It’s Hard To Frugal Your Way To Early Retirement

It's Hard To Frugal Your Way To Early Retirement

Being frugal is a good habit to adopt if you want to build more wealth. However, it is very hard to frugal your way to early retirement.

Instead, it's much better to try and earn more income since the upside is limitless. You can only save so much!

Living A Frugal Retirement Lifestyle

Surprisingly, I didn't receive much pushback from my post, The Amount Of Money Needed To Retire Early And Live In Abject Poverty.

Almost everyone got the gist, which was to help you question whether the pursuit of early retirement is counterproductive if you have to live like a pauper. Instead, perhaps finding a job you actually enjoy doing would be a better use of your time.

Yes, a couple of readers jabbed at me using the words “coastal elite” as a pejorative term to say how out of touch I am that 200% of FPL is a near poverty wage. But come on, this isn't politics. It wasn't I who set the rules. If you find the FPL levels insulting, call your power-hungry Congressman or woman!

The government says that if you earn up to 400% of FPL, then you are considered poor enough to get healthcare subsidies versus paying extra to subsidize others. In general, it’s better to give than to receive. If we all become takers then our country is screwed.

I also acknowledge in the post that earning 300% to 400% of FPL seems totally fine in non-coastal cities.

The Disconnect Of Saving So Much For Retirement

In this post, I want to highlight some disconnects perhaps some of you who are thinking of living off 200% of FPL or less aren't recognizing. Let me set the stage with one reader's budget.

My main goal is for all of you to focus on generating as much wealth as possible through income and investments. After the pandemic scare, it's more important than ever to look for investment opportunities.

Relying on just your day job, when millions lost their jobs, is not the smart way to go.

Hard To Frugal Your Way To Early Retirement

Here is reader Joe, a 23-year-old living in a rural town in Pennsylvania. He rents and has two roommates. He believes living on 200% of FPL is just fine. His plan is to frugal his way to early retirement and explains his budget below:

The “do-ability” of retiring at 200% of the poverty level is not so bad if you live in a poor area. Not all of us are coastal elites. Consider that $25,000 a year goes a long way when rent is $650 a month.

Here’s my monthly budget:

Rent: $650
Car insurance: $ 48
Gas: $ 65
Phone: $ 30
Food: $150
Grooming:$ 20
Misc: $100
Health: $ 72
Gaming: $ 65
Booze: $ 50

Total: $1,250

Obviously, healthcare would go up upon retirement, but miscellaneous and gas costs would go down. This budget is $1,250 a month of spending. If you earned $25,000 a year, that would net to about $22,500 which gives you $1,875 a month.

That’s $525 of fun money, which is pretty sweet. I mean, you can go to dinner at Applebees for like $25, go bowling for $5 an hour, etc. There’d be money for vacations too.

Feedback On The Budget

First of all, I commend Joe for living so frugally and appreciating his lifestyle. So many of us seem to not acknowledge how truly great we have it in America. Even with a 200% of FPL income, you will still live much better than millions of others across the world.

Joe reminds me of my situation when I first got a job in NYC. I shared a studio with a friend for two years before moving on to share a two bedroom, one bathroom apartment with two others.

For more details, see: Housing Expense Guideline For Financial Freedom

Living frugally from the beginning helped me save and invest aggressively for the rest of my life. Once you get your costs down, your wealth really begins to compound through consistent investing.

There are just several problems with Joe's budget that needs to be addressed.

Frugal Budget Early Retirement Disconnect

Federal Poverty Levels - frugal your way to early retirement

Here's where I think Joe and others who think living off 200% of FPL are mistaken when it comes to early retirement.

1) “Living in a poor area.”

When there is more wealth, there is better infrastructure, better schools, better restaurants, more entertainment options, more free activities, and less crime.

Rational people will choose to live in better areas the older and wealthier they get, not poorer areas. At the extreme, you're not going to want to continue living on a drug-infested block once you can afford to live in a gated community. Heck, some may want to travel the world.

It's easy to slum it when you're 23. By the time you're 50, you're going to find it harder to continue sleeping on a cold cement slab. I swear, Applebees will start tasting disgusting after your 1,000th visit.

Even though big cities are more expensive, they are more expensive for a reason. There are a lot more high-paying job opportunities. In addition, big cities are also more exciting with a lot more interesting people to meet.

2) Thinking you'll only have yourself to take care of.

When you're 23 and single, it's easy to think your budget won't change because you're only responsible for yourself. It's also easy to feel invincible. But as we know, there are plenty of people in their 20s who can't even take care of themselves because their parents still are.

But guess what? Life happens. Your parents may get sick and need financial assistance. They may also need your time, which would reduce your potential for making money. You could get sick as well. You might even find someone who you care about and want to start a family. Going from taking care of only yourself to taking care of two or more people can be a tremendous financial burden.

Although 200% of FPL income increases with household size, the corresponding increase in income is often insufficient to match the increased stress of raising children. You will also want to give everything to your children, which could easily surpass the federal government's increased FPL budget.

Life is not static, no matter how hard it is for you to see the future. At one point, my wife and I decided we would be content without kids. Then we had one in 2017 and another in 2019. Then we bought a forever home in 4Q2023. Now our expenses have shot through the roof and I'm technically no longer financially independent. As a result, I've decided to go back to work in a part-time consulting role to help replenish my savings.

3) You can't retire early because your income is too low.

This is the biggest disconnect of them all. People who live super frugally today, mostly because they have a modest income, think they can retire early because of their frugal budget. Let's review the Retiring Early To Live In Or Near Poverty chart again.

Retiring Early To Live In Poverty Chart - frugal your way to early retirement

Let's say you really do end up retiring early with only yourself to take care of. To live off 200% of FPL ($24,280) as a single person, you need to have between $485,600 – $1,214,000 in your taxable investment portfolio based on a 5% to 2% return or withdrawal rate.

Now let's say you're Joe, who happily makes $25,000 a year in gross income and lives with two roommates in a poor area. He gets to spend $525 monthly on fun activities. However, what if Joe had no fun and instead invested 100% of his fun money in order to retire early. How long will it take for Joe to amass the needed $485,600 – $1,214,000 to retire?

Some people try to trick themselves into saying they are Coast FIRE, the most dangerous early retirement strategy to follow. They think they have enough funds saved up so that in 20-30 years, their savings will be enough to take care of them after 60. The thing is, anything can happen between now and then.

A Long Time To Retire

Using a 4% withdrawal rate and a 7% compound return on his $6,300/year in savings, it would take Joe 30 years of no fun to retire early. For only then will he have enough to spend $525/month on himself.

But there is another problem which is that after 30 years, his $525 today will only have the buying power of $225 using a 3% inflation rate.

Sure, living off 200% of FPL is more doable once you no longer have to save for retirement or pay a mortgage. But it's hard to ever get to retirement or own a paid off house on such a low income in the first place.

No rational person is going to retire from a much higher income to then live so spartanly either. To frugal your way to early retirement sounds like a good plan, until you actually try it.

The Better Early Retirement Strategy

Of course, Joe isn't going to be stuck making only $25,000 a year for the next 30 years. In fact, he mentioned in a follow up comment he makes about $35,000. But if he's already got the mindset that earning 200% of FPL is good enough, then chances are he won't be taking further steps to try and supercharge his income.

The key is to make as much money as possible while also keeping expenses as fixed as possible. So long as your earnings are growing faster than the rate of your spending, you're winning. And so long as you diligently invest more of your savings every month in a risk-appropriate manner, you're really going to win out in the long-run.

I really want to encourage readers to develop an abundance mindset. Don't settle for living on the minimum. The desire to frugal your way to early retirement is a scarcity mindset.

Instead, strive to earn more so you can not only retire early but also have the optionality to live it up.

It's Hard To Frugal Your Way To Early Retirement

Know that the amount of money you can make out there is endless. There's only so much cost you can cut. Instead of retiring early on a meager portfolio, find a job you enjoy. Keep on working until your portfolio can generate at least 300% of FPL in passive income.

Do not underestimate the cost of healthcare and family. Because they are your most important assets, you will spend any amount of money to keep them strong.

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Readers, what other disconnects do you observe about the Financial Independence Retire Early movement? Have you tried to frugal your way to early retirement? Why not go for unlimited upside instead?

117 thoughts on “It’s Hard To Frugal Your Way To Early Retirement”

  1. Sam, this is so true! What a great article. I think young people don’t consider things like getting married or having children. I was also a super frugal saver when I was in my 20’s and living with my parents. But then life happened – I fell in love, got married and now I have a fantastic wife and the cutest little baby in the whole world! They are worth more to me than a trillion dollars. We still save as much as we can, but with a wife and baby there is no way we would be able survive if I was still earning peanuts like back then.

    Maybe it would help if people waited until all of their children reach school age, before they finalize their retirement spending budgets and judge others? First things first, as the saying goes :-)

    1. Wonderful! Congrats to you.

      It’s hard for a parent to deprive their kids of every opportunity, if they can afford it. Therefore, we tend to spend and push back our retirement savings. It is only logical.

      Make it count when it counts the most. We only have a limited time with our kids! None of us parents want to regret not having done everything for our children while we could.

  2. My father in law is 95 with dementia and in a home. His pension is more than enough to pay for his needs. We just sold his lifetime home and as POA I need to put that money somewhere that is safe for the beneficiaries and not risky so they don’t come back at me with any liability. It is essentially their money as soon as he dies. Any suggestions where to put the money to earn something for them ?

  3. I think there’s another critical thing our friend “Joe” who is so happy go lucky needs to consider about his “poor area” utopia. When a recession hits and jobs go away, there will likely be much less opportunity in these regions of the country.

  4. My company offers a 401k match of 100% up to 3%, and 50% up to 6% which evens out to 4.5%. They also offer a 401k Roth.

    I have 9% invested in the 401k and 6% invested in the 401k Roth for a total of 15% of my earnings.

    Should I just match the 4.5% for the 401k and take the rest of my earning and look for other investments? Or should I keep saving the way I am.

    I know this is a broad question, but I wanted to open this up for conversation since I haven’t found much online.

  5. Many good comments on this. You definitely want to have a good extra buffer in your portfolio/ income stream to be safe as over a long period of time emergencies/ accidents etc very likely will happen (and they cost money to deal with). I like the idea of finding some type of job you enjoy, even if its part time to keep some money coming in. I dont mind working but its the full week heavy grind and commute that wears thin after a while. I think most people have some bandwidth and enthusiasm to work a few days a week if you can find the right situation.

  6. This is truly ridiculous. Despite the obvious – that there are so many bloggers, including Mr. Money Mustache, that indeed “frugaled” their way to financial independence, there are so many horrendous assumptions in this post I couldn’t not respond.
    1) “poor” was probably a poor choice of words (no pun intended) but low cost of living areas aren’t necessarily more crime ridden; in fact, I would argue the opposite is generally true. I live smack dab in the middle of Wisconsin, and I can tell you it’s one of the safest places in the US. And I’m in a small metro – safer and less expensive areas exist on the outskirts too.
    2) Assuming someone is frugal because they need to be is another silly assumption. My spending is a touch more than the person above, and I earn about double. That’s the point of FIRE – earn more than you spend, the more the better, and the faster you reach financial independence. With more jobs being location independent, living in a LCOL place makes financial sense.
    3) Being frugal has not stopped my sense of working to earn more. My pay has increased 80 percent since I started in my field full time not quite ten years ago. I’ve also developed side hustles. Drawing a correlation between the two where none exists is ridiculous.
    So far this is the second post I’ve come across on your blog and each of them were eye-rolling and out of touch. I started my own blog for this very reason – for people who live in smaller towns and cities, to give voice to their perspective, because they are lost among these coastal elites. This post just illustrated to me that it’s more needed than I suspected.

  7. Marie Jacobs

    Thank you for the follow up. I felt the previous post missed the mark by trivializing the hardships of persons actually living in poverty. This is better, but I still think it is problematic to use the same poverty line, or minimum income as a percentage of the poverty line, for all 48 contiguous states. the cost of living varies widely and that’s before considering each persons comfort level or whether they would rather eat at Applebee’s or continue to work. Just because the federal government does it doesn’t mean we can’t learn from their mistakes.

  8. TheEngineer

    If frugality to Financial Independence is painful – you are doing it wrong!

    Financial Independence is the detachment from other people money – their money can no longer enslave you.

    Financial Freedom is the freedom from money itself – money have very little or no role in the true meaning of your life.

    On the average, Financial Independence will take 10, 15, 20 to 30 years of planning and execution – it is the first financial mile marker.

    Financial Freedom is much harder to attain because after 10, 15, 20 and 30 years of chasing after a number with a vengeance most of us are conditioned and hardened to the only life we narrowly and mistakenly designed for ourselves.

    There was a mystical/historical general (220–280 AD in China) who had been conditioned and hardened in battles and forgo the opportunity to have his own family, mate and children. In his 70’s, he begged the strategist to put him in the last big battle because it is the only life he understood after so many years – he died in that last epic battle.

    Financial Independence is a worthy endeavor, but the full spectrum of life begins after the Financial Freedom mile marker!

  9. For those who play to retire early with young children, living expenses will increase a lot when one starts a family and when it grows. Back in 2010 when we thought we could retire on $1.5M assets in addition to owning a home without mortgages, our expenses were “only” $60K per year, or $5K/month with a 6 yr old kid.

    Now in 2019, our monthly expenses has increased to $14K due to: food/groceries $3K, education $3K, and travel $3K. Our lifestyle hasn’t really changed much, it’s just you’re now travelling at peak seasons which tripled your expenses, and your teenage kid eats like a horse, and even for public schools, you need to pay for books, clothings, dental works, extra-curricular activities like sports, tutoring, amortized college tuition savings, etc..

    Even if you can keep the food and travel down, can you really say no when your kid wants to try out club sports, or when the school orchestra goes on the summer tour to Europe? We’re currently planning to retire when our kid goes to college, but even with his tuition and room and board fully saved up, we’ll really have to wait and see how the expenses will look (if they go to out of state college, who’s flying and how often?)..

    It’s one thing to plan for income replacement, but people should pay equal attention to their living expense increases if they still have young children.

  10. Am I staring at an elephant in the room? He thinks on his 25k budget that he can retire, but there is zero being invested for said retirement? Regardless of if you’re of the FatFIRE or LeanFIRE mentality, you’ll never reach FI, never mind RE (if that’s even one’s intent) if you don’t put something away. Pensions are going the way of the dodo, and are lucrative for those that have them, and not so much so for those whose benefactor’s go broke and declare bankruptcy. A well-funded 401k with a company match is the best thing to hope for, the closest thing to a pension the current working generations will likely see in most instances. $525 blow money sounds like a lot–and leaves room for lifestyle creep, too. Such a low working income will not equate to much in the way of social security–the other “pension” that may or may not be a reliable source in the future.
    There will always be extremes, but I am definitely enjoying the lively discussion and variety of viewpoints!

    1. Macarthur wheeler

      He actually stated he makes around 35,000 yearly and allegedly invests around $20,000 per year.

  11. Thanks for all your hard work and advice, Sam. You certainly come at the world from a different angle than I do in many regards, primarily the fact that you live in an expensive costal city and I live in a midwestern college town (Bloomington, IN specifically, which – although in an awful red state – is very blue, very beautiful, very safe and a very affordable city in which to live). Another difference is that I don’t see you write all that much about pensions and social security income, which comprises all the money my wife and I need to live on although we do have a 7-figure portfolio (we earn enough from my pension alone to probably never need to touch our investments; we own our home outright on a 3/4 acre lot in a nice neighborhood within the city limits; and have zero debt, all of which makes SS look like icing on the cake).

    When talking investments, SS income is often overlooked as a reliable (for now) steam of income that could – were one to live long enough – be worth well over a half millions dollars. And it doesn’t take any discipline or sacrifice to invest the money during ones working years to reap the eventual dividends. That decision is made for you (for now) and, for boomers like myself anyway, who have additional sources of retirement income, it can provide the extra income needed to continue boosting the value of your portfolio.

    I count myself more lucky than savvy, and after a 32 year career (I was already working in my dream job as I continued my education during the early years) my wife retired at age 56 (from her corporate job with an extremely generous early retirement incentive package) and me at 57 and we haven’t looked back. Good luck to you and to all your readers out there!

    1. Macarthur wheeler

      FS has a few historical pieces on pensions and how to quantify.

      Don’t remember if there are any on SS but I suspect there is at least one.

      Pension value depends on the measure you use for quantifying return. I’d check the financial health of your pension if you have not already.

      Personally, our pensions have had reforms that have reduced benefits but solidified long term health of the pension. Some pensions have yet to make reforms and are in substantial danger.

      1. Indiana state employees and state funded university pensions are not the most sound financially compared to those of other states (somewhere in the top of the second tier at around 63% funded – the ratio of assets in proportion to total pension liability) but certainly not in any kind of trouble, and it’s rather unlikely that my state constitution guaranteed pension will be affected during my lifetime.

        But if all that changed my wife and I do have a sizable investment portfolio to draw upon, so… I’m not losing any sleep. And in the meantime we’re spending far less than we earn and investing the difference, so the proportion of our passive earnings (specifically stocks, bonds and hard assets such as gold, silver and real estate) will increase compared to my pension earnings (which of course are fixed).

        Clearly I would prefer not to touch any of that if possible and leave my two children something to ease their struggles in the rough times ahead but I’m never going to have sell my house, move into a shack and eat potatoes, even in the worst case. [Yeah, famous last words, I know! :)]

        1. Macarthur wheeler

          We have the same pension constitutional protections where we are.

          A very unlikely but not impossible scenario is a state going insolvent. A state would have the ability to negotiate liabilities in that case. That could turn a state pension into pennies on the dollar settlement. It’s a very small probability but not impossible.

          Regardless, with your investments it sounds like you have the ability to withstand pretty much any rainy day.

          Our household is close to having a paid for home with no other liabilities. We could retire now, but are putting another ten years in and retiring late 50s. Really not FIRE. More like FIRH. Financial Independence Retire Happy.

          We enjoy work. We assign 45% to investments, cash, 529 and extra mortgage principal payments monthly. On top of that we are doing substantial ROTH conversions yearly. FS just rolled his eyes.

          Our lives are simple, not minimal. We have the ability to help family and friends often.

          We have a steady and strong pace set. We are in no hurry. It’s a journey and we Intend on fully enjoying it.

          1. Good comment and a solid plan for now and into the future. That’s the secret more than anything: differentiating between the two yet learning how to maximize potential for both. You can’t live la vida loca for 40 years then expect to continue when the money quits rolling in. Conversely, living like a pauper for ones working entire career while saving everything for retirement will leave you with little to show for your efforts except maybe a bank full of money you don’t know how to enjoy. Striking a balance is paramount, especially in the middle-class world.

            As our incomes nudged up near upper-middle-class numbers late in our careers, it allowed for some acceleration in our FIRE plan and landed us somewhere between the two when we finally retired. Neither my wife nor I consider ourselves wealthy, but we will be financially comfortable the rest of our lives.

            And we’re the same way: we give to charities and preferred political candidates but also put our two children through college, leaving neither them or us with a dime of debt after the fact. And we like to help too: we bought them each safe, late-model cars when they got their licenses, then again when they got their degrees. Next time however, I’m afraid they’re on their own (I have my eye on an Audi Q5 for myself this time!)

            Good luck with your FIRH plan!

  12. I have to say that the FIRE movement can be very tempting. Nowadays, there are so many blogs and videos about how to live frugally and achieve early retirement before 40 or even earlier – who wouldn’t want that? There is no surprise that more and more people having their struggle earning more $$$, decide to cut their spending to an extreme level to achieve their goals and gain financial independence. Even I (being very entrepreneurial since an early age) was initially very interested in the FIRE movement. I liked reading Mr Money Mustache or Frugalwoods. But in the end, my conclusion was the same as Sams – “There’s only so much cost you can cut”! You always have a chance to use your skills and time to make extra money (with enough willpower and having an actual plan). Building business or side hustles is a lot of fun! I also struggled at one point and had no idea how I will increase my income. I always wanted to invest but was 100% consumed by my job. I admire Sam for building this blog while working in finance, I know the struggle. My career started in M&A where I was very unhappy, but I managed to change the company, get better working hours and have time for other meaningful activities! It’s not a success story (yet) but it works for me.

  13. “Financially retarded” refers to my ex-girlfriend. A long story, I won’t go into it here. I’m talking about a woman who couldn’t begin to understand money. Give her $100 and she’d fritter it away at warp speed in the span of a few hours. Her income was at the poverty level, living paycheck to paycheck, and she couldn’t begin to understand my lifestyle. Her worldview came courtesy of modern movies and TV shows. Sadly she’s not unique! She didn’t grow up in poverty either. As I understood it, at one point her parents had a million or so and lost it. She didn’t learn from that. If you read these financial blogs you’ll come across something called Poverty Mindset which is basically the polar opposite of frugality and self-reliance. A relationship between being poor and making poor life choices is another way of putting it. Prepare and save for the future vs. spend it all now and live for today.
    There are consequences for our actions. The government wants us to be reckless consumers. Peer pressure and commercial bombardment ensures this ever more so, surrounding us with Wants. Maybe it’s a matter of survival instinct, intelligence, and the ability to break away from the herd. Maybe mental maturity. The ability to override instant gratification for the sake of the future.
    Don’t get into the habit of having things done for you. Learn to do things for yourself. The important things. Above all, don’t become wrapped-up in the Image you project. Image leads to narcissism which leads to laziness and the spendthrift mentality we have with keeping up with the Joneses. Something like that.

  14. You just don’t get it, Macarthur wheeler. (I don’t have a fantastic lifestyle only a financially decent one; but that’s a matter of opinion and your mileage will vary!)
    My 7-figure net worth was earned through making sacrifices my whole life. Anyone could do this provided that have the willpower and the independence to not follow the herd. Conformity and Status are killing America. I am surrounded by financially-retarded people who “want it all Now!” and don’t want to work hard to get it. I guess you could call this the millennial mentality. I don’t know. If you live a life of instant gratification, not saving, then don’t be a crybaby when you end up destitute in your old age, unable to retire and living in a constant state of financial fear. The requirement that you be a part of the clique of your neighbors is more important than saving for the future. The bitterness, if there really is any, is on the behalf of these people who put down my lifestyle. It need not be big expenses like luxury cars either. A $5 drink at Starbucks repeated constantly adds up. Let me tell you something. My parents would never dream of paying that for a cup. They lived on plain old coffee with a touch of milk added, nothing else, ideally made in a Mr. Coffee machine than a Keuric monster.
    Thirsty while shopping? I’d find the nearest water fountain or have the patience to wait a few minutes driving home. The Starbucks crowd may put me down for my lack of their so-called sophistication. As a matter of fact they would conclude that I’m poor and broke, with a low I.Q. to boot! Too bad that we can’t compare net worths. That will never come up. I don’t embrace the status quo luxury items they do so it’s a kind of discrimination. On a larger scale I don’t have a swimming pool like my neighbors because to me it’s a hole in the ground you throw money into. The guy with the biggest hole on the block is king. There are numerous problems I have with Capitalism which I won’t get started on; inappropriate as it is here. The conditioning and conformity process of our culture is my rage, and the inability of people to accept what they reap (or lack thereof) whilst living under it. Perhaps it is a matter of balance. What works for me might not work for you.
    I like to look into consequences. I see what drinking does to people around me so I therefore do not drink. I see what overspending does to people around me so I therefore save more than spend. That’s reality for you. Find your own balance.

    1. macarthur wheeler

      There is nothing to get. Living below your means and investing the difference with a risk appropriate asset allocation year after year with compound interest is not an epiphany. And while some people have not applied this simple yet effective financial tactic, it does not mean they are “financially retarded” as you eloquently put it. Nor does it mean that people are following the herd or demand instant gratification. Sometimes life events make it difficult. So you try to get better each day. And learn. And adapt. And be nice to fellow humans.

      The theme of the post by Sam is that achieving FIRE is exponentially more difficult on a limited income stream. A person increases their chances over time if they seek to increase the incoming amount of clams. Minimalism in all things makes it tough. Especially if you are responsible for 2 or 3 or 4 other people.

      Personal finance educators like Sam and the esteemed Dave Ramsey are positively impacting a lot of people like me and the people you refer to as financially retarded. Sam is making a difference.

      Whether you can or can’t, you’re right.

    2. Capitalism is what allows you to choose to live frugally, save, invest, and retire early. It gives you the choice. It also gives others the choice to spend into oblivion. It’s freedom, some people can use it to there advantage and some can’t, but at least you get to decide.

  15. Interesting perspective. As a millennial in a large metro area, I certainly didn’t grow up thinking the same way as Joe. I always wanted to move up and make more money so I could afford finer things I value for myself and my family (travel is a big thing for example). His view may be somewhat simplistic, but we could also treat this as an alternative way of living. Nothing wrong with just wanting to go to Applebees for the rest of his life. I probably will never live this way but I respect his perspective.

  16. What about using your rate of change or slope on income or career growth as a metric for early retirement? Sam alludes to this in the article but I have never seen a write-up about using that as a measure for making a key decision like hanging around another year. For example, if your career growth has flatten-out at a high-number and you have saved a bunch should you consider restarting in a new field at a much lower level that might provide more purpose and/or joy. Human happiness seems to correlate much closer to a positive direction as opposed to an absolute high number. In Joe’s example, if he’s seeing positive growth in money or purpose, stick to it, otherwise leverage FIRE to change his direction.

  17. “I really want to encourage readers to develop an abundance mindset. Don’t settle for living on the minimum.”

    For me, this line is what separates the successful vs average person. A lot of Americans think they’re trying hard enough when they are actually giving minimum effort. I went to UC Berkeley 20 years ago and half the school was Asian even though Asians made up a small % of the US population. Asians aren’t born smarter, we just work harder. I worry that Gen Z Asian-Americans and future generations won’t work as hard.

    If you want to be encouraged to try harder in life, read the 10X Rule by Grant Cardone.

    The key to retiring early is about increasing your income and saving more. I’m 40 and can afford to retire now even though I’m not frugal because I worked my ass off to grow my business.

    Two really important traits to being a successful student or adult:
    1. self-discipline (harder said than done or we’d all be rich and skinny)
    2. ability to focus on achieving long-term goals instead of giving in to short-term pleasure (related to self-discipline and being frugal)

  18. You know many of your posts I side with the costal elite makes you out of touch crowd. The idea of middle class at 300k in most of the US for example is worth a chuckle….

    But I agree with you on this one. Retiring in your early thirties budgeting 25k a year for the rest of your life is a recipe for disaster. Life happens and things change. One simple emergency like a car repair or if you have a home a simple repair job and you’ve spent ten percent of your yearly budget. At a minimum I’d recommend making it to the point where routine emergencies are not a significant percent of your budget. You don’t need to plan necessarily for black swans, but a cloudy day might be a good idea. Especially true when you realize how different most people are at 40 then 30.

    1. Stop the Criticism of HCOL

      Comments like this just don’t get it. $300K is middle class for people on the coast. It’s about being able to raise a family and living without having to think about simple financial decisions, “Can I afford takeout tonight because I just came out at 8pm tonight and I’m too tired to cook?”

      Sam is one of the financial blogs who is actually realistic about what it’s like to live in San Francisco and New York. Sure a lot of people can be middle class in these areas with an income of $100K-$200K, but I know that I’d have a lot more sacrifices for someone making that much than someone who lives in the midwest making $100K or even less. To be fair, I’ve lived in the midwest and now in San Francisco.

  19. Social Capitalist

    A lot of these arguments come down to lifestyle or lifestyle creep (which I too am guilty for). I would like to add a different take – there is no way inflation is 3% unless you’re making it that way.

    Choosing to buy something that is more expensive is not inflation – if so, then stocks would count as they inflate at 7-8%\yr. Only having to buy something that costs more is inflation; therefore it is highly variable and individualized.
    As an example, someone will point out that gasoline is much more expensive than in 1980, 1.00 vs. 2.50/gallon today. But that’s only 2.25% inflation. Moreover, choosing a fuel efficient OLDER vehicle can save more on gasoline since it will get better gas mileage than most “cars” do today. Yes, I mean heavy big trucks. The point is simple if apples are expensive today, buy pears. Apples will be cheaper again tomorrow.
    But this does not occur and we know why. Which is fine- selfishness is motivational too – but we shouldn’t use imaginary numbers to say COL is so much higher when it’s a very controllable number within our budgets and a number driven more by our want than our need.

  20. Hi Sam,

    My take is that it is possible to achieve frugal and invest the saved monies (from the active income) for an early retirement. I believe that it requires determination and belief to do so. I am one of such example. I did not have a high-paying job and focus on dividend growth investment as the catalyst for early retirement. I keep the lifestyle expense constant and low. My want is minimial and I am easily content with the simple lifestyle. I believe that it is the type of lifestyle which one desires. Some may want high cost lifestyle and there is nothing wrong with such desire. It depends on the desire of one.


  21. At nearly 60 I have no desires or “wants” anymore and I realize the Big Scam of our society. You are programmed to want and need everything on television. Most of which are scams or overpriced junk. The standard is set there, by which you must live. The more power big biz has the more they can ram it down your throat through commercials. Just a few key people pushed down the hill and the rest will follow along jolly-like because they need to be a part for the sake of acceptance. Imagine a large company which manufactured post-modern pogo sticks gained a foothold on the market… In a few years every business would have to, by law, supply its workers with special lockers to house them at work. More money! And for what? To accept the new norm. Oh, but they pogo sticks are “smart” and have do-dads built into them…

    My parents never carried phones around with them. Today everyone does because of the money drained off from every fool out there. Mobile phones aren’t necessary but conditioning has taught you otherwise. Multiply this by all the other so-called conveniences of modern society — and you’re broke!

    Again, nothing matters to me. The food going down my throat can be anything but cheap generics are no different to me than the finest grade ristorante servings. An old car gets me places just as well as a new state-of-the-art luxury SUV. 1 acre of property suits me just as fine as 10 acres of property. Why bother spending so much for the same end results? The answer is that Consumerism wants you to. They want to financially enslave you.

    Joe Blow says Grooming includes hair gel, haircuts, toothpaste, deodorant, creme for when pimples pop up, mouthwash, dental floss, cologne, soap, body wash, etc. Anything to do with hygiene.

    Much of that is bull, too, thrust upon us by advertising. A few dollars at Dollar Tree goes a long way. Simple soap and water takes care of pimples as effectively as a magical name brand cream. A bar of soap takes the place of body wash, fancy gels, cologne, and even deodorant. Years from now you’ll no doubt discover that your favorite cream or jell causes cancer via the chemical soup of additives. Keep it simple and you save money and won’t even have second thoughts about it again after a year’s passage. I used to use deodorant constantly when I was young and rashes and infections began to develop in my arm pits, so convinced I was that I needed this product to hide my stanch. Switching to soap and water, I saved money and my body odor was but an illusion all the time. And at my age, my hair grows slowly and a single annual haircut will normally suffice.

      1. I think you need a mobile phone, especially for travel. Many companies pay for them. Frugaleer lives in a different world. A world where soap takes the place of deodorant

    1. “My parents never carried phones around with them. Today everyone does because of the money drained off from every fool out there. Mobile phones aren’t necessary but conditioning has taught you otherwise.”

      I’ll bet your parents paid for newspaper and magazine subscriptions. I’ll bet your parents bought a book of stamps every single week to pay bills and send letters to friends and loved ones (not to mention paper/stationary and envelopes). These menial things have been replaced by phones connected to the internet. I’ll bet your parents had to take valuable time out of their day to head to the library whenever they needed to research something – or to a bookstore to pay for a book. I’ll bet your parents had a set of encyclopedias (those weren’t cheap!). I’ll bet your parents had to take their automobiles to a repair shop, or call a handyman for moderately challenging household fixes – now they could just watch a 3-minute video tutorial on YouTube and do it themselves. Oh – and the parts or tools they need? They wouldn’t need to travel to the next town to find the auto parts store or hardware store that carries the specific part they need – just order it on Amazon and it arrives in 2 days!

      Here’s a good one… I’ll bet your parents purchased a camera (maybe one of the good expensive ones), but they didn’t carry it around with them all the time – only when they knew they might want to capture some memories. But before they could use it – they had to buy film! And then, IF they wanted to see those pictures – they had to pay to get the film developed. Again, not cheap – and you had to wait several days for your pictures to come in. Or… you could pay a premium for ‘same day’ development.

      So, despite the perceived high cost of smart phones – they really are saving us money in the long run – if you think about it. And there is SO much more that they do that I didn’t even mention above! Countless apps make life easier by saving us time and money. And that saved time can be spent increasing earnings/income!

      1. Outstanding argument here, Matthew! I agree with John a few comments up that my mobile smart phone adds value to my live but when put into words with specifics such as you’ve done, it makes me appreciate it all the more!

        1. Hmm, I wonder if the avatar with a single tooth and unibrow is a result of having written “live” rather than “life?”

  22. 200% FPL is nowhere near poverty; it’s double the income of the highest-income-people-in-poverty, in (one of?) the richest country (ies) in the world. My own personal spending has only exceeded 200% FPL once in the last decade, in the year I bought a house and did some remodeling. Usually I’ve been around 150% FPL for a pretty comfy “college student living the good life” lifestyle. When none of the income is going towards debt or tuition, it goes a long way.

    It does seem you’re a bit out of touch with how inexpensive life between the coasts can be. In my small Midwest city, $650/month in rent nets you a fairly large 1br apartment in the nice part of town. The slummiest apartments are around $450 for 1br, and the top of the line waterfront 1br luxury apartment might go for $900 or $1000. No roommates needed, and in none of those areas are people treating the streets outside like a toilet, as some San Francisco residents might.

    I do agree that being frugal and not needing luxurious 200%+ FPL isn’t a good reason to avoid working hard to earn more income. A 60% or 75% saving rate is much nicer for accumulating wealth than ~5%. But having that extra income doesn’t make spending any more satisfying, and there’s not much happiness left to buy as a single guy at 200% FPL in an average cost of living area.

    1. Sounds great. Why do you think the government gives so much subsidies for people who earn 200% of FPL?

      Can you share your household size etc so we can learn how you’ve been able to reach your financial goals? When do you think you’ll be able to retire and how much do you think you’ll need?


      1. There are a lot of people at 200% FPL, and they can vote? Plus anyone making more than that isn’t going to feel bad about people poorer than them getting subsidies, because it’s basically a prerequisite for them to get subsidies of some sort. Subsidizing people at that level of income is also an easy political sell because most people make more than that, spend nearly all of it, and can’t imagine spending less than they currently spend… so the people at lower incomes like those at or below 200% FPL are easy to sympathize with. Especially when the tax bill is being paid by someone richer than you anyway.

        For me: household size of 1, expenses typically under $20,000/year, with a base salary that has ranged from $40,000 to $85,000 since graduating from college (during college I worked enough to earn ~$20,000 / year). It’s pretty easy to get the finances right with that kind of income as a single person if you drive a modest car and don’t go overboard on housing costs or vices (e.g. drinking, gambling).

        I could see pulling the trigger for a lean FIRE lifestyle in a couple of years at age 32 with a paid off house and ~$500,000 in invested assets. Right now I’m on track to spend about $18,000 this year, but about $7,000 of that is mortgage payments. So once the mortgage is gone I’ll be spending well under $20,000 per year even if I’m paying for 100% of my health care premiums (which I probably won’t have to do, if the government continues to encourage people to have lower incomes with the Affordable Care Act). That leaves a pretty large buffer for larger infrequent expenses (e.g. new roof, furnace, unpredictable medical issue requiring me to pay an out-of-pocket-maximum for the year, etc.).

        But instead of pulling the plug at 32, I’ll probably work a bit longer to build up some more savings and to figure out what I want to do with my life. If I walked away from the job now, I’m not really sure what I’d do with all of that free time. And whether it’s in 2 years or 5 years or 10 years, I’ll probably do some kind of hobby that earns some income.

        I also agree to some extent with what you’ve posted earlier about retiring too soon as you enter your peak earning years; I’m pretty close to the most senior position I can have without getting onto the management track, so it’d be a bit silly to stop working while I’m earning so much money so easily. I really don’t want to keep grinding away until I’m 40 though. The marginal utility of the extra dollars accumulating in my investment accounts is already starting to fade, so another decade of work just for some bigger numbers on a computer screen doesn’t seem very enticing.

        1. Cool. I’m glad you plan to pay off the house before you retire.

          Is your plan to be single for the foreseeable future and in retirement?

          Life is pretty cheap if you have just yourself to take care of.

          1. Yeah, being single is the plan for the foreseeable future. It does keep costs pretty low.

            But if I weren’t planning on being single, it’s not unreasonable to expect a modern strong and independent woman to be able to finance her own lifestyle, right? It is 2019 after all. Young, single, childless women are more educated and earning more than their male counterparts last I heard.

  23. One of the issues in the FIRE movement is sometimes we pedestal a certain lifestyle without being able to see changes in the future. Granted one person’s frugal is another’s wealthy and one’s wealthy is another’s frugal, long-term you hit a fantastic point bringing in inflation cutting your purchasing power nearly in half every 20-30 years. It’s easy to think you are in a good place now and can sustain it for life. Family changes, housing needs (unless you own you can’t guarantee your place will be available for life), moving costs, lifestyle changes, all of these can slowly change over time.If you pull the trigger to retire early and aggressively you can find yourself in a pinch and be unable to sustain your lifestyle. Throw-in healthcare and the fact that it’s impossible to forecast what kind of world we’ll live in 50 years ahead of time, I’ll take the more conservative approach.

  24. anonymous SF

    Hey Sam,

    Your posts have motivated me to get out there and hustle – realizing that my main job isn’t going to provide me with the type of financial security that I want long term.

    I’m 25 years old and currently live in San Francisco. After reading your articles I realized I needed to find flexible ways to earn more and now bring in a conservative $600/month with task rabbit. This is great for the time being, but my real goal is to launch a company once I feel more financially secure – I am expecting this to take at least another year to two years.

    My question is – do you have any other recommendations to supercharge my income?

    1. Great job earning a side hustle through task rabbit! I would look at trying to do some freelance work online. Online work is the most flexible type of work. You can do it anywhere in the world and there’s a growing demand for people with online skills.

      I would also focus on building a passive income portfolio ASAP. Every thousand dollars you Invest makes 20 to 40 dollars a year.

      1. anonymous SF says

        Much appreciated – I’ll keep at the online work, I’ve been on upwork but haven’t landed anything yet (it’s only been a month).

        Regarding passive income I currently invest my emergency fund in a municipal income fund (FHIGX) and have an after tax robo-advisor account that’s heavily tilted towards stocks – with all dividends and capital gains being reinvested. I’m dealing with low capital at the moment but I’m really trying to develop the right habits right now.

        Really appreciate you responding to my original post – I love the blog and read it every week.

      2. Do you live with your parents for free? SF has one of the highest rents. Are you making at least 300 thousand a year after taxes? If so your lower middle class. Move to a cheaper city invest 75 percent of your income including what your saving on rent. Be tight be frugal be self discipline ed. Good luck

  25. Also my gross income is $35k, and with a good income portfolio you can live off the interest and never draw down the principle. So I could have say $2 million and live off $80k a year interest. With a more reasonable total return of 10%, I can get there in 20ish years. Everyone seems to assume that retirement portfolios are intended to be wiped out over the course of one’s life and then one should die penniless. Why?

    Also, this historical return for dividend aristocrats is in fact 11.8% CAGR.

    1. I think where people have doubt is that you can build a $2 million portfolio on only a $35,000 a year income. But I wish you the best of luck earning that compound rate of return.

      How big is your portfolio now?

      1. Currently, I’m at $42,000. With this future value calculator, I see $1.9 million in 20 years. This assumes

        PV- 42000

        N- 520 (20 years, compounding every other week when I receive dividend payments)

        Interest rate 10% (divided by 26 periods in a year)

        Periodic deposit 958 (This is higher than the current contribution amount because I’m adjusting for future raises)

        1. Joe, for being a young man, I like that you’re thinking about retirement already and being frugal. With that attitude about saving money, you’ll do better than most people. However, your assumptions are way too optimistic.

          1. “compounding every other week when I receive dividend payments”
          – You can’t compound every 2 weeks. Dividends get paid out quarterly.

          2. “Interest rate 10%”
          – Over the next 20 years, global GDP is expected to slow down and the US should average a 1.6% annualized growth rate. Stock analysts expect US equities to produce annual returns of 4-5%.

          3. “Periodic deposit 958”
          – That’s equal to $25K a year and if you’re only making $35K/year now it might take 10 years before your income is high enough to contribute $25K a year. I would recalculate by having $5K in deposits in years 1-5, $15K in deposits from years 6-10, etc. As you get older, your income goes up but your expenses do, too. With a family of 4 living in Silicon Valley, my expenses now are $10K/month but I still save $250K+ a year.

          4. Taxes
          – Nobody ever talks about the taxes they’ll owe on the dividends and capital gains. Taxes will take a big chunk out of your rate of return.

          I don’t know what you do for a living, but the most realistic way to get to $2M is to increase your income by being a great salesperson, business owner, or work at one of the big tech companies. Joe, I wish you the best of luck.

          1. 1-Dividends pay out whenever you want them to, if you set up your portfolio that way. Some pay Jan, April, July, October 1, some pay on the 15th of the same months, same with other months. 11-12 stocks with different payment dates, and you can get biweekly compounding. Also, money goes in from my check as well, which helps it compound.

            2- Over the next 20 years, investment “experts” will be just as wrong as they ever were, and even if they are right it won’t matter, because I don’t invest in the broad market. As I said, dividend champions have a historical CAGR of 11.8%, compared to 7.48% for the S&P 500. A bet on the largest, best run businesses in America is a bet on American exceptionalism.

            3. I’m putting in about $23k a year now. I figured an average of 25k going in over however long as I get raises is reasonable.

            4. Taxes on capital gains are 0% up to $38,000 and 10% on the amount from 38-200k. So I’m not too worried about that. Taxes will be negligible compared to what a working stiff pays.

            I’d love to increase my pay but I really don’t see it coming for me, I’ve tried everything

            1. 1. It’s not biweekly compounding if only 1/12th of your stock portfolio is paying a dividend each month. If you invested 100% into one stock that pays a dividend every 2 weeks, then you’d have biweekly compounding.

              2. I guess we’ll see in 20 years. I hope market returns stay high.

              3. If you’re making $35K/year, paying taxes, and spending $15K/year…I don’t know how you’re able to contribute $23K/year unless you’re getting gifts.

              4. The taxable income range includes your capital gains. Also, some types of dividends are taxed at the lower long-term capital gains rate (0%, 15%). Some types of dividends are taxed at your higher ordinary income rate (22%+). Also, there are state taxes. In CA, dividend income is taxed at your ordinary rate.

              5. To increase your income, check out this thread:

  26. Spot on Sam. Life in one’s 20s as a single person is very different from 30z, 40s, 50s etc with a spouse and/or kids to care for. Our lifestyle needs and desires can change a lot over time and it can be hard to visualize or anticipate how much of a financial and lifestyle impact that can make. Lots of food for thought in this post. Thanks!

  27. In response to your points

    1. It’s really not a bad area. And as I age, I will have lots of money from investments. That’s kind of the idea of early retirement. I will have about $2 million, which would kick off $80k in dividends a year (today’s dollars). So if I want to drive to the big city or do something fancy or travel the world, I can. And it will only take about 20 years of DRIP investing to get to my goal. And that’s assuming I don’t have any other windfalls, like Inheritance.

    2. My parents are loaded. If they get sick they can hair their own team of doctors and nurses they will be fine. I’m MGTOW. I will never have any leeches in my life.

    3. Oh yes I can. I invest 55% of my gross income. I’m already worth over $40k. At a 10% rate of return, I’ll have $2 million in 20iah years. And I certainly have fun now. I like video games and drinking, both of which are cheap habits.

    1. Great to hear that you will have $2 million in 20 years.

      Could you suggest some specific topics that I should write about to help people like you who will be multimillionaires?

      BTW, what does your parents being loaded have anything to do with your situation? Thx

      1. Most people who make 35 k will never even have $5k in their bank account. The reason is people blow their money on stupid $h!t. This holds true for all income groups, in general. This is why I think a few posts on frugality/minimalism would benefit your community.

        If I may give an example: with 35 k income, if you buy a $50,000 truck, $300,000 home, $4,000 tv, etc and have payment plans on all of them, you will never accrue any wealth.

        So since most people blow their money, they are never able to invest any, and thus can never build wealth.

        If you would like me to write up a post on how I will achieve FI, I’d be glad to. But I’m not sure how to put graphs and etc into the text. I could email you about it if you want.

        Parents- you mentioned that one might need to help ones parents, financially speaking, in their old age. I am just saying that will never be a problem for me because my parents are so loaded they can have anything they want and even if they were old and sick they’d never run out of money, so I need not concern myself with being able to help them. (they have over $10 million in assets)

          1. Um, OK? Just preaching the truth here fella. He asked why people never accrue wealth, and I said it’s because they blow their money on stupid stuff (consumerism). My landlord has $140k in income and is always broke.

            1. Just to burst your bubble a bit (you’re generally on the right track!)

              – $2,000,000 probably isn’t going to kick off $80,000 in dividends. The S&P 500 is closer to 2% than 4%.

              – You’re probably not going to see a 10% return given current valuations. For my projection spreadsheet I put in 4% (if it’s good enough for early retirees, it should be good enough while accumulating).I think Vanguard and others have been projecting closer to 5% returns, maybe before inflation, for the next few years. But who knows?

              – It’s easier to shoot for the big returns when you don’t have as much to lose. I’m getting close to having half a million saved up, and I’m glad it’s split between stocks and bonds and house equity, because I’d hate to lose $250,000 at this point in time if the market were to crash.

            2. Mark- you’re correct about the s and p 500 being at 2%. However, I’m not investing in that. I’m investing in a carefully selected SWAN blue Chip dividend portfolio,which kicks off 4.8% currently and should stay there. If it doesn’t do so in retirement, I may move some of it into junk bonds.

              As for 5% return, you’re correct- with regards to the broad market. The dividend aristocrats index has a CAGR of 11.8% in the last 100 years, and 11.7% in the last 20. Vanguard projected 6-7% returns so since SWANS run about 2-2.5 ahead of the market I expect to get 9.5-10%.

              I understand where you’re coming from by being cautious about a possible market crash. But for me, it wouldn’t matter since I’m 23. It would allow me to get a better price on the stocks I want. I may rebalance in the future depending how things look. The way I see it, I don’t lose money unless I sell for less than I paid. I buy for yield and yield growth. DRIP is the secret to riches.

              Thanks for your insight!

  28. I think there’s a song called, Young, Dumb, and Broke. For some reason, young people think that they know more than they really do. I don’t know whether it’s stubbornness, or stupidity, or being naïve, but there’s a reason why no matter how much you try to educate young people, they got to figure it out by them selves.

    I’m not sure there’s anything you can say to Joe, or other people his age to make them think differently. They’ve got experience in life on their own, make their own mistakes, and evolve.

    1. Let’s not discount that Joe is WAY ahead of the curve compared to most 20-somethings as he is actually thinking about his finances long term. Confident and naive maybe, but staggeringly more insightful and prepared than the average.

    2. What part of my post is stubborn or stupid? I live cheaper than most people do, and therefore don’t have to work as hard or as long. I also have fewer problems to worry about. Why so angry? Are you envious?

      1. One of the things that might help keep your cost down is your attitude. I don’t think anybody would want to be with you or stay with you with your type of know it all attitude.

        Not only are you delusional with how much money you think you’re going to have in the future, you’re also very arrogant. And if you can’t see that, then you’re just gonna have to learn through experience.

  29. My point is 85%of Americans make less than $80k, and 50%make less than $34k. Your advice is not useful to the vast majority of people.

    1. What about the more than 50% of people who make over 200% of FPL? Surely what I write has some relevancy?

      What type of articles should I write to help those making under $25K-$34K that are different from what I write now?


      I welcome as much detailed feedback as you can give me because I want to plan better and white in the audience over the next several years.

      A guest post from your perspective on How to help people in your situation would be great too. Getting the community involved to share their stories that’s definitely one of my objectives.

      I don’t my readers to be average or below average. We’ve only got one shot at life, so we might as well try to shoot for more.


      1. One of the biggest disconnects about the FIRE movement to me is all the 20 and 30 something people blogging about FIRE who are using their blog to find their RE.

        In order to do that, they have to sell a bunch of people on the idea that RE is the next brass ring and that they should use this tool or service to get to RE (or start their own blog!).

        Someone more cynical than me might say that FIRE is just a huge pyramid scheme to fund lifestyle businesses – from MMM on down the line. But I’d never say such a thing.

    2. Joe,

      Why would you want to be all things to all people? And why would you ignore the 90% plus people who do not live in or near poverty?

      The people who get in trouble the most are the people who don’t learn from people who’ve been there before. There’s no need to reinvent the wheel.

      Why are you here if Sam’s advice is irrelevant to you?

      1. I’m not talking about people who live in poverty. I’m talking about the lower middle class to middle class. I think lessons on frugality would help a lot of the readers. Statistically, most of us make under $80k.

        1. Maybe but there’s already plenty of sites that focus on FIRE on frugal budget. Check out Mr Money Moustache for example. Sam’s site is one of the few that doesn’t espouse everyone living off 24k or less a year in “retirement”

          1. If you paid attention, you would see I would be living off something like $80,000 a year, which is a very comfortable retirement. Just because I have a low wage doesn’t mean I will have low income in retirement.

            1. Inflation is tame now, but I suspect that in 20 years, 80K will not be as fat of a retirement as you suspect.

  30. 200% FPL would make you better off than millions across the World??

    Try ~6 billion, almost the entire population. There is no reason to stay in a HCOL area whilst attempting to Frugal-FIRE, thus subjecting yourself to abject poverty.

  31. Trying to get ahead

    I think you can “frugal” your way to FI, but it’s a long road and takes discipline–especially when you endure ongoing criticism from so-called friends and family.

    My wife and I are DINKS (but plan to change that soon with a baby perhaps in 2020), both age 36, and live within the metro of a major coastal city. Our net worth is $2.5mm. We earn $580,000/yr together (including a few passive investments) and have consistently saved roughly 85% of our after-tax income for the past several years. We live in a house that is TOO BIG for two people (or even three after a baby comes) and we travel constantly and dine out regularly with friends at nicer restaurants. I haven’t been to an Applebee’s since college. We can easily cut down our budget by pulling on these three levers but haven’t done so because we believe we are still relatively frugal. Are we? However, we sometimes see our expenses creeping up and have to remind each other to get back in check. It’s a constant struggle between wanting to enjoy things and also be mindful of our long-term goals.

    Here is our average monthly budget:

    Public transit to work for 2 people $1,050 (very expensive given our location)
    Med/Dental/Vision $130 (one of us gets everything free through work)
    No Mortgage (paid off 4 years ago)
    Property Taxes and Insurance $980 (cheap for our area)
    Utilities/TV/Internet $750(expensive b/c home is large)
    No mobile phone bills (both employer-paid)
    No subscription services, e.g., Netflix or Hulu
    Student Loans $207
    Car lease $200 (modest economy full-efficient car)
    Car insurance for 2 cars (one is owned) $150
    Vacations $1,700 (this is a big indulgence for us; 1-2 international per year)
    Misc $1,500 (primarily due to hosting dinner parties and dining out, e.g., omakase)
    Total $6,667

    We are saving about $30,500 per month (including all pre-tax retirement plans).

    We are strongly considering moving to a smaller space, such as a townhome, in a highly-rated school district even though we plan to increase our household size by one or two. We just have too much maintenance in a SF home. It’s costly and not enjoyable.

    My wife and I take alot of guff from family and friends to “live a little” and “lease a BMW” or “put a $75,000 in ground pool in your yard.” These are the same people who either have no money or more often get everything handed to them from their parents. Neither of us has been so fortunate. We got $0. We are not looking forward to the inevitable criticism we will endure if we downsize to a townhome. We know that we need to do what is best for us and our goals but it’s still annoying to deal with others and their opinions as we work toward our long-term goals.

    1. Love the aggressive savings! I wonder… perhaps you guys are getting “a lot of guff” from family and friends because you guys need to be more Stealth Wealth? If they didn’t have any idea how much you guys earned, why would they encourage you to spend $75,000 for a pool?

      Also, you guys clearly have your finances together, so money isn’t a worry. But if you want to start a family, I encourage you NOT to wait until she is 37 to start trying. There is no right time. But since you already know you want children, then you might as well start now.

      Biology may not cooperate, which we found out for several years. I wish folks told me when I was younger more about the joy, pain, and realities of parenthood.

      Related: The Best Age To Have A Baby

      1. Trying to get ahead

        Thanks, Sam. The problem with stealth wealth is that we both work in industries that are commonly associated with high incomes and are also widely publicized on blogs and in the media. We very recently decided to pull the trigger on a baby so we are on it! We are hoping it all goes smoothly but I will say that waiting did help us alot financially and with us moving along in our careers without a baby competing for our time while our careers were still new and vulnerable.

    2. Keep it up!

      When it comes to advice or critiques from friends and family – best to smile, nod your head, and then ignore them. They don’t know your financial goals, so no point in listening to them.

      Also, best to maintain a level of stealth wealth. If they don’t know you have money, they won’t make comments to encourage you to spend.

      With stealth wealth: next time they ask you to put in a pool, you can say it would be so nice to do so but I don’t have the money, can you lend me some money for the work? This should put an end to that comment going forward.

      1. “… can you lend me some money for the work?”

        I LOVE it!

        Oh, and what about the pool maintenance/upkeep costs??? and the associated higher utility bills to run the pump and heat the pool???

    3. I get not inheriting a penny (in fact I helped my mom financially) while we were told we were rich but that was not true. We never got help, did everything on our own but we have a neighbor who inherited over 10 acres of property, built a beautiful house on it with help his parents sold it to us, then they built another big house, again with big money help of his parents. The neighbors husband makes about about $250k a year and drives the company car. They are always making less than nice comments about people who get gov’t help (but ignore the help they get from parents) but I get that too. We started from $60k yr and for a 10 yr period we made around $400k yr but that has changed. Thankfully we were pretty frugal when I made good money.

      I see both sides. Everyone has different circumstances sometimes not any fault of their own (like my having to help my mom or his dad financially) Everyone has a different perspective and since circumstances change, perspective change.

      The problem with today is everyone sees a number and think they can judge the situation.

      1. Trying to get ahead

        Beth, thanks for your comment. It’s frustrating though. I had over 200k of student loans when I got out of school. Through frugality, I paid them off in full within 4 years of starting my first job. Everyone tells me that was impossible so I must have had “help.” I can assure you I did not. Then I bought a home and paid off a 600k mortgage in full. Everyone said I must have had “help.” This is a small crowd bc I don’t advertise these two things. It is still frustrating. People wonder why they can’t do the same while eating $20 avocado toast and a $6 latte and then driving home in their $800 per month leased car and wearing a Michele watch and Prada bag and Tori Burch shoes.

        1. Well that’s the thing. You had a lot of student debt but people don’t take that into account when they are looking at income. When I was going to college my roommate had a min wage job. We agreed to each paying 50% of the bills. All she did was go out partying. After I graduated I did have student debt (not as much as you though) but when I got a pretty decent paying job my roommate said, “since you have a better job you should pay a higher percentage of the bills. Of course I said no. What I should have said is sure, if you help me pay my student loan debt.

          Yes it is frustrating that people don’t use their heads and see the full situation. They only see what they want. People don’t want to make the pie but when it’s done they want a piece of it.

        2. Congrats on paying down all that debt! When I was making good money instead of increasing my SOL. like you I paid off debt, contributed full amount to a 401k and after tax investment account so I have more control how I draw out of my 401k.

        3. First time comment here. From an entirely different country but people are more or less the same everywhere. My question is: Why do you need to convince people that you had no help paying your college debt or cancelling your mortgage? It’s none of their business. Why do you get frustrated about it?

  32. Totally agree with you Sam, I lived it.

    At the age of 22 in 1995, I came to Silicon Valley. I lived in a crap area of Santa Clara and, with two roommates, paid $400 a month in rent. I made $48k that year and it was awesome. We partied in San Jose, we went to Sharks games, we had a lot of fun around our house. My spending was not far off from Joe’s.

    But life happens. I got a girlfriend. I moved. I always lived below my means but I also always focused on improving my means.

    Now I’m 46, married, with a house and kids, and I can’t imagine living like I did at 22, even though I have fond memories of it.

    I did learn an appreciation of “enough” along the way. FIRE (or FatFIRE as most would see my situation) has given me a huge sense of empowerment. It’s a great way to shape your life. But at 23, don’t think it’s all going to be the same later on, you’re kidding yourself!

    Focus on income, leave beneath your means, think what you value and spend freely on it. Do that and the opportunities ahead of you will only grow.

  33. The amount needed for FIRE only works when a lifestyle is set that you are happy about for the next 40 years.

    I believe too often, people pursuing FIRE only look at their current lifestyle (let’s say at the age of mid to late 20s) and base expenditures off of that lifestyle. That’s fine if the person never intends to start a family or have kids.

    I believe coming up with a FIRE number might be more appropriate after marriage and after being all set on the kids front. This might be at the age of mid-30s to late 30s. Then you have your true FIRE number.

    Then try to aim the next 15 to 20 years on achieving that FIRE number and be FI by mid-40s to 50.

  34. I understand living a frugal lifestyle. I don’t understand the FIRE movement.
    It really doesn’t make sense to me to live in near poverty now so I can live in near poverty later. When I was 15 I wanted to go live in the woods and survive by my wit and skills. Now that I’m much older I still want to live by my wit and skills, but living in a cave (or a marginally acceptable dwelling in a marginal neighborhood), just isn’t that appealing.
    I’ll continue to work at a job I enjoy and practice sane consumerism.

    1. It’s more along the lines of “live without a few luxuries now so you can live like a king in retirement”. You underestimate the power of compounding interest. Just a few hundred a month saved now adds up to millions over 30-40 years

  35. Valid points about costs going up with family and age. Also, Joe is in a powerful position by setting his needs modestly early on and saving aggressively. I would offer that earning more and being frugal with your needs may roughly be equally powerful in getting to FI depending on circumstances. Sometimes high earners are rich and lower earners are sitting on a pile of cash through modest expenses and the miracle of compounding in investments.

    1. Earning loads of money certainly helps, but I’m not in a life position where I am able to do that. Without going into detail, my job opportunities are limited.

  36. You summed it up in two words – life happens. None of us have a crystal ball so we can’t assume we will know exactly how we plan to live our lives once we retire or what specific expenses will be (although we should still plan as much as we can).

    And chances are you’ll want to live it up a bit more and splurge once you retire, simply because you’ve worked hard to get there. I’ve read many articles where people retired early and wished they worked just a couple of more years to boost their financial health; maybe they retired a little too early and didn’t estimate well enough, didn’t take inflation into account, etc.

  37. I find it amusing you connect a poor area with crime when you live in San Francisco. Los Angeles is the same way with million dollar houses being located in gang neighborhoods where you will hear gun fire nightly.

    You are correct with there being more “free activities” (like parks) in wealthier cities but many of those parks are taken over by gangs and the homeless.

    One of the more shocking things was finding out a couple hundred dollars in rent was the difference between a low crime affluent area and a crime ridden gang neighborhood.

  38. I have to admit, I chuckled out loud when I saw Apple Bees being used as an example for what fun money could buy, then I caught myself being needlessly snobby.

    During college, AB used to be one of my favorite go-to places on Friday nights or weekends. The ambience in AB was a good mix of fun and style, and I loved how most of their foods tasted decent. It was all decently priced too so when the bill came out to around $20-30 for an appetizer, entree, and a drink – I justified that it was definitely worth spending what I earned in 2-3 per hour while part-timing at a finance company.

    But I haven’t been back to AB in more than 10, perhaps even 15 years because my taste buds changed. What I used to savor at AB now tasted like an oily cardboard box topped with maple syrup.

    However I know I’m just kidding myself because I still eat McD every now and then. LOL. I thoroughly enjoy it too so even though I may act like AB is something I will no longer enjoy, I know I would enjoy it if I set aside my superiority complex. In fact, maybe I should take my family there tomorrow :)

    I mean I get it. We should all strive to increase our quality of life, maximize what we can by being efficient, helping others, providing for family, saving for our kids education, donating our time and money to where it matters, save as much as we can to make compounding interest work for us, but it’s always good practice to sit back and reevaluate your stance on everything. Remind yourself where you came from and the things that you used to cherish. The things that mattered to you then that no longer matters to you now. Why did it change? Should it have changed?

    I know our taste buds gets refined the more we try the finer things. I know we “can’t go back” once we try something that’s better, but we can also chalk off this mentality as being weak.

    Honestly, when I see the FPL levels and it’s humbling to know that so many people can live fulfilling lives with incomes at or below the thresholds. I’m fortunate and extremely lucky to be in a position where I’m worrying about investment allocation and not thinking twice about where I spend my fun money as long as it’s within reason, but this post reminded me to pause, reevaluate, and to appreciate even the smallest things in life. So thank you Sam for this post and Joe, for keeping it real.

    1. I used to love Denny’s and Outback steakhouse too! Alas, tastes change over time.

      Where things go bad is when our tastes get more expensive, but our wealth does not grow for whatever reason. Then we start getting melancholy or furious, and then a revolution occurs.

      Our wants must be congruent with our actions.

      1. It’s referred to as champagne tastes on a beer budget.

        The town we live in doesn’t allow fast food restaurants at all (think there is one Subways, but it is nowhere nearby). So we eat in a lot, not because of cost, because of calories and because we like to know what is going in to what we are eating.

    2. It’s fine to have luxury products, but I really don’t enjoy them. I’m not going to go to a restaurant where you pay $100 a plate, even if I could afford it. Why? In many situations, luxury goods are not worth the extra money. Should I buy an $80,000 BMW when a $20,000 Toyota does the same job?

      I.e. it’s not worth paying 100% more for a product that’s only 5% better.

      Can I enjoy luxuries? Sure, a few. Can I enjoy them in retirement? Sure, as many as I want. But they don’t really mean anything to me. That BMW wouldn’t be any more fun for me than a regular car, because I couldn’t let we rip since I’d be stuck behind slowpokes on the highway all the time.

  39. That’s the big problem with the FIRE movement. Young people can live pretty frugally. But it’s not a good idea to set your FI target to your current expense. Most of us will spend more as we get older. We want more comfort and some nicer things in life. Being frugal is much more palatable when it’s a choice and not the only option.
    300% FPL is a good target. We spend about 250% FPL, but probably need to generate 300% FPL to pay for taxes and healthcare after my wife retires.

  40. People tend to have an irrational fear of healthcare costs in retirement. I often see people who refuse to even quantify the expense, which makes budgeting for it impossible!

    On average, I see marketplace plans that carry premiums of around $1200/mo for a family of four with an out of pocket maximum of $10,000. Therefore, in the worst case scenario, a family would have to budget for $24,400 in annual health care expenses. This is, for sure, a BIG number. But, at least it is a number!

    At a 3% withdrawal rate, about $850,000 of assets will cover healthcare expenses for this family. For people shooting to retire with $3,000,000 (ie, 2 401K millionaires!) this seems to be attainable. That means this couple can live on $65,000 a year plus have healthcare covered!

    Of course, we don’t know what will happen in the future to healthcare. But, I can’t imagine a circumstance where premiums continue to increase as a percentage of wages. In my view, the US will have to make a change to the healthcare system drastically if that happen.

    Remember, the US has always done the right thing — but not before exhausting all other options first.

    1. Good point about there at least being a number to calculate for a potential worse case healthcare situation. But ouch, $24,400 is a big nut.

      $65,000 a year for two is absolutely great for a couple in retirement. That’s almost at the top of 400% of FPL. But half that amount, or $32,500 at 200% of FPL is starting to get tight.

      Can a couple who is used to earning $100,000+/year be willing to live off $32,500/year pre-tax? I don’t think so.

      But a couple earning $32,500/year is going to be hard pressed to save a $1 million after-tax portfolio to retire early with $32,500/year. I peg the percentage who do at less than 0.1%.

      1. A couple earning $35 a year combined needs to get the hell out of McDonalds and get a real job.

        1. I like you. You’re making this comment section fun.

          I hope you come back and read our comments 7-10 years from now.

  41. You bring up good points about healthcare and family. These are always the hardest to financially plan for yet the most important. Looking back when I was 23 and where I am now there is a dramatic difference in my priorities. Additional, you brought up aging parents and their well being is yet another expense that is often overlooked in financial planning. In Joes scenario it didn’t look like he is saving anymore. Or at all.

    Is he retired or is that his income that he living off of? Is he satisfied with the amount he has already saved ($485,600 – $1,214,000)?

    If you saved that amount by 23 you must have had a substantial income. If this is his income then his low income position is most likely going to susceptible to automation. Which will put him in a difficult position in the future.

    Thank you for post

  42. I think one of the big disconnects that people who are extreme early retirees (in 20s or early 30s) take part of is that they are using the 4% SWR from the Trinity study as gospel.

    That study only looked at 30 years and it was a much different economic climate than it is now. Having a 40, 50, or even 60 year retirement is going to put far more stress on that 4% SWR even if the economy does exactly the same during the period the study was conducted (which a lot of experts say returns are going to be lower).

    And as your body ages there are going to be more health issues so that needs to be considered carefully as well.

  43. Supplemental (because I’m half asleep):

    Grooming:$ 20 I missed because it’s right smack in the middle.
    Per month? WTF is this guy doing buying combs and razors and haircuts and…?
    One comb will last forever. Go to Dollar Tree and get a 10-pack of disposable razors for $1. I shave once a week since I’m retired. I can get by on 2 razors per month easily.

    I’m not going to bother with misc. or gas. Depends on how far you live from the stores. Depends on what gas-guzzler you drive. If you need to drive and own one like the rest of the herd.

    And I don’t carry a phone. Make what you want of that.

    1. Grooming includes hair gel, haircuts, toothpaste, deodorant, creme for when pimples pop up, mouthwash, dental floss, cologne, soap, body wash, etc. Anything to do with hygiene.

  44. BS

    Starting with “frugal” is a noun not a verb.

    You can retire a millionaire in this country (called USA) IF you have the stamina to live and enjoy living below your means. It requires self-discipline. I had garbage jobs all my life and am now retired with a 7-figure net worth. I got it by saving and investing. There’s a magic called Compound Interest. Place you money in scatter hoards where it will grow Over Time. By not running with the spendthrift herd you can get ahead. Take this “Joe” guy’s monthly budget and I could trim it to half that. Just look at those last two: Gaming and Booze? Pleeeeze! I always lived a clean lifestyle. I get my entertainment from the free local library and play Old school games. No drinking, no smoking, no drugs. $72 for health? Is this part of a gym membership or related tripe? $1 a month with AmeriHealth insurance. High deductible. It’s all I need because I’m healthy. In a few years Medicare will kick-in. Actually Joe would probably qualify for state relief where I’m living meaning he’d be on Medicaid which provides almost everything including free dental. I don’t even have that now. Food: $150? Joe needs to learn to make his own food at home, like a green salad every now and then for pennies. I could go on. You go on about Applebees. You eat there you deserve all that comes with it. Feel free to substitute Starbucks or Whole Foods for it. Don’t forget to add in the big SUV you need to live for.

    The hardest part of frugal living isn’t frugal living. It’s the Discrimination people like me face from so-called affluent people who, in reality, have negative net worths. They’re programmed by Capitalism to drag people down to their level of over-spending and living for the moment. Normalizing waste and consumption.
    Then it’s waah waah waaah the government stole my money and back to stage 1. You’re supposed to want new and latest and greatest things. You’re judged by it. The whole town I live in today is based upon appearances.

    1. Congratulations on retiring with a healthy net worth.

      I’m frugal too, but not as much as you. Like all things in life I feel like there’s a spectrum. You look at Joe’s monthly budget and can trim it in half. Me, I look at it and think he’s being good enough.

      It’s all about moderation. You think he should spend time cooking to save money, but what if he values eating out with friends or families and using that time to also socialize?

      You think he shouldn’t drink booze for health reasons, but I drink occasionally and have ZERO health issues. My physical always comes back completely fine and the life insurance premium that I’m paying is as low as it can be. Again, it’s all about moderation and finding a balance that works for you.

      I would just count your blessings and not let those fake affluent people bother you. If they look down on you because their neck high in debt, it shows more about who they are as a person. Anyway congrats again on retiring with a 7-figure portfolio. What do you do to keep busy now that you’re retired btw?

    2. Can you share your age, budget, and household situation?

      What type of discrimination do you face based on your budget and how does that affect your budget and the way you feel?

      Unless you’re telling other people your budget, I don’t think others would discriminate against you by charging more or preventing you service etc.

      P.S. I love using “frugal” as a noun. It sounds neat in the title.

    3. Just because you’re retired and on Medicare doesn’t mean you have it for free. My husband and I have over $3200 taken out of our SS/yr plus we pay over $4k/yr for a supplemental drug(catastrophic since we take no drugs), doc and hospital and those numbers go up every year.

    4. Macarthur wheeler

      You and this guy “joe” both demonstrate bitterness while at the same time espousing your fantastic lifestyle.

      On one hand you have worked crap jobs your entire life yet have accumulated a net worth in the 7 figures. Then you bemoan capitalism that provided you your net worth and disparage everyone around you.

      It is hard determine if you dislike capitalism, people , or both.

      If you have a 7 figure net worth live a little and try Chili’s. They have really cold cerveza.

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