Basically he talks about how when you retire depends on one number, percentage of money you can save from your pay. If you save 50% of your pay and invest it, you can retire in 16 years. Pretty eye openning
> The most important thing to note is that cutting your spending rate is much more powerful than increasing your income.
I believe that part isn't exactly right, because you can increase your income way more than you can reduce what it takes for you to live. If you're a software engineer making let's say 70k, you can find a job where you make 150k, 200k or even more. If you currently spend 50k every year, it's way more effective than trying to spend less. You also have to take into account that once you retire you can live somewhere where the cost of living is lower.
Yes, doubling your income and maintaining your lifestyle would make a huge difference. In many cases such an extreme bump isn't reasonably available.
I believe GP was more referring to the rough rule of thumb is to have 25x your annual expenses by the time you retire. +5k income versus -5k expenses, you're better off cutting your expenses. By cutting expenses, the target drops by 25xExpensesCut, and you're throwing an extra ExpensesCut towards savings, helping on both sides of the equation. Going from spending 95% of savings to 90% makes a huge difference on the timeline, but 50% to 45% is much more modest since the timeline for compounding growth is so much shorter.
Using 70k income, 50k expenses, and a 5% return, this would take about 30 years. [0]
75k income, 50k expenses goes to 25.2 years [1]
70k income, 45k expenses goes to 24 years [2]
150k income, 50k expenses goes to 10.6 years [3]
Another detail often forgotten about, salary is stated before taxes, spending is almost always after taxes.
That further increases the power of decreasing expenses.
All good points. The original article has a few things that are oversimplified I think, which is why I criticize it a bit. For example, if you go from a country in the EU to San Francisco, you're going to earn way more but spend way more too. But if you plan on going back to the EU when you retire, this won't matter much because your living expenses will drop.
I don't know how hard is doubling your income in general, but I don't know if it's always harder than dividing by two your expenses. The thing is that by focusing on earning more, you will end up with more money, and at that point you can always cut back expenses. While if you focus on cutting back expenses, you will end up with less money.
Agree. I think that advice panders to people who want advice they can act on today. You can choose to save $3 at your next grocery store visit right away and it won’t even hurt.
However, telling people to work on earning more feels like an impossibly difficult ask for many. You’ll get instant pushback when you suggest it, so bloggers avoid it.
FIRE blogging is more about pandering to what people want to hear. It is, after all, a big money blogging niche these days. Alienating the reader is to be avoided if you want to keep readership up, so career and earnings are to be approached delicately if at all in their writings.
That's a good point. I wonder why we consider that people telling people to spend less is okay, while telling people to earn more is not. Maybe because we consider that they have total control over what they spend, but not over what they earn? While this may be true, most people still could probably find a better job.
The problem I've always had with that story is that most people are struggling just to live on what they make. Saving 50% of your income when you are trying to make rent is a pipe dream. Even making decent money, if you have a family, saving is tough. The idea that we are poor because we buy lattes is over-simplified, and borderline insulting.
Life is more complicated than a blog post with some arithmetic.
I could list more than 10 people I personally know who have probably permanently stunted their lives via credit card debt from door dash and uber eats.
The the world doesn't owe you a standard of living. If you want to have more money, spend less money. Or don't. It's your choice. Nothing insulting about it.
> The problem I've always had with that story is that most people are struggling just to live on what they make.
FIRE obviously isn’t meant for someone trying to live in an expensive city on a $15/hr wage. However, there really are many career paths that readily allow the math. You’re obviously going to struggle to make it work if your goal is to work for a non-profit in Seattle or San Francisco, but it’s entirely within reach if you choose to work for an average tech company in an average city. It’s also trivial to make the math work out if you’re able to get a FAANG job anywhere and keep your lifestyle in check.
> Saving 50% of your income when you are trying to make rent is a pipe dream.
Depends entirely on your lifestyle and relationship situation. Many of us easily achieved FIRE savings rates by simply getting married to another professional, choosing to keep expenses within the limits of one person’s income, and putting 100% of the other person’s income into savings. Instant 50% savings rate, and it’s not even difficult to be honest. As a bonus, it was easy to transition to having kids and a stay-at-home spouse because we already lived on one income.
Obviously doesn’t work for everyone in every situation, but it’s not correct to say it’s a pipe dream or that it can’t work. It’s a choice that requires choosing lifestyle and career directions to match, but everything is a tradeoff.
If you make $125k a year why cant you live like those making 55k? That’s the pickle at upper middle class incomes your spending is a choice. Most people refuse to see that.
The other half of it is how much you spend. You also have to keep your retirement spending at the same level. i.e. if you make 100k/yr and save 90% of it, you can retire in 3 years... however, you have to keep your spending at 10k/yr. So if you can handle living that frugally, great! Otherwise you have to save a lot more before you can retire at your "current" lifestyle.
But isn't this just the financial equivalent of "lose weight by consuming fewer calories than what you use"? It's far easier said than done.
If you lose your job, or spend a chunk of your savings in a family emergency of some kind, then what? Do you have to save 80% of your take home to make up for the lost savings?
Basically he talks about how when you retire depends on one number, percentage of money you can save from your pay. If you save 50% of your pay and invest it, you can retire in 16 years. Pretty eye openning
<1>https://www.mrmoneymustache.com/2012/01/13/the-shockingly-si...