine” that outperforms anything else that has ever been invented. It cuts knee arthritis symptoms by 47%, reduces dementia and Alzheimer’s in older patients by 50%, Diabetes by 58%, Anxiety, Depression, Fatigue in people of all ages, improves longevity and even Sexiness.. just about anything that ails you.

If we could all get our hands on it, our lives would be transformed for the better. And yet it is a medicine entirely in reach for most people. And it’s completely appropriate for Anti Automobile April, because the medicine also functions as a form of transportation.

It is, of course, none other than good, old-fashioned walking. But until you idolize it properly with statistics and warm thoughts like this, most people don’t give much thought to the wonderful activity.

I’ve always been a bit of a walking enthusiast – as a kid I would go for walks far outside of the town’s borders, exploring the riverbanks or walking over the big bypass bridge where nobody else tended to go without their cars. In high school, walking cured the blues of turbulent teen romances as well as getting me to and from my evening shifts at the convenience store on warm summer nights. I still go for long solo walks almost every day as a way to empty the brain and fill up the lungs with better air. In the daytime I walk along the neighborhood streets and creekside paths, but at night when the golf course is closed, I’ll stroll across the fancy greens and admire the wide-open spaces, getting a good look at the black sky and the thousands of stars of Outer Space. Even though I’ll ride a bike whenever I need to be somewhere in a hurry, there is something you get from walking that you can’t get any other way. So if you’ve still got your legs, this is the way to say Thanks*.

Your assignment for today is to walk just a bit more than you normally would, and to think about it and appreciate it just a bit more. Isn’t it amazing how easily that collection of muscles and bones gets you around, just reading your mind and taking you wherever you want to go? How marvelous that you can do it with no license, no traffic laws, and no permission from anyone else. You can go up over the curb, step carefully through the garden, and walk right up to the door. You can stop wherever you like, and even run or fly for brief periods to cross puddles or gaps between the rooftops of highrise buildings.

Ken Ilgunas recently walked from Northern Alberta,  through the entire United States, and ended up at the Gulf of Mexico. 1700 miles, entirely on his own feet, carrying his entire home on his back, one step at a time. If he can do that, then we can definitely crank out at least a mile or two of our own every day, right?

I hope you enjoy your dosage as much as I enjoy mine.

*And even if you don’t have working legs these days, it is still a fine thing to roll outside by any open-air conveyance available.

How can I dismiss the desires of the millions of line-waiting humans as just wasteful folly? It is because in our natural state, we are supposed to be a diverse and individualistic species. At any given moment, you might choose to be walking in the woods while I’m at home cooking some dinner. Later, we might get together with some of our other friends for a party on my back patio, but we would not expect everyone else in town to suddenly mob into the yard as we did that. If we turned around and saw a lineup of people stretching around the block, we’d know something fishy was afoot.

So the sort of mass behavior that causes lineups tends to occur only in special situations:

• When there is some central authority planning or advertising it
• When herd mentality has taken over, turning People into Sheeple

Marketing causes crowds of people to want each new Apple phone on its release day, so those suckers end up in the silly all-night lineups you hear about every year. Black Friday sales are a similar phenomenon.  The 9-5 workday, (combined with poor choices of home and work locations) causes hordes of people to want to drive cars just before 9 and just after 5 every weekday. And thus, these people end up in lines as well. Herd mentality also makes certain people love certain bands and sports teams, just because they have already become popular with other people. And thus they line up to get tickets and parking spaces at the crowded stadiums.

Knowing all this, it should not surprise you to learn that as a general policy, Mr. Money Mustache Does Not Do Lineups.

If I’m planning a car trip through a big city, I’ll plan around the rush hour traffic jams, no matter what. To cross the city of Toronto, you need to plow through 60 miles of highway 401, a road so busy that the daily traffic jam lasts about 18 hours. The only sane conditions are found between 10:00PM and 4:00AM – and so that is when I make my stealthy crossing.

In Colorado, the ski resorts have become so popular that a spectacular lineup forms around each lift chair. A 500-person mob of people waiting and shuffling instead of skiing, is your reward for trying to visit one of these places on the weekend. On top of that, the traffic jam that forms on Interstate 70 on weekend afternoons can turn a one-hour descent into a six-hour one. But if you stop by on a Tuesday, both conditions are cured.

As a lifelong music-lover, I love to go out and see live music as well.  But this doesn’t mean staying up all night to buy tickets for a sold-out arena to hear a popular band repeat their radio hits. The best music experience for me is seeing insanely talented young musicians play the music they just invented,  in a small venue, where you can shake their hands, say thanks, and buy their CDs from them directly after the show.

And during my recent stay in downtown Las Vegas, I found people queuing up for everything, with no apparent benefit to themselves. There are lines to get drinks at the bars. Lines to check into the hotels. Lines of cars everywhere. Lines waiting for the elevators that extend almost to the doorway to the empty staircases.

It’s all a bunch of nonsense. As explained in last summer’s post about reaching the top 5%, most people spend most of their time doing what everyone else does, without giving it much thought. And thus, it is usually very profitable to avoid doing what everyone else is doing.

On the trip, we did a little experiment: Mrs. MM and I wanted to get away for a few minutes. So we decided to go down to the hotel lobby and get some fancy coffees at the Starbucks, which we would sit peacefully together to enjoy. Already I can see your eyebrows raising, but try to stay calm and remember this is just an experiment.

When we got to the coffee stand, I was dismayed to see that everyone else had had the same idea. There was a line of at least 10 people snaking out from the cash register, including two formidably proportioned gentlemen sitting on electric scooters and towing life support equipment. My first instinct was to chuckle out a few new curses towards the overcrowded venue and keep walking. But we persisted.

After sufficient waiting, we finally earned the privilege of forking over $8.11 for two grande lattes. This is roughly the same amount I normally pay for two pounds of organic fair-trade espresso beans at Costco, which makes over 100 cups of fancy coffee at the MMM Homebrew Cafe, but again, we wanted to see what everyone else likes to do. The cafe tables were all full and people were awkwardly leaning on the noisy slot machines or enduring the Beyonce-blaring lobby nearby in order to drink their coffee.

At last, we decided to end the experiment, satisfied that the behavior of the masses was not for us. We found a quiet-looking staircase and walked up three flights to an abandoned conference center area. There was nothing to buy up here, and no automatic conveyances to carry your body here, and thus it was completely empty. We sat down on a comfortable little couch and drank our incredibly pricey coffees with no sounds beyond those of our own conversing voices. It was blissful.

Other parts of the vacation reinforced this pattern: In Moab, Utah, we usually stay in one of the little campgrounds in the canyon along the Colorado river. This year, I was surprised to find them all full, and we had to give up our first two nights of camping and stay at a hotel instead. The hotel manager informed me that we picked one of the peak times to be in Moab – an event called “Jeep Week”. In this tragic comedy of an event, people from all over the country tow their ridiculous motorized La-Z-Boys with knobby tires from the comfort of their enormous 20,000 pound motorized RV homes. Once in Moab, they detach the smaller recliners and sit in them, pressing pedals and burning gas to bump around on the red rocks for a while. All apparently oblivious to the Muscle over Motor principle, which explains that greater fun could be had by simply riding a 25-pound Mountain bike on the same trail.

To get back to the point, by unwittingly arriving at this peak time, the MMM family ruined its own fun and missed out on two nights of camping, because the campgrounds were full.

Although we tried our best to obey the Off-Peak principle, we also made another major stumble: touring the Hoover Dam. To understand the error, check out this quote directly from the visitor’s brochure:

“Although several modern dams are higher, wider, and produce more electricity, the Hoover Dam remains the most popular for visitors, hosting millions of visitors every year”. Translation: “We have no idea why so many people are lining up to tour this old thing, but shit, we’ll keep taking the money if you keep giving it to us”.  The pamphlet went on to explain that the popularity is continually reinforced by major movies that feature action at the Hoover Dam as part of their plots (Superman I being my favorite).

Sure enough, we took the tour, and it was over an hour of lineups and crowding just to see a turbine room briefly and hear a guide squawk out a few memorized facts. There was even a lineup to get into the parking garage.

Meanwhile, a much better experience can be had with no waiting: park in one of the free pullouts on the Arizona side of the dam. Hike down the hill and walk over the entire length of the dam to explore the stunning scene with your own eyes. Then hike back up and climb another 200 feet, to the astounding new Colorado River Bridge (built between 2005 and 2010), where you are so high that the dam looks like a little toy in the canyon far below you.

You can use this general principle to end up with a better life in all areas. If you find any part of your life subject to overcrowding, consider whether there is another way it can be handled. Crowded roads are eliminated by biking, replanning, or even moving. Crowds at Disneyland and National Parks are avoided by visiting areas where there is no RV parking or gift shops. Crowding at venues is eliminated by being a producer of entertainment, food, sports, or music, rather than just a consumer of it. Lineups at shopping malls are easily avoided by not going to shopping malls.

The off-peak life works perfectly for working people, since it frees up some of your limited time and money. And it takes on a new dimension once you gain the flexibility to escape the 9-5 work schedule. Suddenly you can do everything when everyone else is at work, from renting vacation homes down to visiting the grocery store. This saves you even more, and frees your mind from some of the overhead of dealing with constant crowding.

So from now on, if you ever find yourself amid a crowd of running sheep, just turn around and run the other way. It can take a bit of dodging at first, but it’s worth it for the much better view.

Of course, we are fighting back in our own way by showing up with a big cooler full of fresh food, hot plate and frying pan, box of wine, and plans to enjoy this place in a way they don’t want you to enjoy it – with hiking, parks, and even a bit of public transit. Take that, Sin City!

So anyway, I’ve got a little meeting planned on Thursday with one of the Bosses of the MMM Forums – a guy who goes by the nickname ARebelSpy. Since he was already planning to invite several local Mustachians, he suggested we invite YOU as well and make a party of it. That sounded good to me.

Time: This Thursday, April 4th 5:00PM

Place: Sunset Park, at the tables under the umbrella thingy

Bring: If you are so inclined, cooler with any fun beverages, and even something for the public barbecues if you like. Your friends. A frisbee or football perhaps. I’ve never been to this park, but I’m excited to check it out.

This will be one of the rare MMM meetups where the lovely Mrs. MM will be there too! We have the grandparents along with us on this trip, so we will take advantage of the convenient babysitting to come out on the town together.

I Hope to see you there! If you have trouble finding us, send me a tweet or something, I will try to keep on top of things.

Spring is finally here, and with it comes the opportunity to kick one’s own ass up to a new level of satisfying performance. Thus, I thought we Mustachians might work on our health and fitness this month, even while maintaining the usual focus on exceptional finances.

One of the best ways to accomplish this is to look where the fields of fitness and finance intersect, which is of course right in your driveway … in the Motorized Throne* of your automobile.

At an Intellectual level, we both know that the less time and money you spend driving yourself around, the richer and healthier your life will become. But down at the Excuse-making, Complainypants, and Emotional levels, you feel you need every tonne and horsepower of your car for daily life. Your entire world is based around that beautiful machine, and you’ll be damned if Mr. Money Mustache is going to rip it away from you using only the power of his keyboard.

So let’s just take it easy for starters. Let us agree that cars (and in the US, personal trucks) can be used for both good and evil.

When they are blasting you and your family along on the interstate, past the amber waves of grain of the Great Plains, or up across the glaciers and spires of the Continental Divide, while the stereo rocks and everyone sings, cars are undoubtedly a Force of Good.

On the other hand, while they are wedged into an overcrowded parking lot making six-point turns between pauses to wait for shopping carts to roll slowly past, cars are not quite as empowering. And when perched impotently on the lift, dripping strange fluids as your grim-faced mechanic explains the upcoming repair bill, they also fall short of their common role as a bodypart augmentation.

So how do we separate the Good from the Evil?

Well, Duh, we obviously just stop using them for local errands under 3-5 miles, when we should be using our feet or our bikes.

But since it’s only the first of the month, I’m going to make it even easier. For this month, why not just try to make yourself AWARE of when you are using your car, and when you are not.

Just start a little chart with five columns, and stick it on your fridge. “Day, Car, Bike, Feet, Comments”. Pre-fill the “Day” column with 1 through 30, the number of days in April.

Then every day, just mark down the number of miles you traveled using each method of transportation. Write a comment, or a thought, or an excuse in your “Comments” column.

By becoming aware of what you do each day, you might just find yourself shifting your transportation habits. Especially since you’ll be showing all of us your chart at the end of the month. Awareness, after all, is the first stage of ass-kicking.

Happy April!

*”Motorized Throne stolen from D. Cain, Raptitude

The only thing is, in most cases you’re creating a double whammy of wrongness. Wrong because you’re spending more money than necessary, which means incurring more debt, working longer, and having less time to live your own life. And more importantly, you are probably programming your kids to expect handouts, and displacing their own healthy learning, effort, and growth with the leather-upholstered La-Z-Boy of your easy flowing cash.

Once again, my odd upbringing in another country is what allows me to bring you this new perspective. Although it may be hard to imagine for members of the wealthy middle-class of the United States to believe, it is not actually necessary to fund the lifestyles of your children, once they stop being children.

Let’s use a bit of Money Mustache history as an example. I’ve got two older sisters and a younger brother. As was prone to happen in the 1960s, our parents started the family far too young, and with far too little money to comfortably handle so many offspring. Over time, a spartan lifestyle and increasing income allowed them to get ahead of the curve eventually, but the frugal habits never left them – and still haven’t to this day.

As a result, we kids never experienced the fabled lifetime shower of parental handouts. We each got a bedroom and some great home cooking every day, but beyond that, the financial benefits thinned. A $1.00 per week allowance could be extracted if you handled the household trash-hauling. $5 was on tap for anyone willing to cut the 1/2 acre lawn. Getting places by car was something you could do once you turned 16, funded your own insurance and gas, and asked politely to borrow the minivan. Although mobile phones were not yet invented, good video games were just coming to market, and I’ll let you guess who was expected to pay for those. And a university education, while it was understood that you would want to get yourself one, was something you work for several years to save for, so you could get through the first year in order to resume working to pay for the second. Parental assistance was provided, but it was just enough to boost your own savings to the level required for a debt-free education.

Fashionable clothes in high school? Easily handled with the generous pay from your part-time job at the convenience store. Beer and other party supplies? Likewise. Restaurants and coffee shops? Dream on, those are for adults with real jobs. Plane tickets to Daytona Beach for spring break or Amsterdam for a summer of backpacking? An ideal thing to save for, perhaps in a few years once you are financially independent!

And as for the concept of inheritances and estates that are so popular with the rich: What a load of rubbish! By the time you die, your kids will be out prospering on their own. What good will extra money do them, when they have already figured out how to earn it for themselves? And why would you want to deny your grandchildren the opportunity to learn the same thing?

If you could go back to the early ’90s and ask Teen Money Mustache if he would like any of those perks, his eyes would glaze over at the possibility and he would suddenly be overcome with jealousy and desire. But if you ask me right now if I wish I had received such pampering, you already know the answer: “Hell no!”. I’m eternally grateful for every bit of hard work I have had the privilege of doing in my life so far.

Thank goodness for that job working at the gas station in the dead of winter. Without that, I never would have known how great every subsequent job was. And thank you for the completely barebones life I lived all through university, for without that I would never appreciate how incredibly luxurious my family’s almost-$30,000-per-year  lifestyle is right now. And thanks, Mom and Dad, for ensuring that money was treated as a precious resource not to be wasted, for without that perspective I never would have learned to handle it properly, allowing me to save enough to retire from corporate work before starting my own family.

This is not to say that I’ve deluded myself into thinking I am some kind of superlative self-made man. I have had loads of advantages handed to me, including being born in a rich country, raised by the right parents and siblings, taught by the right teachers, and many other things.  There is plenty of good luck in my past, not the least of which is the luck of having parents which handed me fewer silver-plated luxuries than most other parents give their own kids.

What’s this? Am I saying that a disadvantage actually ends up being an advantage? I sure am.

Because of being raised in an environment where money was something that was never wasted, all four of the Money Mustache Siblings are responsible with the stuff now. I don’t think any one of us has ever run a credit card balance or financed a shiny new car. Everyone knows how to drive a manual transmission, use a table saw, give a good haircut, and set up a tent. And we’re no anomaly – this pattern is seen among children of frugal and non-materialistic parents around the world. It’s not a guaranteed recipe, but it’s great odds.

Meanwhile, the misguided use of pampering has the opposite effect. From my morose and spoiled first Trust Funder housemate in Boulder, through the bratty teens of reality TV shows and all the way up to Paris Hilton, it is clear that money does not grease the way to a better upbringing for kids. While it is certainly possible for rich and highly generous parents to raise wonderful offspring, it is never the money that is creating the good character.

And this brings us to the second part of this equation. You.

If you are one of the 99% of people who is forced to live with only a finite amount of money, you should probably give some thought to how that money is spent. You can buy things, like cars and cell phone plans for your kids, or you can buy freedom, in the form of paying off your debts, saving most of what you earn, and soon being able to choose your own work schedule or even retire early.

When you become a parent, this kind of freedom takes on a far bigger meaning. Your children become the most important thing in your life, which means your job can no longer occupy this place. And that’s great, because with money worries out of the way, it no longer has to. Instead, you can start devoting mental energy to figuring out what you kind of real advantages you can give those kids. Do you want to make their lives easier, and give them an early taste for as many material things as possible? Or do you want to do the opposite – putting a bit of challenge into each day, and teaching them that life is not about you and your stuff. It’s about you and the people around you, in the natural environment in which we all share.

My own son has learned that you generally don’t buy toys or presents – you make them*. TV is something people in previous generations used to watch – nowadays we have the unlimited book collection of the Library for entertainment. And getting to and from school is not something you’d use a car for – since you’re strong enough, you use your bike. In the dead of winter, you add a hat and gloves.  As he gets older, this old-fashioned education will expand to include how to take care of your health, how to build and care for things, and eventually how to become rich. I find it fascinating to watch my little boy as he grows up and figures things out for himself. Outside observers find it shocking to observe how rarely the spending of large sums of money is required in such an endeavor.

It takes more time to raise a kid this way, but that works out well, because more time is exactly what you get in exchange for showering them with less of your money.

Addendum on Education:

After publishing this, I can see that the comments are bringing up a discussion of whether or not it is helpful to pay for a child’s higher education. While everyone will make that decision for themselves, here are my thoughts on it:

Mrs. MM and I are more excited about supporting our son than anything else in life. We’ve got his back. So in the likely event that he chooses to get a university education and the unlikely event that he has not found ways to earn his own money in advance and/or get enough scholarships, we have the resources to pay whatever bills might come up.

The thing is, you don’t have to know this stuff in advance. First of all, university is far from being the only gateway to a successful and productive life. Second, the cost varies astronomically depending on how you approach it. And third, given the right opportunities and an entrepreneurial upbringing, it is entirely possible for kids in high school to earn five and six-figure incomes based on brilliant things they have come up with on their own.

As a parent, you don’t depend on  things like this to make ends meet. But you also don’t close the door on them by telling your kids, “You will go to university. It’s the only way to get a good job. We will pay for it, so there’s no need for you to think outside of the box. Just go study for your calculus test.”

If you teach your kids the true nature of society and life, there is no box.

*with the enormous loophole that certain toys come from grandparents – you gotta bend to reality at least a little bit, right?