Thursday, 25 August 2016

Save money and save the planet with Mr Money Mustache

Do we need to be a little more careful about using resources?
Futures Forum: Are we running out of resources? 

Classical economics does not worry about 'scarcity' as such:

It is certainly true that nonrenewable resources are limited in physical terms. From the perspective of the geologist, there is only “so much” oil to be extracted.

However, from the economist’s perspective, what matters is not physical quantity, but how efficiently a resource meets a human need. We care about oil because we want energy. If through new technology we can create the same or more energy with less oil, then in an important sense we have more oil than we had before. The existing quantity of oil can now serve more human needs. Moreover, falling costs of extraction can also lead us to find previously undiscovered oil or to tap into known supplies that had been too costly to reach.

So advances in technology do indeed matter, not because they abolish scarcity but because they enable us to stretch the resources we have so that they are functionally less scarce than they were before.

When we speak of improvements in technology, we really mean new and more efficient ways to achieve the ends to which the old resources were a means. New technology might enable us to use an existing resource, such as oil, more efficiently, but it can also provide a new solution to the same problem. For decades, the human voice and data were transmitted by copper wires. Eventually, copper’s price rose to where entrepreneurs had a strong incentive to find another way to provide the service. Eventually they developed sand-based fiber-optic cable, which can carry thousands of times the data for a fraction of the cost of copper. The development of the soft-sided beverage containers—juice boxes—is a similar story, and it is worth noting that their lighter weight reduces gasoline use per unit.

When economists say, “We will never run out of resources,” what they often mean is that faced with increasing scarcity of one resource, we will always find new solutions to the problem that that resource originally solved. In an important sense, the actual economic resource was not copper but “the ability to convey voice and data.” And that resource has become “less scarce” by the substitution of sand. This illustrates Simon’s point that the “ultimate resource” is the human ingenuity that finds new and better ways of using physical resources.

Economists and Scarcity | Foundation for Economic Education

Perhaps we can look beyond 'scarcity':
Futures Forum: Transitioning to a post-scarcity world

Or maybe we've just had enough of spending on stuff:
Futures Forum: Peak stuff >>> Are consumers getting tired of consuming?
Futures Forum: Peak stuff >>> peak home furnishings >>> peak meat-balls

Besides, it might be good for us:
Futures Forum: Live more: work less... earn less... spend less... emit and degrade less

This is the thinking of a very popular website, featured in the US media quite a lot of late - and its author certainly displays a lot of that 'human ingenuity' admired by classical economics:

Mr. Money Mustache's guide to badass frugality and retiring at 30

Friday June 24, 2016

When it comes to planning for retirement, Canadians have a big problem. They're not saving enough. Young people, middle income workers, people with student loans, they're all in danger of going into retirement with no security or having to work well past retirement age just to make ends meet.

Finance minister Bill Morneau and his provincial counterparts set out to change that this week when they announced reforms to the Canada Pension Plan. They see a solution in higher premiums yielding larger benefits. That is, when you're over 60 and old enough to qualify.

That would never have worked for Peter Adeney, the charismatic financial blogger who retired at 30. He says when planning for retirement, you should leave the government out of it entirely.

"Once you are off the mill, you'll feel like Neo did when he unplugged the suction cups from his pale naked body in The Matrix and looked around at the other imprisoned humans."- Peter Adeney, aka Mr. Money Mustache

"I think it's better to seek your own solution to retirement," he told Brent Bambury. "If you're in a rush, like I was, it's more like increasing your savings rate and shaving decades off of your own financial independence day, rather than seeing what might happen from the government's coffers when you're 65 years old."

He should know.

On the wealth he grew in just a decade, Adeney supports his family and enjoys a lifestyle that he finds infinitely preferable to the debt-ridden rat race so many of his contemporaries bought their way into. 

Here's how he describes it on his blog: "Once you are off the mill, you'll feel like Neo did when he unplugged the suction cups from his pale naked body in The Matrix and looked around at the other imprisoned humans."

A grand bargain with yourself

Adeney and his blog are known online as Mr. Money Mustache, and thousands of readers pore over posts with titles like 'The Shockingly Simple Math Behind Early Retirement' and 'Join the Cult.' But it doesn't seem like a cult when he describes his approach to spending and saving. It's more like an adjustment, recalibrating to a different kind of stimulus and reward.

Adeney shifts the pleasure in consumerism from the act of obtaining the product you spend your money on to the joy you experience when you hold onto that cash and exert control over impulses.

"There's a lot of joy in self-control," he says.

"If you think you're getting rewards from buying their cars and buying more junk for yourself, then you're going to keep seeking out that reward," he explains. "If you train yourself to get rewards from self-control... then you'll find that you get better and better at those behaviours."

How to be a financial badass

Adeney has a word for the mastery of the difficult decision: Badassity. When you execute a money-saving workaround, it's not a hardship or a deprivation, it's a ninja move. It's the act of being a badass.

"It's because the most efficient way to be frugal in a rich society like ours is to embrace hardship. The most common type of car that gets sold in Canada is the compact SUV, because people are like, 'Well, I don't want to have to bend over slightly to sit down in the driver seat. I don't have to wait like 10 seconds to get to highway speed. I need something that will get me there at 6.'" ​

"Just these little tiny indulgences. They get more and more ridiculous, and instead he can take the opposite approach and say, 'I'm going to take my bike out in a blizzard and get groceries and impress my family.'"

"That's kind of the spirit of badassitude. You end up happier having to do these difficult things instead of pampering yourself and getting lazier and lazier."

For most of us, deeply imprisoned in the matrix of consumerism, that's a big adjustment. But Adeney says it came easily to him.

"I was kind of born with this mentality, which is just a desire for efficiency, to be making something happen. Efficiency is a form of beauty or art, so I just enjoyed maximizing my fun and finding ways to make it not use up all my money."

Holding onto that money is how he and his wife managed to retire from careers that spanned a single decade, and that accomplishment drives followers into his guru-like online presence. Everyone wants to know how he retired at 30.

"When I look back, it looks like we were spending about $40,000 a year as a couple before we had kids, and a lot of that was going to the mortgage," Adeney remembers.

"We were saving 50 to 60% of her income. So these are software engineer salaries, fairly good income. By the time we quit we had savings up somewhere around $800,000 or $900,000. Some of that was owning a lot of our house, and the rest of it was simple index fund Investments which can generate cash flow through dividends."

Four wheels bad

But wait. How do you end up banking 60% of your income? Adeney says a lot of families are throwing their money away on their cars.

"I definitely noticed that I'm an anomaly, and I didn't think I was until after I retired and I noticed that everybody else in my age group was still broke and living from car payment a car payment," he says.

Adeney thinks the North American reliance on the car is worth challenging. For him a bicycle is more than another mode of transportation. He calls it a "money-printing fountain of youth."

Mr. Money Mustache says you probably don't need the $100,000 Tesla. (Getty Images)

"The classic example I like to give is instead of depending on car transportation, replacing some of it with the bike. Instead of having hundreds of kilometres of travel every day, see if you can find ways to have the same amount of fun within a small radius of your home. And just that little trick can cut $10,000 to $20,000 off your annual spending, which in turn cuts 10 to 20 years off your retirement date."

"If you do it right."

They're frugal, not ascetics

Adeney says his family spends about $25,000 dollars a year now. Their house is paid off and work is something he does when he's inspired. But he doesn't think his family lives an ascetic life. He says it's fine to indulge in the occasional high-end coffee, as long as it f doesn't go too far.

"A latte at Starbucks is a pleasure if you go out one weekend with your friend and savor that. However it's a destructive habit the way most people do it, which is idling in the drive-thru in their $30,000 Ford pickup. And they do that on their way to work and instead of being a $4 per month, which is a nice luxury, it will become a $300 per month. Or it will become happy hour, that's $100 every Friday."

"We have to draw the distinction between the short-term treats that are genuinely happy, and long-term destructive habits that cost a whole bunch of money."

See? It is shockingly simple.

The Scold

Mr. Money Mustache’s retirement (sort of) plan.

Mr. Money Mustache, the father of Mustachianism, isn’t perfect. He allows himself occasional luxuries, gets drunk now and then, and admits to two regrettable “five-to-ten-dollar mistakes” in 2015. The first was buying his ten-year-old son, Simon, a mini-Rubik’s Cube, which broke when they tried to take it apart. Junk. The other was putting several slices of leftover mushroom pizza in the same Tupperware container as some plain slices, which Simon, citing the mushroom taint, then refused to eat. There was a thirty-dollar mistake, back in 2010: Mr. Money Mustache built a rig for a storage box attached to the rear of his Scion hatchback, but the heat of the muffler melted a hole in the box. He modified the design, then wrote about it on his blog. The post, called “Turning a Little Car Into a Big One,” was an ode to the ingenuity of his storage box and to the underlying good sense behind owning a cheap, small, fuel-efficient automobile. He left out the bit about the muffler. The central tenet of Mustachianism is “financial freedom through badassity.” As the embodiment of badassity, and the exemplar to thousands of aspirants, Mr. Money Mustache must be as stingy with his counterexamples as he is with his expenditures. He has to be a badass.

Mr. Money Mustache is the alias of a forty-one-year-old Canadian expatriate named Peter Adeney, who made or, more to the point, saved enough money in his twenties, working as a software engineer, to retire at age thirty. We’re not talking millions. More like tens of thousands, and then hundreds of thousands, which he and his wife diligently salted away at a time of life when most people are piling on debt and living beyond their means. He calculated a way to make these early paychecks last using a strategy of sensible investment and a rigorous, idiosyncratic, but relatively agreeable frugality.

He is, by his own reckoning, a wealthy man, without want, but he and his wife, who have one child, spend an average of just twenty-four thousand dollars a year. Adeney is a kind of human optimization machine, the quintessence of that urge, which is stronger in some of us than in others, to elevate principle over appetite, and to seek out better, cheaper ways of doing things. He presents thrift as liberation rather than as deprivation. Living a certain way is his life’s work. “I’ve become irrationally dedicated to rational living,” he says.

He created his Mr. Money Mustache avatar as a way to tell the rest of us, with meticulous and triumphal precision, about his finances and his life style, and about how bad at math and life the rest of us are. We are debt slaves, consumer suckas, car clowns, complainy pants. His goals, he says, are: 1. “To make you rich so you can retire early”; 2. “To make you happy so you can properly enjoy your early retirement”; and 3. “To save the whole Human Race from destroying itself through overconsumption of its habitat.” The blog, which he started five years ago, is really an attack on consumerism and waste—a theology of conservation—disguised as a personal-finance advice column. The prospect of retirement is in some respects just a lure—the carrot, as opposed to the stick of his relentless polemical thrashing of anyone who thinks it’s O.K. to buy lattes at Starbucks or drive “a gigantic piece of shit that can barely navigate a parking lot.” He told me, “I’m really just trying to get rich people to stop destroying the planet.”

The Scold - The New Yorker

With some interesting articles from his blog:


Making Space for Badassity

If you’re going to become rich, you need to either earn way more money than you spend, or spend way less money than you earn. This is the basic math of it, which even the worst complainypants cannot dispute. The whining usually starts when Mr. Money Mustache starts talking about how to implement the ideas above.…

Happiness is the Only Logical Pursuit

If you set aside your fancy adult concerns for just a moment and think deeply, it’s hard to avoid the conclusion that this entire world is really just a giant zoo. It is a giant zoo packed with silly animals, and we’re just the one who takes itself most seriously. Every speck of life exists simply to…

Recipe for a Badass DIY Electric Mountain Bike

  By this point, we already know that bikes are awesome and good for you, cars are useful for a few limited things but come with major disadvantages, and electric bikes combine most of the advantages of both. But they do still come with the downside of, “how does a somewhat experienced cyclist get a really…

The Cheap Ticket Into the Elite Class

If you ask a modern member of today’s American Elite to review Mr. Money Mustache’s childhood and educational history, the report would probably come back dripping with sympathy and disdain. I went to public school (the only school, really), in a lower-middle income small town. I didn’t join many extracurricular activities or attend any private…

Mr. Money Mustache — Early Retirement through Badassity - blog

No comments: