A few people sent me this interview in the Washington Post with a personal finance blogger named Mr. Money Mustache (real name Pete) and asked me what I thought about it. To sum it up: Pete and his wife relocated to Longmont, Colo. in search of a lower cost-of-living, and cut down on expenses by doing things like biking to work and cooking meals at home. They put the money they saved into investment accounts and bought a house to rent out that generates $25,000 a year for them. Pete quit his computer engineering job in 2005 after discovering that he didn’t like working in a corporate atmosphere. Thanks to passive income from his rental property and from stock dividends, he has been able to retire in his 30s and have a nice life.
I think it’s great that Pete wanted to retire at 30 and figured out a way to do it. I think it’s great that he and his family can live off of $25,000 in Longmont, Colo. and invests in index funds and is living the life he wants to live. Good on him.
But there’s this in the interview:
You describe the typical middle-class life as an “exploding volcano of wastefulness.” Seems like lots of personal finance folks obsess about lattes. Are you just talking about the lattes here?
The latte is just the foamy figurehead of an entire spectrum of sloppy “I deserve it” luxury spending that consumes most of our gross domestic product these days. Among my favorite targets: commuting to an office job in an F-150 pickup truck, anything involving a drive-through, paying $100 per month for the privilege of wasting four hours a night watching cable TV and the whole yoga industry. There are better, and free, ways to meet these needs, but everyone always chooses the expensive ones and then complains that life is hard these days.
And the conclusion:
In short, what are the main ways to live well on less?
Embrace challenge and shun convenience for its own sake. Ask, “Will this really make me happier in the long run?” about all life decisions. Realize that happiness comes from accomplishment and personal growth, rather than from luxury products. Seek out voluntary discomfort as a way to become stronger, rather than running from it. Develop a healthy sense of self-mockery, and acknowledge that you are a wimp in many ways right now (and only by acknowledging it can you improve). Practice optimism. And of course, ride a bike.
That’s pretty high-level stuff. If you just want the meat and potatoes: Live close to work. Cook your own food. Take care of your own house, garden, hair and body. Don’t borrow money for cars, and don’t drive ridiculous ones. Embrace nature as the best source of recreation. Cancel your TV service. Use a prepaid cellphone. And of course, ride a bike!
That’s all fine, but if you’re not sure why I find those parts problematic, I’d like you to take a look at the conversation I had with Helaine Olen.
Nobody disagrees with the idea that we should all know how to manage our own money. If you work for a company that offers a 401(k) and a match, you should be contributing to that 401(k) and getting that full match. If you are spending more money than you take in, you’ve got a problem.
But it’s a myth that the typical middle class life is an “exploding volcano of wastefulness” and that “everyone always chooses the expensive ones and then complains that life is hard these days”. This is the myth that’s driving and funding the personal finance industrial complex.
It is true that there is a segment of people out there who need to learn to live within their means. This segment of people can certainly learn a thing or two from Pete. I know a few of these people.
But the majority of people I know aren’t wildly irresponsible. They’re not buying luxury cars and designer clothing and $5 lattes every day (ah, the latte factor!—every personal finance guru’s favorite example). They’re dealing with shrinking salaries, skyrocketing health care and education costs, a weak economy that has resulted in job loss. Indeed, some of these people are the ones who tried to do it right—who saved up six months’ worth or a year’s worth of emergency savings only to drain it all during the financial crisis and housing crash; who cashed out their retirement accounts because they needed to pay their mortgage and didn’t want to lose their home. All the bike-riding and TV cable canceling wasn’t going to help them. Quitting your yoga class isn’t going to fix pay inequality or result in employer-supported maternity leave appearing in the office. And we can go on about the 401(k) problem.
And then there’s the idea that if you find happiness or value in something considered a luxury—eating out every week at restaurants—you are somehow doing it wrong. It’s totally judgmental, and as we’ve learned, totally untrue.
You can dine in the nicest restaurants, invest in your retirement, and enjoy what you do for a living while living in the big city.
You can invest in a rental property, eat at home and bike to work, and retire at 30 by living off of passive income from a rental home.
You can, as I once learned from doing an interview with a prominent video game designer, support your family on less than $15,000 a year by living very simply and growing your own food.
You can decide you never want to retire.
You can develop a debilitating condition, rack up a ton of medical bills and complain that, yes, life is hard these days.
Our financial lives vary, and we each have different ideas of how we want it to be. Personal finance is personal for a reason. Some of the problems we come across have to do with things we can control, namely living within our means, but a large part of it—pay discrimination, skyrocketing health care costs, the 401(k) problem—are simply out of our control and are things that typical middle class households are really dealing with. It’d be nice to recognize those problems while telling people to get out of their F-150s and get on a bike.