Maybe the extreme frugality championed by Mr. Money Mustache is more of a personal goal than a practical necessity for most. What about a more balanced approach? The main goal is focusing on the numbers and mechanics of getting your “employees” (i.e. your dollar bills) working hard for you vs just being thrown away into materiel nonsense never to be seen again. Taking these steps:
- Build up an emergency fund (call it 6 months)
- Pay off high-interest debt
- Invest:
- Max out 401(k) contributions, especially with employer matching, or IRA
- in a simple, low-cost index fund
Even without the Money Mustache’s level of frugality, you can still result in a “super decent” nest egg given enough time. With returns of about 7% annually, this can even lead to the potential for early retirement.
Mr. Money Mustache’s passion for frugality is inspiring, and his willingness to make short-term sacrifices for long-term freedom is admirable, but it’s not for everyone. There is a more pragmatic approach that can appeal to a lot more people, especially for those of us who may struggle with the level of deprivation the Money Mustache embraces*.
*Not that MMM is depriving himself…that’s the key here, he loves what he is doing. He chooses what he wants and embraces it fully. It just so happens that what he wants are low-cost (strategic). Some people are okay biking to work, others need the latest car – there’s no right or wrong, but there is a big difference with the money that is being pushed out. A new (to you) bike might cost $1,000, a new car? looking at something like $25,000. Hiking is another low cost activity vs traveling the world. All these different decisions can add up to a big difference.
I think the key is finding the right balance that works for your individual circumstances and mindset. Whether you aspire to Mr. Money Mustache’s extreme savings rate or a more moderate approach, the underlying principles are the same – live below your means, avoid debt, and let compounding work in your favor.
Time exposes us all, are you going to be caught swimming naked?
By applying these lessons, I’m confident I can make meaningful progress on my own FIRE journey, even if I don’t match Mr. Money Mustache’s level of frugality. The important thing is taking that first step and staying committed to the long-term goal of financial independence.
#MMMSeries
Joe DiAndrea 