Oct 8, 2012 364 comments

How to Go from Middle-Class to Kickass

73-year-old Jacinto Bonilla demonstrates what happens when you defy preconceived notions of your society. We define such independent thinking here as “kickass”.

Dear Mr. Money Mustache,

Sure, I’m interested in becoming rich and maybe even having the option of early retirement. But nobody ever got rich by clipping coupons or skipping lattes. Shouldn’t I concentrate on boosting my income?

sincerely,
A member of the Middle Class

A few days ago, I had the opportunity to go out to lunch with a dozen of my old coworkers from the high-tech company. It was quite a reunion, as I hadn’t seen many of these gentlemen since September 2005 when I retired from my engineering job. Everybody seemed just like I remembered them. A few distinctive silver strands had sprouted from many of the heads and beards. Many of them had moved on to jobs at other local companies. But the most notable thing to me was that they all still had jobs.

Since the Mr. Money Mustache identity has become quite a fun little part of my life, I let some of them in on this secret of what I’ve been doing with my free time. But invariably, when you talk about early retirement with a person who gets by on a high middle-class income, they become baffled by how small things like riding a bike or understanding electricity consumption can make such a big difference. To a standard office worker, early retirement is what happens if you win a lottery, get a huge inheritance, or have ground-floor stock options in a company that makes it big.

I was baffled in the opposite way. I imagined what would have happened if I had stayed at that company for all these years. I would have earned an average of perhaps $110,000 per year in salary, as well as cashing in about $200,000 in stock option profits (I gave up quite a few in-the-money options upon departure, with strike prices set during the tech crash of the early 2000s). The company’s generous benefits plan would have further saved me some out-of-pocket expenses, like the cash we paid to the hospital when our son was born.

All in all, I would have earned at least $1 million since then. And assuming Mrs. Money Mustache had kept working, she would have earned close to that amount as well. $2 million before tax, which would have gone straight to the bottom line and compounded since income from investments was already covering our expenses as of late 2005. In short, as we added that income to our existing savings, we would be ridiculously wealthy by this point.

But yet many of these coworkers, most of whom are older than me and were already working before my career, continued throughout my career, and are still doing it seven years and counting after my career, still somehow need to work, according to their own accounting. Some people in this situation are even living from paycheck to paycheck.

Quite accidentally, this group of coworkers has formed a nice control group for the study of Mustachianism. They have a wide variety of incomes, but all live in the same area, so the base cost of living and the tax rates are held constant. But one participant in the study tweaked only one variable while leaving the rest unchanged: the spending rate.

Somehow, Mr. Money Mustache maintained an outwardly-normal appearance among this peer group, showing up at work in acceptable clothing, achieving similar job performance, earning an average amount, and participating in all the usual social activities, yet adjusted his spending downwards enough to make a drastic difference in his financial outcome. How could it be?

The answer is as simple as the following table. Observe the monthly spending of a Typical Fancy Professional Worker versus a Future Early Retiree. To be fair, let’s adjust the spending estimates to assume we are comparing two double-income families with two school-aged kids.

Category	Middle Class	Kickass	Notes
Mortgage Interest	1333	1000	MiddleClass: $400k house, Kickass: $300k
Property Taxes	200	150
Car Payments	700	100	MiddleClass: 2 new cars and bikes every 5 years. Kickass: 1 used car every 10 years
Gas, Insurance, Stealership fees, Maintenance, registration, on the auto fleet	800	100	Kickass lives close to work and bikes
Home Maintenance, Renovations (appliances, roof replacements, pest exterminators, house insurance, painting, carpets, floors, plumbers, tree trimming, etc, etc). Plus water and trash service.	1000	450	Insourcing instead of Outsourcing
Miscellaneous "shopping" (stuff you buy at the mall, coffee shops, trinkets on vacation, $4.00 gourmet juices at the airport, voluntary ownership of multiple large animals, plus anything else not covered in this table!)	600	100
Groceries	1000	400	Killing your $1000 Grocery Bill
Beer and Wine	200	50	Bota Boxes, drinking only a reasonable amount, and even home brewing
Restaurants and takeout/deliveries	600	50	Cooking great food at home.
Work Lunches	200	40	Kickass goes out every Friday, otherwise uses the Secret Food 'Stash
Gym Memberships	100	0	Barbells at Home, Rocky Balboa-style urban workouts
Housekeeper	400	0
Lawn Service	100	0	Don't be a giant wuss! Put Muscle over Motor.
Ivy League Child Activities	800	100	Avoid Ivy-league preschool syndrome.
Toys and junk for kids (and other people's kids)	100	10	More creative and less consumerist gift giving
Clothes and Shoes	200	50	If you can't live on $600/year of clothes, I have a fist you need to meet
Outdoor and Sports Gear	100	20	Craigslist, plus realizing you do not need the same bike as Lance Armstrong
Haircuts, nails and waxing	80	5	A $1.00 pair of nail clippers and a $40 Universal Men's Grooming Device (aka hair trimmer).
Golf Membership	50	0
Apple Products	100	10	Unless you earn a living as an iOS/Mac developer, you may own one Apple device per person.. period. Upgrade every five years.
Music and Movies	50	10	Netflix and Pandora. No, you may not buy DVD series of TV episodes!
Electricity	100	30	I'll show you mine if you show me yours
Heating/Cooling	100	50	Understand then Destroy your bill
Cell phones	150	50	Check out Google Fi ($20 per person, 15 for each additional)
Cable TV	100	0	Cut your cash-leaking umbilical cord
Landline Telephone	25	0	News flash: it's not 1998 any more, which is when I last had a land line phone.
Internet	50	50
Books and Magazines	60	0	The Library will make you rich.
Vacations	500	200	Kickass still likes to travel, but avoids Tourist Traps
Prescription Medications and doctor visits for stress and overweight conditions	100	0	Allowance for healthier body due to more exercise, less restaurant food, and no stress about money or career


Monthly Total	$9898	$3025
Annual Total	$118776	$36,300

Annual Income (after tax)	$140,000	$140,000
Annual Savings	$21,224	$103,700
Savings Percentage	15.16%	74.07%
Years to Retirement	43	7.5

Wow! Just by switching from the typical high-income family’s spending, to the slightly-less-ridiculous-yet-still-luxurious level of spending that comes as part of adopting a more Mustachian lifestyle, this typical family was able to reduce its annual spending by over $82,000 per year. Far from being stuck in a deprived lifestyle, the family on the right still gets to live in a $300,000 house, own a car and some bikes, eat great food, stay in shape, read great books and watch great movies, and in general lead a solidly kickass life.

And as you can see in the table, each of the areas of optimization aren’t just wand-waving or imaginary – they are documented in more detail in the underlined links in the right column. It is essential for the typical high income reader to understand that I am not making this shit up. The “Middle Class” column represents realistic numbers gleaned from my own middle-to-high-income friends, peers and former coworkers. And the “Kickass” column is a mashup of the typical spending of my own family and those of other people trained in the art of more efficient living.

And all of this comes with a time-tested guarantee that you will gain, rather than lose, happiness as you implement the changes.

So now I can turn the question around: what do YOU think is more effective: optimizing your spending, or relentlessly working overtime and hoping for a “generous” $10,000-before-tax raise?

And is the effort of learning how to do it worth the reward of slicing 35.5 years from your mandatory working career as shown in the table?

I think we’re going to see a lot more ass-kicking in the months and years to come.

Previous Post: Guest Post: Why You’ll Become Busier After Retirement Next Post: The Tyranny of Having a Real Job

Want More?

saoili October 9, 2012, 9:08 am

I don’t want to sound like a complainy-pants, but when you talk about how people can save more than my pre-tax salary (including bonuses, free lunch, and fuel allowance), I feel less like you’re addressing me than usual. And my husband’s refrain of ‘that site is aimed at people who make a huge amount of money’ sounds more believable than usual.

Reply
- Mr. Money Mustache October 9, 2012, 9:48 am
  
  Sorry, Saoili! If I get to go to lunch with YOU someday, the article that follows will surely reflect your own situation more accurately ;-)
  
  Remember that the Kickass family is actually a big spender.. you don’t HAVE to live in a $300,000 house with $6,000/year of maintenance and renovations, or spend $3000 a year on clothes and vacations as I have the ‘frugal’ family doing here.
  
  So for guidance of what to do with less income, adjust the spending downwards!
  
  Reply
riggerjack October 9, 2012, 9:09 am

Wow, I’m really going to be the first one to question. $2400/month on home maintenance and renovation?
Nearly 29k a year, or 23% of total spending seems crazy. That’s a new kitchen yearly, with money left over for an exterior paint job every few years.
Don’t get me wrong, I’m spending this kind of money in this category, but I’m doubling the size of my house. And I know my goals are atypical.
I’m not trying to nitpick, but I know renters are scared off by home maintenance costs as they are, this figure should have them running for the hills!

Reply
- Mr. Money Mustache October 9, 2012, 9:18 am
  
  You’re right, that is a little expensive, what was I thinking?
  
  And the same goes for the home maintenance section in the “kickass” column (I spend WAY less than $6,000/year on my main house and rental house combined!).. so at least the ratio of spending is not thrown off greatly.
  
  In response to your comment and a couple of other ones, I broke up those categories a bit, made some of them catch-alls, and gave the “MiddleClass” family a discount of $600/month ($7200/year) on their expenses. Now they only waste $82,000 more than the Kickass family per year.
  
  It may be a pointless exercise, though: I’m sure they’ll find a way to spend it. Adding just one motorboat would bring them back up.
  
  thanks for catching that..
  
  Reply
  - Posted On October 9, 2012, 3:40 pm
    
    A rule of thumb that I have heard is: plan to spend about 1% of the value of your home on repairs each year. Not saying one will do that every year, and some say if the money is not spent on repairs, do a small upgrade at the end of the year. Start saving for the next year to be prepared for repairs again.
    
    Reply
TB at BlueCollarWorkman October 9, 2012, 9:21 am

THis is awesome and right on, man, right on. It’s amazing all the little decisions we make, and if we just change our thinking a little, we could save boat loads!! Way to really lay out the numbers, dude. Hopefully your old coworkers will check out this post of yours to see how they can become more badass.

Reply
Mike October 9, 2012, 9:42 am

MMM, I went from driving a 2003 turbo Subaru to a 2000 Honda Insight. The gas savings in a month alone is ridiculous. I wouldn’t say the car is fun to drive ;) but it’s not a terrible way to get around either.

Reply
- Mr. Money Mustache October 9, 2012, 10:20 am
  
  Nice one, Mike!
  
  I agree, although you’ll rarely hear me admit it: I like driving sports cars too. That’s one reason my Scion xA is a nice compromise – it uses a bit more gas than a Prius and has slightly less space in the hatch. But it costs less, more than making up the difference. And while not a sports car, it is still thoroughly fun. Lightweight, short, and with a really slick manual transmission, high-revving engine, stiff and nicely bolstered sport seats, and extremely chuckable dynamics. The Prius by comparison is 700 pounds heavier with a sedate CVT automatic transmission and an interior straight out of your grandma’s beige 1998 Camry (although this improved a bit in 2010).
  
  All of this is silly, though: I keep the Scion because it costs less than a Prius, even while it is more fun. But if it cost more, I’d be a fool: spending more on a car just in a quest for fun is a silly addiction for a non-millionaire, just like expensive wine. Finding ways to get your fun that earn, rather than cost, money, is where it’s all about when you’re working on getting rich.
  
  Reply
Foghorn October 9, 2012, 10:15 am

MMM – would love to see a post about your 50/month car insurance / gas / maintenance! I can understand mustachian savings in gas & maintenance….but the insurance number is what has me puzzled. even with state minimum coverage (in VA) on 2 used vehicles (one 4 years old and 1 15 years old), i’m above 50/month in insurance alone.

Reply
- Mr. Money Mustache October 9, 2012, 10:46 am
  
  It is pretty crazy indeed – my insurance with Geico these days is somewhere in the $20s, and the car gets driven mostly for vacations, which are budgeted separately in “travel”.
  
  Reply
Art October 9, 2012, 11:05 am

One problem, MMM… The “Middle Class” will NEVER retire if you are using the same approach for them as for the “Kickass” family. Looks like for the “Kickass” family you are using something like the 4% safe withdrawal rate to arrive at the 7.5 “Years to Retirement” which is where they can cover their Yearly Spending of around 36K with the return on their capital (accumulated savings). If your “Middle Class” family wants to continue spending 126K per year, then 51 years of saving 14K per year is not gonna cover that!

Reply
- Mr. Money Mustache October 9, 2012, 2:16 pm
  
  Art:
  >>51 years of saving 14K per year is not gonna cover that!
  
  Yes it is, according to my old article on the topic: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
  
  a 10% savings rate gets you to retirement in 51 years
  a 15% savings rate gets you there in 43 years (note that I changed the savings rate upward after some reader feedback earlier today).
  
  Remember, time to retirement depends only on your savings rate. Earning $1 million/year and spending $900k (saving $100k) is exactly the same as earning $50,000/year and spending $45,000 (saving $5k). Assuming you hold the spending constant through your lifetime.
  
  Reply
  - Art October 9, 2012, 2:42 pm
    
    OK, then I don’t get it…
    
    Without doing any compounding, saving 14,000 * 51 years = $714,000. That is not enough to generate 126K per year in spending money that the Middle Class family “needs”. Now, saving 103,700 for 7.5 years will get you $777,750 in capital which at 4% per year will generate $31,110 which would more or less cover the Kickass family’s expenses.
    
    Somehow, I feel that the answer is in compounding… Are you using 5% in both examples?
    
    Reply
    - Travis October 9, 2012, 4:17 pm
      
      Yes, that is what you are missing. Compound the saving 14k each year @ 5% over 51 years and you end up with $3.25 million. The 4% withdrawal rate works out for the same spending amount…
      
      Reply
Cory October 9, 2012, 11:13 am

Love the kickass list. The only thing I can’t match it the property taxes, cell phones (we have 2 kids that insist on one) and hydro. Our taxes are $6900 per year on our 2600 sf house on a 1.65 acre lot and even if we moved closer to town with no property they would only drop by by about $1000 dollars maybe. Hubby wont go without football on the TV which requires cable and as much as we try the electricity bill averages $100 per month. The one thing we don’t have to pay for is water since we have our own well.

Reply
- Mr. Money Mustache October 9, 2012, 2:12 pm
  
  Wow, it is traditional for parents to pay for their kids’ cell phones in your country? That must be a very luxurious place!
  
  I enjoyed the model of my own teenage years from age 15 onwards: parents give you a place to live and free food, kid pays for the rest. Clothes, education, driving or bikes, school activities – the works. It is a happy and invigorating feeling, being a kid of semi-independent means.
  
  Given a $6900/year property tax bill, I’d probably move to well-designed 1200SF house with less land. Or move West! :-) But every step counts.
  
  Reply
  - Cory October 9, 2012, 4:38 pm
    
    Oh wow. Move to a 1200sf house. Seriously? I would be voted off the island pretty quickly with that suggestion. I think we would also have to give up ensuite bath, triple car garage etc. with a small house like that. The property taxes around these parts are high. We live on a large property without any neighbours which we have grown accustomed to so to speak. I guess it’s all a matter of choice where you want your money to go. When the kids get jobs I will ask them to pay for their own cell phones.
    
    Reply
    - da55id October 10, 2012, 8:46 am
      
      consider renting out a room to add $500-700 a month to offset the prop taxes and provide you with additional tax deduction for depreciation
      
      Reply
    - Mr. Money Mustache October 10, 2012, 9:55 am
      
      The interesting thing is, I live in a 2600 SF house right now, and we’re scheming to move to something smaller, like perhaps 1200, just for the hell of it.
      
      This taste has developed over time, as in my 20s I figured the ideal size for a house was in the low 4000s :-)
      
      Now I see it the way I see cars: any space you are carrying around that doesn’t get used, is an unsightly chunk of fat that needs to be trimmed. My house has hundreds of square feet of hallways and staircases alone – all we do is walk through them!
      
      But I also think that most existing 1200SF houses would be crappy places to live, because they are built by cookie-cutter 1960s subdivision planners instead of people with any artistic/architectural talent. Low ceilings, tiny windows that don’t face the sun, chopped up floorplan, and artificial plasticky materials and carpet everywhere.
      
      So my plan is to take a run-down 1200SF house with a nice solar exposure, strip its interior to the bone, and rebuild it in liveable style. Huge South-facing windows, reclaimed wood and stone everywhere, a giant living room and kitchen, two medium bedrooms, two fancy but reasonably-sized bathrooms. Skylights and open beams everywhere.
      
      Even this would feel like Luxury city to me. My property tax bill would be cut in half, forever, and I’d get about $150,000 more out of the current house’s capital to invest.. also forever! Plus we’d be tying up less resources for our small family.
      
      Reply
      - da55id October 10, 2012, 11:36 am
        
        …or that…
        
        Reply
      - Jamesqf October 10, 2012, 12:06 pm
        
        I think what matters here is not the size of the house (I’m fairly happy with my 1250 sq ft, though I would like to add a sunroom & maybe a sauna), but the amount of land it’s on. I wouldn’t like it nearly as much, though, if it were on a typical small (sub)urban lot, just as I’ve never seen the point of a 5000 sq ft McMansion on a 10,000 sq ft lot.
        
        Reply
      - Sir Osis of DeLiver October 13, 2012, 7:44 pm
        
        If you’re thinking about renovating a smaller house to maximize living space, I suggest reading “The Not-So-Big House” by Sara Susanka. It’s probably been a decade since I read it, so my memory is fuzzy, but I remember being impressed at about the way it described designing a house to use space effectively and to make it seem larger than it really is by strategically choosing how spaces are laid out and connected and the like. Very Mustachian!
        
        Reply
        
        victoria October 15, 2012, 8:50 am
        
        Seconding the book recommendation. You’d probably really enjoy it, MMM.
      - Cas Hout March 1, 2013, 5:38 pm
        
        We live in a 1200 square foot house with only one shower/bath and two teenage girls. We have lots of room, as we have another 800 or so square feet of living space in our basement. It is certainly manageable, and serves to remind us that space is limited so shopping must be purposeful. We also have plenty of windows and natural light. We also have a front porch. Our ceilings are the standard 8 feet, but, heat rises, and why pay to heat my ceilings? Our property taxes are still $200/month though. Plus we pay for garbage pick up at $1.75/bag (one bag every 2 weeks). We do have 2 acres of land though, and we do not live in an area that requires us to squint at the address to determine if it’s our house or the neighbour’s. ;)
        
        Reply
bogart October 9, 2012, 11:19 am

I agree, an interesting comparison. Items missing from this list that appear in mine and that I include in the “can’t do without” category include health insurance premiums, dental insurance premium, dental bills (yes, in our family the math has worked out to make both the insurance worthwhile, and we have costs on top of those), actual mortgage (principal) payment — it may be savings but I’ve still got to pay it, water, life insurance, and homeowner’s insurance.

Also, I was totally down with the $50/month on clothes (heck, it seemed generous) until I realized this was for a family of 4 including 2 growing kids (who, perhaps, also have changing sports interests and/or other activities that may require particular clothes — band?). Unless this hypothetical family lives in an area with good thrift stores *and* has the dedication/time to shop them, I’m dubious.

Finally, a question: we too lack a landline and thus far are happy doing so, but I wonder about continuing with this as our son gets older (he’s a bit younger than the youngest Mustache). How do you plan to handle this? I can’t see leaving our kid home alone (once he’s old enough for that to be appropriate) without a phone of some sort that he can operate available to him.

Reply
- Chris October 9, 2012, 12:35 pm
  
  I thought the same thing about clothes. Maybe if you have a baby and a three year old. Good luck with finding thrifted stuff for ten year old boys (that still have knees anyway) especially if you live in a place that is not super affluent to start with.
  
  We just got winter gear (two new pairs of gloves, two new pairs of boots, one pair of snowpants). DS2 is wearing his brother’s old coat and snow pants and DS1 coat and hat from last year still worked, but his snowpants and boots were way too small. Anyway I could have bought cheaper stuff, but my experience has been that they don’t last as well (not through one kid let alone two) and we spend way too much time working, playing and walking to the school bus outside for cheap junk.
  
  MMM is not feeding pre-teens or teens on that grocery budget either ;)
  
  Reply
  - Mr. Frugal Toque October 9, 2012, 3:46 pm
    
    The thrift stores here in Ottawa have clothing for children that has never been worn. How can we tell? Because the original $55 price tags are still on the clothes.
    Crazy, huh?
    
    Reply
    - Erica / Northwest Edible Life October 9, 2012, 7:56 pm
      
      Oh. The Value Village in Ballard, WA really is a bit far for you to travel. Plus all that wait at the border. Sorry about that…when you said “local” I thought you meant local within Seattle. ;)
      
      Reply
- Dancedancekj October 9, 2012, 11:12 pm
  
  If you or a family member is getting a lot of cavities, check the frequency of carbohydrate intake (that’s the number one cause I see – this includes liquids like pop, chocolate milk, sugared coffee and tea and juices, as well as like chips, crackers, cookies, pretzels, or fruit). Make sure to brush twice a day WELL (meaning it is squeaky clean, no furry feeling teeth) and floss properly. This can go a long way towards preventing high dental bills, and is very feasible (takes less than 5 minutes per day)
  Not everyone gets lucky with medical bills due to being dealt a hard hand regarding congenital defects, systemic diseases, and congenital disorders, but for the most part people have a fighting chance with their teeth (with rare congenital issues being the exception). Even then, once you get the mouth stable (no large cavities, orthodontics if needed) it should be relatively low cost for the maintenance of dental health (~$100 a year at my office for a regular checkup with x-rays, cleaning and exam)
  
  Reply
  - da55id October 10, 2012, 8:54 am
    
    take your kids to a pediatric dentist and have their teeth sealed. We did this with both of our kids and they are now in their mid 20s with zero cavities. win win
    
    Reply
  - bogart October 10, 2012, 10:31 am
    
    Thanks Dancedancekj and da55id. Our dental issues have been with the adults in the family (both me and DH) and reflect problems that occurred years ago — some large cavities in my case (now leading to weak teeth, or what’s left of them, and a need for root canals + crowns), and I’m not sure what the actual origin of his was (likely also a cavity), but it led to a root canal followed by an apicocectomy followed by an extraction and (impending) an implant. So, sure, but the damage is long since done, and it’s dealing with the aftermath. I do apparently have assorted issues that make me (have made me) more prone to cavities — “rough” surface on the teeth, moist mouth, sleep with my mouth open — but mostly, my issues reflect decisions made in my tween/teenage years.
    
    I’m astounded at the thought of $100/year, though sure, we’d manage fine within the insurance if there weren’t bigger issues (maybe someday, but it’s clear that at least through next year when the implant is done, we’re already maxed out and have spent our full med flex account balance just for tooth stuff along). Around here a slngle cleaning/exam (no xrays) runs about $120 (most of which the insurance covers). Ah well.
    
    But, yes, I plan to do (or at least to look into, but my sense is that will lead to doing) the sealants for our son.
    
    Reply
    - da55id October 10, 2012, 11:40 am
      
      yes, I’m facing implants as well. Bummer, but on the other hand, at least I can get this highly advanced technology instead of the fate that befell my father – dentures for life! Some things really are worth what you pay for them.
      
      One of the little known benefits of mustachianism is reduced stress which results in reduced teeth grinding which results in better/longer lived teeth.
      
      Reply
      - bogart October 10, 2012, 3:09 pm
        
        Absolutely, I’m not complaining about *getting* the implants. Paying for them (well, it, at this stage) is a nuisance, but make no mistake: I’m grateful we can.
        
        Reply
    - Dancedancekj October 10, 2012, 5:25 pm
      
      Wow, that’s quite a bit of work!!! Sorry to hear the history of your husband’s tooth especially. Hopefully after this stretch, you will be able to keep your dental bill down with regular maintenance!
      
      Reply
  - Sir Osis of DeLiver October 13, 2012, 7:53 pm
    
    I’ve never had problems with cavities but in my teens I cost my parents a fortune in orthodonture. And it wasn’t just cosmetic: Had I not had professional work done, I wouldn’t be able to chew properly. My orthodontist said he’d only ever seen one person with worse-aligned teeth than me — and he retired a couple of years later. I hope my daughter fares better but I’m prepared to shell out a small fortune just in case.
    
    Reply
Andy October 9, 2012, 11:24 am

This post is making me reconsider buying the Nike + GPS Sportswatch :( I found it for $50 less on Craigslist AND it will improve my health. I am an avid saver and don’t go crazy with gizmos, but I want it! I know I can run with a regular watch and divide the distance by the time, but the watch is sooo cool.

Reply
Chris October 9, 2012, 11:52 am

MMM might not agree with this approach, because it is less focused on the consumerist side of things and the joy of living a simpler life. But for those who are absolutely choking over the idea of cutting their expenses so much or finding where to squeeze the next dollar, then you could attack it from the other side: Put aside a set (high) percentage of your savings as the FIRST deduction from your pay (after mandatory deductions like taxes). Then you can breathe a little easier about spending the rest, even if it’s not the smallest/most efficient budget you could ever have.

Whatever you earn, if you just commit first to put aside 30, 40, 50% or more of your pay, you will never see it, therefore you will never miss it, and it will grow quickly as MMM has aptly demonstrated. You will be forced to live within a budget of the remaining amount (assuming you don’t do something stupid like use credit to buy more). You can also always be looking for more ways to cut costs. I like MMM’s approach better, but maybe this will work for those who are having trouble figuring out how to do it. Just save the money first, then you will be forced to adapt a lifestyle within that remaining budget.

Reply
- BadassCPA October 9, 2012, 5:32 pm
  
  I agree with the thinking that you won’t miss it if you never see it. I started my new job at the end of last year and didn’t qualify for the 401k until July, so I had only half a year to max out my contributions. Between this and my wife taking time off of work for our new baby, I was prepared for our savings account to take a hit. Maybe it’s because we’ve been going out less but we haven’t noticed the difference at all! It will actually feel like a raise in January when the contribution is spread over 24 paychecks instead of 12.
  
  Reply
  - Mr. Sharma October 9, 2012, 9:19 pm
    
    Ha, I’m in the same boat. I received a substantial raise a few months ago and decided to contribute it all and more to my 401k. My net paycheck actually decreased after my raise lol.
    
    Looking forward to that automatic raise come January 1st where the 401k contributions are spread out over the entire year instead of half the year.
    
    Reply
  - Double Down October 10, 2012, 11:24 am
    
    That is awesome, good for you for putting a year’s worth of contributions into just 6 months! Definitely more than most can say they’d do. Since you haven’t noticed the (double) amount you’re already putting away in 12 paychecks, do you think you’ll take that extra amount and save it somewhere else in addition to your 401k? That is, continue to save the same amount you are now rather than spend what would feel like a raise?
    
    Reply
    - BadassCPA October 10, 2012, 3:18 pm
      
      Since we have not felt the burden of double contributions, we are considering maxing out my wife’s 401k as well. Mine is a Roth 401k, so we know we can pull the contributions out at any time if needed.
      
      With a regular 401k we can’t pull out until 59 which does not make sense if we’re planning to retire at least 20 years before then!
      
      So we’ll definitely try to save it, just not sure if it will go into the 401k. She puts a little right now, but nowhere near the max.
      
      Reply
      - Ryan October 10, 2012, 4:12 pm
        
        Look into 72t withdrawals. There’s a limit to how much you can take out each year, but you can start at 35. I plan to retire by 40 but am still maxing out my 401k and don’t expect it to hinder my income stream.
        
        Reply
        
        BadassCPA October 10, 2012, 6:43 pm
        
        Thanks for the tidbit, that’s all I need to get googling!
      - Mr. Sharma October 14, 2012, 1:03 pm
        
        Another option of taking money out of the traditional 401k is to convert it to a Roth IRA and wait 5 years before being able to withdraw your conversion basis tax/penalty free. I’m sure you would have other sources of funds to get you by until the 5 year period is up. Also, when you do convert, you would be paying taxes at the time of conversion. If that so happens to be when you have already retired, your income tax bracket will probably be a lot lower than it is now.
        
        I’m a big fan of traditional 401k’s (although I use both) because I have the option to convert and pay taxes in the year I want. That may be a year when I take off work, lose a job or retire; it’s at my discretion. Also, you never know if marginal tax rates go down…
        
        Reply
    - Mr. Sharma October 14, 2012, 1:08 pm
      
      I sure will. Savings is savings.
      
      The decision to contribute X amount into a 401k is just an allocation of the savings. Once January comes, I will be able to contribute even more to my savings beyond my 401k.
      
      Reply
- Pete914 October 12, 2012, 9:54 pm
  
  I believe MMM has actually commented on this approach- called something like a “false scarcity” model. It is a step below an official budget because it doesn’t focus on every expenditure, but the point is that you artificially reduce your income by saving it before you ever see it. It is effective for people who don’t like budgets, but I see it kind of as a transitional phase between no control and an official budget. I use this method myself for what it’s worth, but I’m trying to move to a budget.
  
  Reply
- Sir Osis of DeLiver October 13, 2012, 7:55 pm
  
  Great suggestion. Also, when you get a bonus or raise, adjust your savings so that your “take-home” doesn’t increase. Just keep funneling the dollars into savings.
  
  Reply
Barry October 9, 2012, 1:44 pm

This is a fantastic article! That is all.

Reply
James October 9, 2012, 3:40 pm

It might be better for your net worth to upgrade certain electronic devices with each new iteration. Depends on depreciation rates.

For example, if you buy a new MacBook Pro for $2,000 and it depreciates $200 over the course of a year then you can sell it for $1,800 at a loss of 10%. If you repeat this process then it’s a $200 a year habit. If, however, you wait five years and sell it at 30-40% of its original worth then you are worse off financially and have had a worse computing experience for four of those five years.

I don’t know what the actual numbers are like, but I’m saying that your advice depends on what the used market is like for the gadgets (or whatever else) you’re interested in. It might also be better if you buy last year’s model every year. Just a thought.

Reply
Matt Alden October 9, 2012, 4:09 pm

It’s a great article.

I agree with all of the items except for the groceries. Americans have been spending a smaller and smaller percentage of their disposable income on food every decade for the last 8+ decades, and it seems to be externalizing the cost to the environment and healthcare, probably many times over.

There are some ways to save money, like having meatless days, going to farmer markets, eating out less, etc. But that’s one area where I think people shouldn’t cut corners on too much unless they absolutely have to.

All the other stuff: spot on, in my view.

Reply
Peter Drinnan October 9, 2012, 5:49 pm

Makes me think of that Christopher Walken movie called “$5 a day”. Seriously though, I think this is as important for the environment as it is for retirement.

Reply
Ornella @ Moneylicious October 9, 2012, 7:20 pm

You had a goal in mind. Reducing expenditures in various areas was a way for you to keep in line with your goal. Not everyone has a “Future Early Retiree” goal. Most of the decisions you made were made with reflection upon that goal (and probably others, too)

Reply
- Erica / Northwest Edible Life October 9, 2012, 8:02 pm
  
  Totally agree! You should definitely prioritize your daily life decisions based on your long-term goals. For example, I have a “never see my kids and then die broke and alone” goal I’m working hard towards, so I ignore everything I read here.
  
  Reply
- Jimbo October 9, 2012, 9:22 pm
  
  Do you, by any chance, go to cnn.com and comment that not everybody wants to be kept informed of live news events?
  
  Just curious.
  
  Reply
George October 9, 2012, 11:55 pm

In your chart, the first row is Mortgage Interest, MiddleClass is $1333 and Kickass $1000.

Well as mustachian’s in training for the last year, me and my wife have projected with our savings that we will be able to payoff our 3 Bedroom, 1800 sq ft house (with a 1/3 acre lawn) in full soon such that there will no more mortgage in the picture. Thus, this eliminate the $1000 mortgage interest from the calculations all together.

At our currently savings rates, our house will be fully paid off around Feb 2014, me and my wife will be the ripe old age of 32 and 33. Of course the MMM blog provided many tips and advice in order to enable us to save money from my paychecks to make any of this happen.

Thus, it appears that many “KickAss” would actually have “0” in this category for your chart.’

Anyways your chart is great, and it only follows 1 year of spending! Once the “kickass” start investing their savings to achieve compounding over a few years then one really sees the numbers explode in size.

It is true what MMM says, a Millionaire is made Ten Bucks at a time: http://www.mrmoneymustache.com/2011/08/01/a-millionaire-is-made-ten-bucks-at-a-time/ Grab those tens anywhere you can find them in your budget or expenses!!!

Reply
Joe @ Retire By 40 October 10, 2012, 12:55 am

Great illustration! We are not at your level, but we are spending a lot less than the usual middle class. Saving 70% of your income is just a dream to the middle class.

Reply
Gerard October 10, 2012, 7:37 am

A recurring theme in the comments is that many of us have blind spots, things that we choose not to see as unnecessary because, uh, we want them, I guess. I personally don’t understand dropping money on a pet or expensive wine or swim teams or child cell phones or a three-car garage or lots of books, but I bet I spend on something that seems foolish to other people. My second home, probably.
The joy of all this is that you can get badass about three-quarters of these things and still come out ridiculously far ahead.
(Speaking of blind spots, I notice that the only thing that MMM’s kickass family doesn’t cut costs on is internet access…) :-)

Reply
- Mr. Money Mustache October 10, 2012, 9:44 am
  
  You’re right Gerard.. a family could surely innovate away some of their internet access costs as well. I dropped my own in half by sharing a (business) plan with a friend. At the minimum, everyone should be aware of all the providers in their area, choosing the most suitable one.
  
  My internet access blind spot probably comes from the fact that it’s my livelihood. The ‘net provides most of my music/video entertainment, learning, communication, administrative support for running the bills, AND some income. And I have no office to get free access – I’m at home for much of every day.
  
  So to cut that service and bike to the library every time I need to log on would be pennywise, pound-foolish. And I kind of assume many Mustachians are in a similar place, maybe because of my own bias/blind spot.
  
  If any Thoreau-types out there feel they are better off without internet access at home because it allows them to free their mind for other peaceful pursuits, I salute them!
  
  Reply
  - Gerard October 10, 2012, 10:41 am
    
    I did without home internet for about a year and a half (2004-6), and it definitely improved my sense of calm and unpluggedness. But it was inconvenient, and obviously not a great idea for somebody who has a popular blog (when I said “MMM’s kickass family”, I was thinking about the imaginary one in the example, not your actual family!). Also, I guess decent internet is needed to replace some of the other luxuries that are being cut from the list. In the same way, a non-kickass family probably “saves” a lot on bikes by having too many cars.
    
    Reply
    - Debbie M October 10, 2012, 7:09 pm
      
      Yes, of course personal finance is personal.
      
      Kickass is spending less than me by living in a state with lower property taxes, biking more, having cheaper vacations, taking care of energy leaks and sucks, self-insuring everything, and apparently never visiting a doctor or dentist. But I am spending less than Kickass by living in a smaller, cheaper-to-maintain house, having a cheaper cell phone (less than $100 per year), not drinking, using regular scissors to cut my hair, and having no kids, and I’m not even kickass (spending about $18,000 of my $31,000 take-home pay for a savings rate of about 40% and thus a work life of over 25 years).
      
      So, there are many routes to badassity.
      
      Reply
Sara October 10, 2012, 9:28 am

Just went through your numbers. You pretty much described my life, except that I rent rather than own. I might own in the next couple of years, though. We’ll see. Now I just need to get my income up. Won’t be retiring when I am 50 though, because that is next week!. However, I spent my late 30s and 40s being “retired” raising my kids. Nice life, but a divorce put a crimp in the savings. I have remained on track with spending, though, avoided debt, and could sustain my present lifestyle at a part-time rate and then retire at 62. Possibly earlier. Happy with my divorce, especially when I look around at all of the unhappy married women who are stuck because of high debt loads. Kind of looking forward to a new job and career, though. Living with early retirement with no partner and in a community where most everyone is commuting and working makes for a lonely time some days. Am considering moving to a more urban community for more single people, but I need to wait just a bit until my kids are little older. “Where” you retire is pretty critical, though, in order to find some compatriots…

Reply
Liz October 10, 2012, 5:56 pm

Here is my budget as a single lady with a professional job:

$3200 in take-home income
$700 in rent
$500 in student loan minimum payments
$150 in food
$50 in clothing for said professional job
$103 public transportation ticket monthly
$25 travel to see family every 2 months
$240 train to get to work
$50 car insurance
$25 car repair fund
$25 dentist savings (might need to replace crown soon)
$40 lunches (when I forget mine)
$25 haircuts (hey I’m a girl!)
$25 materials for professional licensing exam

Total: $1958

That leaves $1242 a month for savings, which is $14904 per year. That is a 39% savings rate. I can’t seem to get anywhere near a 75% savings rate and I feel like I’ve cut pretty bare bones here.

Additional lady expenses that I enjoy:
$10 pedicure every 2 months
$30 extra – better haircut
$40 laser hair removal for face
$10 razors for all body trimming (wears it out fast)
$35 birth control pill
$20 shoe replacement fund
$15 for lady gyno problems
$25 for lady gyno copays

Reply
- Geek October 10, 2012, 8:04 pm
  
  The big thing that stands out is your transportation –
  75/mo for a car
  240 for a train pass
  103 for other transit pass
  25 for family travel
  
  If you can replace just one of the main modes of transportation with a bicycle you’ll save.
  
  Some here might also recommend redirecting most of your “savings” towards student loans, after contributing up to your employer match in your 401k, which will free up that 500/mo more quickly.
  
  Reply
  - Liz October 10, 2012, 8:12 pm
    
    Thanks Geek. I have contemplated getting rid of the car but it makes trips to see family/family events cheap and easy. A round trip train ticket to see them would cost $40.00 for one trip so I feel like the convenience here evens it out ($600 per year in car insurance is pretty cheap). Gas mileage is pretty good. I would have to do some detailed calculations to see if I would come out ahead without a car. My family lives approximately 50 miles away so biking would not be possible. I would say that I could stop visiting but my parent is a widower and I feel like that might be cruel.
    
    For the other parts, I live about 30 miles from work and moving even 15 miles closer would double my rent, and as you get closer it gets even higher. As you can imagine, I live in the 2nd most expensive city in the world (I think). My rent would easily be $1300 a month to share a 3 bedroom to be within 5-10 miles of work plus higher expenses for laundry (I have laundry in my place right now) and food (items like orange juice cost $5-7 in the city while only $1-3 here). The other solution would be to move to an outer borough where my commute would be 50 minutes each way by train but only cost $103 per month for that transit pass. My rent there would be $950 to share a 2 bedroom. That is probably the cheapest but least palatable option since you get neither the convenience of being close nor the pretty scenic landscape I have now.
    
    It’s really quite the conundrum!!
    
    I agree with the idea of using my savings towards my loans to free up cash flow.
    
    Reply
    - geek October 10, 2012, 8:48 pm
      
      Also…. Have you codsidered dollar shave club? $4/mo for their cheapest option I believe. Hubby and I share, he gets 1 cartridge to my 3.
      
      As far as housing, transportation, and convenience…. You’re in a debt emergency so make your decisions wisely. If you don’t want critical advice, I advise against posting here :)
      
      Reply
      - Liz October 10, 2012, 11:22 pm
        
        But I don’t see what choice I have? I can give up the car (saving $75 per month) plus say $20 in gas, but pay $40 to visit family plus bus fare ($20 per month) to get around at night (not safe to walk/bike as female). This equals $60. I save $35 per month by giving up the car. Is that worth it? I guess $35 is $35 but it doesn’t make a huge difference in my payoff and savings.
        
        What other options besides moving and paying more in rent do I have? I am at the bare minimum of rent here. Most people pay $500-2000 more than me per month in rent in my area. I have a lucky situation. The only choice I have is to make more money.
        
        Here are the scenarios:
        Outer borough: Rent $950 to share 2 bedroom, $50 in utilities, $103 metro pass. 50 minutes commute. $1103 total
        Where I live now: Rent $700, train ticket $240, metro pass $103. $40 in utilities 1 hour and 10 minute commute dtd. $1083 total
        Moving within 10 miles of work: Rent $1400, train ticket $0, metro pass $103. $50 in utilities and higher grocery and laundry etc. prices. $1553 total
        
        Which would you pick?
        
        Reply
        
        Trader Rob October 11, 2012, 1:42 am
        
        I would suggest reading the book “Radical Frugality: Living in America on $8,000 a Year”. He talks and deals with this very situation. More importantly he’s more realistic about what one can and can’t do. Best part is if your Amazon prime it’s currently free, otherwise 3 dollars, I give it a 5 star rating.
        
        In spite of it’s title it’s actually a book written with the middle class in mind and I found I liked that a lot.
        
        Kate October 11, 2012, 4:49 am
        
        @Liz. Good for you on making changes. One of the things that I have taken away from MMM is that I am making choices every day about my money that I thought were written in stone. As someone mentioned above we all have blind spots and I had TONS of them. Keep moving on your journey. I think soon you will see that you do have a blind spot about your job. This will end your thoughts on “what choice do I have?” At the end of the day, working in or near an expensive city is not working for YOU. No pun intended. With the debt that you have you are spendiing too much on transportation. You could move in with a parent for a short time while you relocate closer to family.Come up with some plan to have no transportation costs and repay your loan instead. But like some MMM, we work longer than necessary to afford certain things. 39% savings rate is great. It just isn’t kickass. In my own life I had a blind spot for my town. I didn’t want to move and make my kids switch schools. I was reacting to the short term headache of making my kids sad. But then I realized how sad are my kids going to be later in life if they can’t go to a good college or have tons of loans later in life? So we moved last month. I am saving $1000 a month in housing and I got rid of my car. My savings rate is only 40% as a SAHM. I am learning to cut costs every day.
        
        lhamo October 11, 2012, 5:45 am
        
        I think you can get a better rate on a shared apartment in a good neighborhood in Queens. I used to live in Jackson Heights, which is awesome — quick subway ride to midtown, amazing ethnic grocery stores (=cheap) and restaurants (nice in a pinch, also cheap compared to other eat-out options, though you shouldn’t indulge too often). Just browsed Craigslist and going rate for a room in a share seems to be around $700-800 on average. Some cheaper if you are willing to be really frugal and live in a basement, or something similar. Woodside and Elmhurst might be even cheaper — JH was gentrifying already when we lived there almost a decade ago. Whether it is a good option kind of depends on where your office is. We used to work in the West Village and the commute took about an hour door to door (10 minute walk to the 7, 40 minutes or so on the train, including wait and change time, and 10 minute walk to the office from W 4th station). CAn be faster if you don’t have to take the 7.
        
        Georgia October 15, 2012, 11:01 am
        
        I’ll put in a recommendation for Sunset Park. It’s got two express trains, is a safe neighborhood, has a Costco, and relatively inexpensive ethnic grocery stores. It’s not unheard of to find two bedroom apartments there for $1500/month.
        
        Freeyourchains October 12, 2012, 2:07 pm
        
        Don’t forget the Driver’s Liscense fee every 4 years. It’ll cost you $0.50/month!
        
        Let alone your State emission taxes and Registration taxes just to legally allow you to drive on any USA road.
        
        Plus Turnpike tolls which are sky rocketing.
        
        Freeyourchains October 12, 2012, 2:31 pm
        
        It’s nice having individual privacy, but sharing an apartment with a Roomate/SO can cut your rent and utilities in half.
        
        It just takes time and constant effort and creative thought to gradually get to a 75% savings rate.
        
        Example is paying off your student debts, then you save an extra $6k per year.
        
        Getting a roomate until you get married, saving an extra $350/ month.
        
        Getting a husband whom should help pay for Birth Control, because he helps in the creation process or prevention.
        
        Etc. You are on the Right Path already by being Mustachian!
        
        Eventually you’ll even weigh the true costs of going to work, and your true wage versus Time and expenses for work.
        
        Liz October 12, 2012, 6:09 pm
        
        I share a studio! Yes you read that right. I’m bare bones on housing. I share a studio and it costs $700 a month and it’s not in a good building. I live in the NY area.
        
        Blair October 25, 2012, 8:56 pm
        
        @Liz, I think you are doing awesome. You are saving huge, have a budget, and shared it. Personally, visiting family is not an area I want to cut spending either.. My grandmother lives 45 miles away, and I am glad that I spend gas and money to visit. I recognize this as a luxury, and it works for me now. The differences that I see in budget come from location, single vs family and income. I am midwest, single, and a fraction of MMM income.
- Hanah October 10, 2012, 8:10 pm
  
  I hear you – my lifestyle and overall expenses are similar. A couple of suggestions: generic birth control pill or birth control at cost from Planned Parenthood? Or IUD (cheapest overall in spite of high upfront cost)? PP might be less expensive for your gyno needs as well. Store brand razors (I had to try a few different kinds but eventually found a good one)? Electrolysis instead of laser (cheaper and actually permanent)?
  
  Reply
  - Liz October 10, 2012, 8:19 pm
    
    PP might work. I get migraines so can’t do generic (stroke risk). I am totally being a complainypants aren’t I?? :) At least I’m aware of it!
    
    I just thought of something positive. At least half my student loan minimum is going towards interest so I can factor that into my savings rate right?
    
    Reply
    - Liz October 10, 2012, 9:14 pm
      
      oh crap i forgot utilities of $150 per month
      
      Reply
    - Kara October 11, 2012, 1:07 pm
      
      Switching to a generic birth control pill shouldn’t add to your stroke risk. Yes, migrane sufferers have a somewhat higher rate of strokes, as do birth control pill users, as do people with both conditions. (These are still really low rates.) But generic pills, which have the same active ingredients as name brand pills, shouldn’t put you at any more risk. Obviously, you should consult with your doctor first, but switching to generic could easily save you $20+ a month.
      
      Reply
      - Liz October 12, 2012, 6:13 pm
        
        My copay is $25 and for anything other than normal BC pills it’s $35, $50 and $75. I get “complicated” migraines which means that I get visual problems which mimic strokes. Not allowed to take any normal BC. Believe me, I’ve tried.
        
        Reply
- mom of Ethan December 24, 2012, 1:06 am
  
  Liz, I only get a hair cut 2x per year. It’s long and layered, you can actually cut your own layers with youtube tutorials. Also, I use groupons for high-end salons or go to high-end salon schools.
  
  The birth-control pill can be eliminated, use condoms which the guy pays for! It is much healthier for your body in the long run.
  
  If you have a room-mate than it will slash half your rent!
  
  Best of luck,
  mom of Ethan
  
  Reply
- Oh Yonghao October 30, 2014, 5:28 pm
  
  I’m a little late to the party, but it sounds like you are doing well. One thing to think about also is that currently you are spending $500/mo on debt reduction, which is essentially translates to savings and isn’t used to calculate your spending for retirement purposes.
  
  Instead you only need 1458*12(mo)*25(4%rule). Not knowing how long the horizon is on your student loan, it’s hard to calculate your retirement age, but once the student loan is paid off you are at 54% savings rate. It would seem hard to squeeze another $700 after that to get you up to a 75% savings rate, but remember that MMM was doing that off $100k/year, not $38k, and he didn’t start out making $100k/year either. With raises over the years and keeping spending levels the same you could make it to the 75% savings rate.
  
  Reply
BR Guy October 10, 2012, 8:23 pm

Pretty interesting to see how things are different compared to a emerging country, i live in Brazil. First, you guys are really luck to have good education from goverment. We dont have it and we pay a lot for good education or our kids. Also we pay way much more for utilities. Cars here cost at least 2x. We pay more for health care as well, even though if you are in company, probably you pay much less. I have been learning a lot with your concepts and ideas. I am probably 4years from financial independence. I save 80pc of my future spending, although much less compared to my income today. I plan to relocate to a less expensive place where I can cut my expenses roughly in half. And I only got these ideas after reading your blog. Thanks for that!

Reply
Andrea October 11, 2012, 12:01 pm

i thoroughly enjoyed this post as i have many friends that are in the same boat as the middle class MMM described in detail and have no idea how their consumption choices, ie wants, are adding years of employment to their life.

my own household income is only a fraction of MMM’s and his friends but we are in very different industries. i’m a 31 year old office worker, i’ve worked full time since i was 21, and i dread the idea of having to work until i’m 59.5.

what i’ve really taken home from all this reading, including the petty back and forth and nitpicking of comments, is

1) have i really separated my wants from my needs? no
2) do i really make the most frugal decisions possible or am i still mixing up wants with needs? not yet
3) am i fully aware of as many options as possible, desireable or not? heck no

this has been very educational and really invigorates the inner semi-retirementee in me.

in short, stop complaining please.

Reply
- Mr. Money Mustache October 11, 2012, 12:10 pm
  
  Thanks Andrea. I enjoy your mocking of the petty back and forth too!
  
  I mean, come on. If you don’t like what I put in one of the boxes, use your imagination to change that number to your own liking.
  
  The bottom line is, many $140k families REALLY DO spend all their cash and save even less than $15k per year, and it IS INDEED EASY to get by on a spending level the size of the right-hand column. Many people with two kids live on far less.
  
  So the issue is: are you gonna do it, or are you too busy complaining that it can’t be done?
  
  Reply
  - Jamesqf October 12, 2012, 12:52 pm
    
    “The bottom line is, many $140k families REALLY DO spend all their cash…”
    
    And that “spend it all” mentality extends across all income levels, and means that a lot of people are spending just for the sake of spending, ending with closets full of never-worn clothes, garages full of unused toys, and the RV & boat in the yard that (in the case of my neighbors, anyway) haven’t moved in at least 3 years.
    
    I may not be the most “mustachian” here (in part because I don’t actually want to retire), but still, I only spend money on things I really enjoy (or which save me money in the long run), and so tend to save anywhere from 20% to 50% of a fairly variable income.
    
    Reply
    - Freeyourchains October 12, 2012, 2:02 pm
      
      All choices are welcome!
      
      To me: freetime/retirement by age 35 is worth saving 75% of your income for and a nice goal!
      
      I only have one life and i don’t want to drive a lamborghini in Ibiza for 2 weeks to then fly back to work( though if i loved my work and could make it mobile and boss less, then why not make the extra income till the point i don’t need more money to be happy anymore?)
      
      I want to live in Ibiza and bike/surf the island for 3-12 months in extreme early retirement while meeting tons of new people and friends whom don’t need to spend money to have fun!
      
      Reply
- CanuckExpat October 11, 2012, 12:34 pm
  
  I really enjoyed Andrea’s comment. Is it too late to nominate her for most Mustachian comment ?
  
  Reply
Liz October 11, 2012, 4:18 pm

Are you guys including any college savings in here? Just curious how much you think is good to set aside per child.

Reply
- BadassCPA October 11, 2012, 4:34 pm
  
  I use a Coverdell account which limits you to $2,000 a year. I figure $36k by the time my daughter is 18 should be enough to give her a good head start. That way she has some money to work with, and can get a job for other expenses. Seems like a good way to teach fiscal responsibility while still helping her out a bit. I know I definitely do NOT want to fully pay her way so she doesn’t understand the value of money.
  
  Reply
- Freeyourchains October 12, 2012, 1:50 pm
  
  I say let you save for half, and let them pay for half in deffered loans to teach them financial responsibility. Even better if you invest in a triplex or rental home for them and others, and let your child/children manage it and collect rents, then sell it after 4 years. (this will help pay off their half).
  
  Reply
  - BadassCPA October 12, 2012, 4:09 pm
    
    I agree in theory, but it’s hard to know ahead of time exactly how much “half” is. So there will be a pot there for her ($2k/yr x 18 yrs = $36k), and she can decide what to do with it. Maybe go to a public school and have no loans, or go private and pay the difference herself.
    
    I do really like the idea of buying a rental home during college. It’s not difficult to manage when you’re one of the tenants, seems like a great idea. But I might not even sell it, just pay her to keep managing it since she will already be familiar with it at that point.
    
    Reply
- Another planner October 14, 2012, 8:53 am
  
  About college savings – we did not save specifically for college, just saved & invested overall, and draw on those. We have an agreement with our child – we pay tuition & fees (in-state university, this is part of the deal), health insurance & health costs, and as long as he is at home, he’s basic living expenses are covered. He is responsible for all the rest – books, mobile, computer, transport, food & entertainment outside the house, plus clothing etc. So far this has worked well. If he moves out of home, which he will eventually, he also needs to cover his rent etc. He works during the summers, along with some on-campus work, gifts etc.
  
  Could we afford higher tuition & fees and his other expenses, yes, but we chose not to. He’s got to learn financial responsibility and based on our experience so far, he has already become smarter about mobile use, entertainment, transport and meals outside, not to mention buying used books and clothes. .
  
  Reply
Joy Host October 12, 2012, 2:11 am

I love, love love reading this six months after having discovered MMM and my kickass inner mustache. I’m still a baby, but my car’s paid off, I have no cable, downsized, moved thirty minutes closer to work, and cut out a myriad of extras to get rid of my DEBT so I can become truly Mustachian.

What at first tormented me next galvanized me to action, pricked enough to stick with it through the growing pains, and now even comforts and brings me joy.

Reply
- Mr. Money Mustache October 12, 2012, 6:30 pm
  
  WOW!! — I think this qualifies for the MOST MUSTACHIAN COMMENT AWARD for this post!! It is hard to beat a story like that, even with 292 comments and counting on this article.
  
  Reply
Freeyourchains October 12, 2012, 1:44 pm

Go a little further and you become Extreme, ERE that is! (Early Retirement Extreme)

I figured if 6 Billion other’s make and live off of less then $20,000/ year, then so can we! (as excess savings pile up and get invested for passive income.)

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Freeyourchains October 12, 2012, 2:19 pm

It’s quite interesting how those with “At Home” jobs or “Online” passive income jobs save a lot more on transportation costs and Time then those that work 9-5 + commute, dress up, and risk their lives to drive to work round trip every day for the same amount.

And one could explore more with one’s bike on other routes with no Work destination.

Problem still arrises with the difference of Work at home and Passive income/ Retirement/ FI.

Main difference is you can leave your house with all your Freetime instead of working at the computer still.

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Pete914 October 12, 2012, 9:36 pm

“Unless you earn a living as an iOS/Mac developer, you may own one Apple device per person.. period. Upgrade every five years.”

I take small issue with this part, as owning Apple products is not inherently “bad”- New ones or ones with expensive recurring monthly billing, I could agree with that. I have 3 iDevices- 2nd gen iPod Nano which has to be 5-6 years old (no intention of replacing unless it breaks), iPhone 3GS (Jailbroken and unlocked) that my father in law gave me for free and is on a pay as you go plan at about 5 bucks a month, and my late 2010 Macbook Pro. Of those devices, I would say only the MBP falls in this category. Perhaps your original statement should be broadened to be “any new electronic gadgets.”

Otherwise, this was a fantastic article and I’m using it as a checklist to find areas of improvement in my budget.

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Kaydee October 14, 2012, 11:18 am

This is great, and makes a good point, but as I am in a field that doesn’t earn big bucks… perhaps you could do an example for someone who is only making about $45K? I find it really hard to save lots of money, even when cooking at home, walking to work, not using my credit card and only buying things in cash. Perhaps I just need to step it up but at $45K at 29 years of age, retirement seems ages away.

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- Elaine October 14, 2012, 10:18 pm
  
  If your employer offers direct deposit, have part of of your paycheck go into a savings account.
  
  I tried saving on my own for a long time but couldn’t do it consistently. I now have money going into my savings every pay day. Adjusting to living with less cash at hand was a lot easier than I expected. The best part is checking my statements and seeing that money grow.
  
  Reply
  - Kaydee October 25, 2012, 3:25 pm
    
    I have an automatic transfer into my savings set up, I also set up a second savings account and then named them “Emergency Fund” and “Downpayment”… it makes it harder to borrow from them when they have a name/clear purpose!
    
    Reply
Elaine October 14, 2012, 10:41 pm

You’re absolutely right that it’s the spending rate. Your comparison is eye opening and has given me new ideas. I’ve used mass transit my entire adult life. That’s not possible in all areas, but it’s saved me thousands of dollars over the years. Another suggestion for movies and TV shows is Hulu.com. They have a pretty extensive library that you can watch free. In my town, you can also check out DVDs and CDs from our public library. Thanks for MMM, just found it and will definitely be back.

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LB @ Finanical Black Sheep October 18, 2012, 5:30 pm

This is a great post! I had to compare myself to the spreadsheet, even though I make about 1/3 and have no kids, and I came away very happy. I blogged about it yesterday, because it gave me a sense of pride knowing I was saving so much and it was all going towards my college education. I can’t wait to have a real job so it can all go towards retirement, savings and more of the good things in life. :)

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DrewMN October 21, 2012, 9:34 pm

Hey MMM,
Thanks to your well researched cell phone article, my folks are now on a cheaper cell phone plan than their previous AT&screwme.

Would you mind adding the link to that cell phone article in this post? I think more people should know about it.

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Leland October 25, 2012, 11:07 am

I agree that frugal living will help but I need to see the changes a person making $30,000 a year would make instead of $140,000. If I suddenly made $140,000 my current lifestyle with my used car and 90,000 home would automatically become “frugal”. My eating canned soup while everyone else goes to McD’s would also be more frugal. So while I appreciate the advice I would say its not going to help me retire early at this point…just help me with a few less months of choosing which bills are more important to pay.

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- david November 2, 2012, 8:18 am
  
  Leland–I think its important to remember, if you are used to living on less, then it takes less to retire. You are in very much the same situation as I am: I bring home roughly 33-35k a year, and am moving into a 90k dollar home, and also own a ten year old used truck. MMM’s reduced bills are still almost 3 times my own bills, just as his net income while he was working is three times my own. I agree for people who make what we make, MMM and some of his readers do very well compared to us, but the basic tenet still applies…spend less, save more. I contribute 11% to my 401k, and then save another 25% of my net pay, pay all my bills and still have money left over to pretty much do everything I want to do: movies, dinner, etc. I would rather be me, than the people MMM talks about who make 100k+ and still live week to week, stressing out over a 2k dollar mortgage.
  
  Reply
happy November 28, 2012, 8:52 am

Oh, I just found this whole post fascinating! I loved the clickable links. We are primarily a 1 income house hold ( 2 kids) that has not yet made over $60K. However we are 100% debt free with over $500K in assets. plus college $ for the kids. I found my new favorite blog! On a side not while reading and clicking your links I had to get up and promptly reprogram the thermostat!

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- Joy Host November 28, 2012, 10:40 pm
  
  You are AWESOME! How do you not have a blog?! How did you do it?!
  
  Reply
Captain and Mrs Slow November 29, 2012, 4:43 am

His story is probably similar to Derek Knight, he went from 30 grand in assets to almost 700 grand in about 7 years (link below). Unlike most people he was a natural saver and much more importantly so was his wife. She graduated debt free with a bit of money in the bank

From $33,151.00 to $636,140.48 in Seven Years. Our Net Worth Explosion

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Nick December 2, 2012, 3:41 am

Wow. You just torpedoed my ambition to become a financial planning blogger with this post. Everything I want to say to everyone is here. I quit at 31. Kudos for the great blog.

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happy December 5, 2012, 5:43 pm

I actually do but it is as boring as watching paint dry! As far as how we did it goes we bought our first property young. We got a good deal and put every penny towards paying it off asap. We then sold when the value for the home and fsrm land doubled plus some and bought our current wonderful home with cash this year from a seller who needed out. The property appraised for over $50k more than we paid.

We have always saved. We have always done forced savings from our early 20’s to our current early 40’s. We had the $ taken out of every paycheck and sometimes had to be very creative to live on the rest. Kind of boring but it works. I love reading frugal living blogs for inspiration. I knew we were doing something right when for years our friends called us cheap.

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- Rob aka Captain and Mrs Slow January 11, 2013, 8:22 am
  
  This is really the key I emphasis to everyone the need to get in the habit of saving, I know loads of very frugal people who have zero or next to zero in savings, they simply never got in the habit of saving.
  
  Reply
happy December 5, 2012, 5:48 pm

I wanted to that the only thing on the list we can’t help is property tax. On $225k house here it is $4000 a year. A huge difference from the kick ass list. However it is doable since we paid cash for the property. WI has high taxes in general and our county tops the list.

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LeeonLife January 10, 2013, 5:06 pm

“I’d also argue that the $140k take-home pay does not necessarily come with a lot of stress. A single engineering manager, two low-level engineers, a successful small family business or even a couple of established carpenters, accountants, Ontario elementary school teachers, or plumbers could rake in that kind of dough”

MMM, I believe you are forgetting about the compound effect of Payroll Taxes + Federal Income Taxes + State Taxes. I am a single software engineer living in CA with an $85,000 salary and I only bring home about $57.5k after tax. So I get taxed at about 32.5% absolute, much higher than my 25% Marginal tax bracket…

Even if I had a wife making the same high salary as me, we’d still fall well short of $140k takehome pay. Admittedly CA has high state tax, but it also is one of the only places you can make these kinds of salaries so it balances out… But using a standard CA paycheck calculator will show that $140k takehome requires about $220k pre-tax income — much more than even a very senior engineering manager will make or about what two senior software engineers will make in Silicon Valley. This kind of income is well into the top 5% in the US.

I don’t mean to brag, but I graduated Summa Cum Laude from a top school and I never expect to make anything close to this from non-investment income in my lifetime (by myself), so I would hardly call this middle class… more like Palo Alto class. Nonetheless, I love this post’s overall message even if the numbers seem a bit out there for take home pay

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- Mrs. Pop @ Planting Our Pennies January 11, 2013, 5:11 am
  
  Question your own assumptions about NEEDING to live in a high cost/high tax area like CA to earn significant dough.
  
  Mr. PoP and I live in S. FL, which I’m sure no one is ever going to call “the new Silicon Valley”, yet we both work in the tech industry – I am in programming, he is in sales. Together we made about $165K gross from our employers last year, and yet, since we live in a low tax area, we pay only federal taxes, which are actually quite high for us – and less than $2K/year in state property taxes. Our state has no income taxes, sales taxes of 6% are fairly reasonable.
  
  We’ve been offered jobs in CA, but we’d have to earn a heck of a lot more to convince us that it’d be a wise move in the long term given the tax burdens there.
  
  I’m not saying that everyone should live in FL, but we’re living in an ever global world, so question your assumption that you HAVE to live in a high cost area to be a relatively high income earner.
  
  Reply
  - LeeonLife January 11, 2013, 8:50 am
    
    I was actually considering moving to FL or Texas when I retire (5-10 years) and start my own business, but in the meantime I still think CA salaries outweigh the higher taxes even if it is ever so slightly. If you check out my blog, http://leeonlife.com, you can see that I’ve pretty much solved the “higher cost of living” problem, but there isn’t much you can do about the ridiculous state tax here…. and somehow the state is still broke??
    
    Payroll taxes also piss me off. My paycheck today was 3.5% less than the last one. I thought the tax hike was only 2%? wtf? Since I don’t ever plan to use either SS or Medicare, I’m not a big fan of either one.
    
    Reply
CgK March 7, 2013, 11:54 am

I swear I have read all your posts from the beginning, but somehow missed this one. Great post, but most of all, LOVE the table–a man after my own heart! You can’t get to FI without doing the numbers.

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Wolfdognick May 12, 2013, 7:41 am

Great Article and breakdown. The numbers are reflective of so many anti-Mustachians out there. I watched this play out as people very close to me fell victim to the “I make a lot of money” trap. While they had three children living at home they made $120,000 gross income work for them while saving a little and financing vehicles for two of their children. Then, when their incomes shot up to $150,000 and two of the children were out of the house they were suddenly broke and needing to borrow money.

The pile of barely used sports equipment, clothes, shoes, and “habits” that resulted from this behavior is something that truly would break your heart. Especially considering how hard they worked to achieve this skewed American Dream.

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- Matt (Semper Fi) August 30, 2016, 9:54 pm
  
  My sister’s boyfriend confided in me a month ago; he said his biggest weakness is that he HAS to have a new vehicle. What is sitting in his garage right now? A brand-new F150 with all the bells and whistles. What did that run him? 35 – 40k? More? My God, what an expensive indulgence! And he and my sister do NOT make the kind of money where they could “afford” that purchase. And it is heart-breaking to think that people forever trap themselves in the Matrix of Consumerism.
  
  Reply
JVFalcon May 16, 2013, 9:27 am

I am new to MMM; thank you for the artilces, they are good.

I compared our spending against the tables here. We spend about $65k against after-tax income of $110k; not quite Mushtachian, but better than most.

Two areas where we differ; the Middle Class column doesn’t include Child Day Care; my wife and I both work and have two children, so ~$1000 in child care is a required cost.

The second is healthcare spending; the table above don’t have health insurance and seem light on health costs. Insurance through my employer is ~$200, with a high deductible, so $300 – $400 is a more realistic number. $0 for Kickass seems overly optimistic, assuming no allergies, glasses, or other minor issues.

One question; how are the “Years to retirement” calculated?

Again, thank you MMM!

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Thomas Pickett May 20, 2013, 1:30 pm

I would be curious if you could add two columns how much time is spent him and you. But also calculate how much time is yours after you can retire early too. I have a philosophy of people spend time to save money, but it might makes more sense to spend money to save time. And you are kind of doing that so you could retire early.

tom

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Dave June 9, 2013, 10:33 am

And all you have to do is make $140,000 a year…. oh wait, not many people do this. I make about $61,000 a year and we do all of these things but still find it hard to save money. I wish it was as easy as this shows.

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- blessed and grateful June 9, 2013, 7:46 pm
  
  Dave why so negative? We have never made over 65k and are closing in as a family of 4. It might be a bit harder and take a bit longer but it can be done.
  
  Reply
LAL August 5, 2013, 8:47 am

I cannot imagine people spending that much money for middle class. That seems impossible. I feel broke because we save a bunch of money. We live I calculated about 1/3 of our income, taxes 1/3, and save 1/3. But to spend that much? Holy hell. I don’t even know what I would spend it on.

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LaVoltige August 19, 2013, 1:17 pm

Interesting post. Can’t resist a few (admittedly late) comments.

Both couples are highly paid: there’s nothing “middle class” about making ~ $185K (comes to $140K after tax) in the country where median household income is 50K ( $100K for those with professional degrees). Their income puts both couples somewhere in the top 6% earners.

Higher salaries are often associated with higher cost of living. Our Kickass couple lives in a place where it’s possible to routinely make $185K between the two of them and live close to work (major metropolitan area comes to mind), yet houses are affordable, public schools are great, after-school and daycare is free and gas and auto insurance cost next to nothing.

Where is this great place and why doesn’t everyone live there?

Great blog, please keep writing.

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- Mr. Money Mustache August 19, 2013, 3:29 pm
  
  The place is the Western US (Colorado in this example), and the reason everyone doesn’t live here yet is just that the US was originally settled in the East. It takes a while for people to realize there’s no point living somewhere with $600k houses if you’re going to make an under-$200k family income!
  
  Reply
Tahnya Kristina March 15, 2014, 11:13 am

LOVE THIS. Upping our money game is a good goal. I love kicking ass with my money.

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rea May 22, 2014, 6:34 am

This article is truly a nuce one itt helps new the web users, who are wishing for blogging.

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vr October 2, 2014, 11:43 am

Hmmm, I must have skipped something in the past posts or then I’m just unable to think these things with enough thought and from multiple angles. It happens so that after readin the sentence below, I just realized that I don’t even necessarily have to ask that raise I have thought about asking.

“So now I can turn the question around: what do YOU think is more effective: optimizing your spending, or simply working overtime or asking your boss for a $10,000-before-tax raise?”

If I cut my spending 100e/month it makes a raise of 1200e/year in my salary, and that won’t even be difficult. I can cut it down 200e in the next year which makes 2400e/year. That is beginning to be some serious raise (almost 10%) considering my salary is under 30k year after taxes!

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Mara January 8, 2015, 7:53 am

Awesome chart! Thanks to what we have learned from you, our spending is now down to the kickass level (in less than a year) plus the cost of the remaining pets (which it appears we can afford, now and in retirement). The chart shows where we can make further improvements. My hope is to plump up the stash a little more to improve the safety margin and retire happy in 1.5 years.

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James July 31, 2015, 9:39 pm

Wow I am going to try to apply that type of frugality to student loans.

Reply

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