We’re doing it! Run the numbers, find out what works for you, and start making the choices that will get you to your goals. I’ll share some of our tips and tricks through this blog, but they won’t work for everyone.Īll I can say is that the math works.
#Shockingly simple math money mustache how to
I wish I had an easy answer for how to consistently pick the salad instead of the burger, but it’s called personal finance because it’s personal and different for everyone. That’s why early retirement is not so common. It takes disciplined effort over a long time (that’s how compound interest works). Saving for retirement, and even more so early retirement, is a marathon, not a sprint. That’s great if I had started saving in my 20s but I’m so far behind and 43 years to retirement is so long, I’ll never get there so I might as well not even start.YOLO – “I’m not willing to give up or delay satisfaction today for the future.”.“I can’t do that because of, well, the Great Depression.I’ve seen this take a few different forms: We know that saving money (eating a salad) is the wise choice even if it’s hard, but when the smallest of obstacles presents us doubt, we may bail out on it even though we know it’s the right thing to do. I find that the same thing happens in personal finance.
I almost gave up my healthy eating goal and go “whole hog,” so to speak, over a minor change in cheese plans. In that moment, I re-evaluated my healthy eating endeavor and my eyes drifted over to a cheeseburger with fries that had the option to add a fried egg and bacon on top. I am a certified stinky cheese fan, and feta or Parmesan just didn’t make the package I was looking forward to. A few minutes later she corrected that they were out of the Gorgonzola and would I be okay with a substitution of feta or Parmesan. That sounded healthy and delicious, so I ordered it. The waitress described the specials, one being a delicious sounding salad with fresh caught Steelhead, caramelized walnuts, apples, and Gorgonzola. Here’s a story from last weekend: I was at a restaurant with friends. That’s why you don’t see more people doing it. Here’s an example: “What a salad taught me about early retirement.”įorgive me for taking a moment to step up onto my soapbox. The 25x rule means that if you have 25 times your annual expenses saved, then you can continue to spend at that rate forever and not outlive your money.Īlthough the idea is simple, the process of getting there is not easy. This is equivalent to the 25x rule, which is just a different way of stating this. The 4% rule says that you can withdraw 4% of the total of your retirement accounts each year and never run out of money. It used complicated mathematical models called Monte Carlo simulations to predict, even with crazy events like the Great Depression, how likely it would be that you would outlive your retirement nest egg vs. The underlying math behind these calculators is the “4% Rule” which is based on the Trinity Study. If you’re like us and want to play around even more, I suggest trying one of these calculators. In our case, it took our time to retire from 2050 (30 more years in a cubicle) to 2022 (2 more years in a cubicle). Both of these shorten your time to early retirement. If you get a raise, start a side hustle, etc, you can increase the amount you make. If you are able to reduce your spending by being frugal, getting out of debt, etc), you can increase the amount you save. You can drastically affect the time to early retirement by adjusting those two (how much you make and how much you save). There are only two numbers to be concerned about. This is the beauty of the shockingly simple math. And without a mortgage payment, you can bump up that savings rate pretty dramatically. And it includes “building wealth.” And to us that also meant bumping up our savings rate substantially.
We hit baby step 4 in 2007, so we would be on track for working 43 years, saving 15%, until a retirement in 2050 (30 years from now, after a 55-year working career, at the age of 75!). Depending on when you get to baby step 4, and are doing this retire early math, that can be very discouraging. You might be surprised (and depressed) that at the Dave Ramsey baby step 4 rate of 15% of your income going to retirement savings, you’ll be working 43 years until retirement.
If you’re not a nerd, as long as you know those two numbers, you’ll easily be able to determine how long it will take to reach your early retirement goals. You really don’t need to make it more complicated than that (but we’re nerds so we like to). Money Mustache) shares in a very clear way how simple it really is to determine when you can retire early by knowing only two numbers:
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