How to Make Enough Money to Retire by 30

Pete, the Regular Guy Behind Mr. Money Mustache

Meet Mr. Money Mustache. Pete is a former engineer who lives in Longmont, Colorado with his wife and son. Early on, he and his wife decided that they wanted to retire before having children. Wait, what? That's impossible, unless you want to have kids at 65! Actually, it's not impossible; by earning good salaries, seriously downsizing their lifestyle, and using smart investments, Pete and his wife really did retire at age 30.

Pete's best advice for people who want to take control of their finances? Buy less stuff. It's that simple.

If You Want More Cash, Buy Less Stuff

Mr. Money Mustache tells his blog readers that one of the most crucial steps any person can take, whether they want to retire early or just have more financial security, is to simply buy less stuff. Pretty easy, right?

You know how it is, though; even if you don't have much (or any) financial cushioning, it's still nearly impossible to stop spending. A coffee at a coffee shop once or twice a week, a pair of jeans from Goodwill, a yard sale tchotchke... even the most frugal bargain-hunter can forget how small purchases add up.

The way small purchases add up is insidious. Many things you buy are on a daily basis are, on their own, so cheap that you don't even register that you're spending actual cold hard cash. MMM thinks this mindset is a huge problem, and he spends considerable time writing articles that try to drive home the reality that small spending is actually big spending.

Fleeting Pleasure or Long-Term Stability... Not Always an Easy Decision!

Small Purchases That Add Up

What unnecessary small purchases do you make on a daily or weekly basis?

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Think Big Before You Buy Small

Mr. Money Mustache's website is extremely popular, with 400,000 unique visitors a month. In addition to retiring by 30, he now makes a significant amount of money every year with his blog. People love his writing, and indeed start to become slightly fanatical fans, because he offers advice that provides a more extreme perspective on saving and making money. MMM's perspective is also extremely positive and proactive, and he emphasizes simple, practical steps that anyone can take to be more financially stable. We may not all end up millionaires, but if we follow some of his advice, we'll be better off financially.

One of Mr. Money Mustache's favorite things to do when talking about money is to look at the big picture. Let's take the example of getting a take-out coffee from a coffee shop three times a week. For most of us, this would be a pretty normal expenditure, and hardly fall into the category of excess. After all, a $2 cup of coffee is hardly a vacation to Rio. Let's assume that a small coffee is $2, and you go and get three coffees a week with your colleagues at the office (the rest you make at home, like a saint, of course), so your total takeout coffee bill is $6 a week.

$6 is not very much, but let's Think Big, like Mr. Money Mustache. Thinking Big means scrutinizing your small, routine purchases and thinking about how they impact your finances in a year, or even better, in a decade. A decade is not so short in the grand scheme of things, yet most of us never look that far ahead.

And let's be honest. It's not really as simple as giving up every small pleasure and investing your savings ruthlessly. What about the pleasure you get from grabbing coffee with your colleagues? What about the social togetherness that comes from sharing Thai food with friends? Mr. Money Mustache isn't trying to tell you how to spend (or not spend) every penny you earn, but rather to consider your purchases more carefully.



How Much Is Your Coffee Really Costing You?

Not You Too, Comcast!

The cold hard truth about spending becomes even more clear when you think about bigger purchases. Take cable and internet, for example. $100 a month gets you a pretty standard cable and internet package from Comcast.

$100 month on Comcast x 12 months in a year x 10 years in a decade = $12,000 of spending on cable and internet in 10 years!

Say It Ain't So, Dunkin!

Let's use coffee as an example of thinking to the future with a seemingly innocuous purchase, the humble cup of coffee. We're going to estimate that a fairly frugal person spends $6 a week on coffee at Starbucks, Dunkin' Donuts or your local coffee house.

$6 a week x 4 weeks in a month x 12 months in a year = $288.

$288, still not an extreme amount, although $288 might be the same as a low-income person's weekly paycheck. Take it further:

$288 a year on coffee x 10 years = $2,880 spent on coffee in a decade. Wow!

Mr. Money Mustache also encourages his readers to imagine what would happen if they didn't just save that $2,880... what if they invested it at a 4% return? What if they saved money on five other small weekly purchases over a decade, and invested that money? What then?

I'm sure you know the answer to that one: Big bucks, people, big bucks!

Or... Keep the Car but Drive Smarter

Unfortunately, cutting out a car is just not feasible for a lot of folks, myself included. Mr. Money Mustache certainly makes you think long and hard about the true cost of driving, though. He also encourages you to ask yourself:

  • Are you commuting too far?
  • Do you need to drive an expensive, fuel-guzzling vehicle?
  • Could you work closer to home?
  • Could you share a car with your spouse?
  • Could some members of the family bike to work or school?

According to MMM, owning and driving a car is the single most expensive expense for most people. He recommends you ditch the car if at all possible, and if you absolutely need to drive, buy an older car - with cash - and do your darndest to work closer to your home, or live closer to your work.

Think Even Bigger and Ditch Your Car

Mr. Money Mustache's all-time favorite money sucker is the humble car. Nearly every household has at least one car... and plenty of families have two or more cars. One for each adult, one for a teenage child... Mr. Money Mustache recommends you calculate your cost of driving at 51 cents per mile, which is the number that the IRS uses for tax deductions. AAA uses an even higher figure, 61 cents per mile for a small sedan, according to its 2013 Driving Costs pamphlet. This figure includes the cost of fuel, maintenance to the car, car insurance, depreciation in car value, tires and more.

A hypothetical commute of 20 miles round-trip per day, at $0.61 per mile, is $12.20 a day. If you worked every single weekday for every single week of the year, that would be:

$12.20/day x 5 workdays in a week x 52 weeks = $3,172 a year to drive to work and back.

After 10 years, that $3,172 becomes a whopping $31,720! Imagine what would happen if you invested that money, or even put it into a savings account. Bear in mind, also that the $0.61/mile is just for one small sedan. What if a household has two cars, and what if their commute is 40 miles per day round trip rather than 20 miles?

40 mile roundtrip commute x 2 cars x $0.61/mile x 5 workdays in a week x 52 weeks = $12,668 per year, just to get to work.

After ten years, a 40-mile rountrip commute for two people is $126,680!


But What If...

...you don't start out relatively wealthy like Mr. Money Mustache? Pete was lucky enough to start out his career in a lucrative field, engineering. His wife also earned a healthy salary, and Pete estimates that their average earnings during their working years was in the neighborhood of $120,000 per year. What's a poor English major to do with a $23,000 a year salary and student debt?

Pete acknowledges that a high salary makes the entire process much easier and much faster. As low income people shout Duhhhhh... don't give up too easily. Much of Pete's advice is spot on, even for people with lower incomes. Like most life changes, however, making the first leap is the hardest. If you spend too much money on your commute and your car, it will be really hard to find a new job closer to your home, or to move closer to your work. If you're extremely busy, buying the raw ingredients for food (cheaper) is going to take more time than buying prepared foods (quicker and more expensive). Making your own hummus and pita chips after a long day of low-paid work is not the most appealing prospect, but we all know the honest truth:

If you really, really, really want to make a change, you CAN.

Nobody is denying the difficulty of saving half your income every month, or disconnecting cable TV, or selling your SUV and buying a 10-year-old station wagon. The good news is, if you start really thinking objectively about your current lifestyle, and making a distinction between what you want and what you really need, you can make financially sound decisions that will positively impact you and your family.




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