Tiny truths that have dramatically changed how we spend, save and manage our finances -- dollar cost averaging, inflationary risk, market timing, people over money, and more!we've learned

The Tiny Truths That Completely Changed How We Money

We don’t walk around in the world feeling like some financial masters of the universe. I blog about money, of course, so I think about it a fair amount – though less than when I was more obsessive in checking our balances and updating the spreadsheets. But I still don’t think of “awesome with money” as core to my identity. If I had to tell you what kind of car I am and why, the thought wouldn’t even occur to me of “Hmm, what car is the best representation of good with finances?” #subarualltheway (Also, in full transparency, I actually don’t think I am awesome with money at all. If I have cash in my pocket, I spend it, even many years into this aggressive savings journey. What I am a master of, however, is creating systems that eliminate those temptations and decision points, namely through hiding money from ourselves, more commonly known as paying ourselves first. More than one way to skin a cat. So I’d identify more as an expert life hacker and less as a money whiz. But I’m getting off topic.)

Despite not actively thinking of myself as a financial pro, lately I’ve been having more conversations with people in real life that have provided the reminder that, oh right, this is a totally important part of who I am. I know this stuff. And the best part is, I’ve been able to help some friends make some big connections in the course of often very short conversations.

Because the most powerful ideas are often the simplest.

We can read long book after long book, and read lengthy blog post after lengthy blog post (y’all, I know I am the most guilty of writing the longest ones), but ultimately the part of the book or post that impacts your life is one tiny nugget of wisdom.

Like I vaguely remember what’s in Your Money Or Your Life, but the big, indelible idea I took away from it? Money is a representation of life force, and when I spend it, I’m spending part of myself. That’s such a simple idea, but it changed my entire way of looking at money in an instant. I read that book years ago, and I still say that to myself multiple times a week.

Certainly there are financial topics that cannot be summed up so succinctly (tax law, anyone?), but the ideas that have most dramatically changed our relationship to money and the way we manage it are the most simple and elegant. And today we’re going to celebrate them!


How We Used to Money

In case you need a refresher, I started out not exactly terrible with money, but definitely not smart with it. I spent everything I earned, sometimes more than I earned, I saved very little, and I was totally freaked out by the idea of investing risk. I side hustled pretty much from right out of college, but I spent most of that money instead of saving it. I kept the tiny bit of extra money I had in a savings account, and I felt so proud and adult when I took the big step of beginning regular investments into a super conservative bond fund. (It’s okay, you’re allowed to snicker.) I never racked up debt that was truly massive, bought a car more expensive than I could afford or bought a mcmansion with a balloon loan, so I dodged the BIG mistakes, but I feel quite sure I made all the small ones.

So that was my starting point.

Along the way Mr. ONL joined the picture, and we were a mostly positive financial influence on each other (after that expensive long-distance year that we still wouldn’t trade for anything). But I’d say we got, at best, to the level of “sensible” on our own, never “wise.” (Have I told you about the time we kept $80,000 in a savings account for an extended period?) That is, until we started encountering the tiny truths.

The Simplest, Most Transformative Money Ideas

I think of a tiny truth as something you hear, and you immediately intuit the truth in it. Maybe it’s the missing puzzle piece that magically connects all those other floating pieces. Maybe it instantly answers the question you never knew you were asking. Maybe it answers exactly the question you’ve always been asking. Whatever reaction it causes, it’s always a big “Aha!” And here are the ones that dramatically changed our views on money, often in an instant:

People first, then money, then things – My first tough money love came from Suze Orman, and I loved her show. It was like a cross between financial expertise and some campy movie that didn’t mean to be funny but was accidentally hilarious. And she ended every show with this line: “People first, then money, then things.” Whether this was what she meant, I took it to mean people are always more important than money, and are worth investing in, and things are the least important thing of all. Far better to have accounts full of funds than a home full of stuff. That tiny truth made me completely evaluate my priorities, and start questioning the mindless stuff purchases I was used to making. (Speaking of Suze, I also loved that she didn’t judge people for wanting some ridiculous stuff, so long as they could afford it. No latte preaching!)

“Safe savings” guarantees losing money because of inflationary risk – As any fearful investor knows, there’s something so warm and cozy sounding about that phrase “FDIC insured.” A guarantee that you can never lose your money, no matter what. In my early days of saving, I had no cushion or real safety net, and the possibility of losing money in the stock markets that I might need made me feel helpless. But that FDIC insured promise felt safe, like the nice but boring guy who doesn’t stimulate you intellectually, but who you know will never cheat on you, beat you up, or leave you. (The markets are obviously the bad biker boy who will show you excitement but might also ditch you on the side of the road in the middle of nowhere when some hotter, younger piece of ass comes along.) In those days, I hadn’t yet learned that there’s no such thing as a “safe” option and a “risky” option – there are only different risks. And by choosing what felt safe, I was actually taking the worst kind of risk of all: a guarantee that my money would lose value every day it sat in my savings account, thanks to the power of inflation. Though I started out terrified of market investing (and to this day, a large portion of my 401(k) investments are in the Pimco bond fund), understanding that inflation will always outpace savings account interest rates was the singular factor that got me on board with real investing, and I have never wavered since.

The markets hit a new high, on average, every few days — Okay, full disclosure on this one that I can’t fully substantiate the claim. The closest I have found is this story that says the markets have hit a new high every seven days since the end of the last recession, and that the markets have hit new highs 30 out of the last 54 months. But I’m including what we might call a tiny “truth” in quotes, because I took it as face value as true when I first learned it, and it had a powerful effect on my willingness to invest in the markets, especially when paired with my newfound understanding of inflationary risk. Why it is so powerful is the reminder that, even when markets seem high, that doesn’t mean they’re bound to go down soon, or dramatically, or for long. Recessions and corrections have historically tended to be shorter than bull markets, with a few notable exceptions, and looking backward at least, the trend is ever upward. Condensed version of all this: don’t try to time the markets, and especially don’t hold off on investing just because the markets seem “high,” a term that is so relative as to be essentially meaningless.


Crazy comprehensive chart with more info available on MarketWatch

Dollar cost averaging trades false comfort for smaller gains — Just like FDIC-insured feels so safe and comforting, dollar cost averaging seems like such a lovely little hedge against volatility risk. Instead of investing that lump sum of cash all at once, you dole it out into the market little by little, buying some shares at a higher price, some at a lower price, but never going all in on one price. And after I’d gotten comfortable with investing, we still insisted on dollar cost averaging our windfalls. Until, that is, we read the now-famous Vanguard study on the topic, which concluded that dollar cost averaging simply shifts the risk to later, it doesn’t eliminate it. (See? No such thing as a risk-free life.) Put another way: what you gain in a hedge against risk, you lose in market exposure time, re-introducing inflationary risk or creating the possibility of missing big booms. That whole quote that time in the market is more important than timing the market? Totally applies here.

Millionaires don’t eat caviar – So let’s be real here. Though most of us pursuing early retirement are willing to live cheaply to do it – not like the stereotypical idea of “rich people” (I’m picturing the Monopoly Man, or the Kardashians) – somewhere along the way, we become actual rich people. And when that realization hit us that we were there, it was hard to tamp down the thought that, “Well, then shouldn’t we be allowed to do some rich people stuff?” And that’s the same kind of slippery slope thinking that leads to lifestyle inflation and keeping up with the Joneses. Fortunately, the Millionaire Next Door came into our lives around that time, and it has the best anecdote ever. When the authors arranged focus groups of millionaire individuals, they put out fancy champagne, caviar, and various other items you might imagine Robin Leech ticking off in an episode of Lifestyles of the Rich and Famous. And then the guys (ahem, it was a bit gender-skewed) that showed up didn’t touch that stuff, and went for the Coke and club sandwiches instead. Which was a big aha moment for the authors, and in turn the biggest takeaway for us from that book. In other words: you can look like a rich person, or you can actually be a rich person. We’d rather be the latter and (mostly) skip the fancy stuff. (Mostly.) ;-)

What Tiny Truths Have Changed How You Money?

Let’s keep adding to the list in the comments! What little nuggets of wisdom have you happened upon that blew your mind, changed your approach to money or stick in your head? Share away!

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115 replies »

  1. Mine was that wealth is measured in time, not money.

    Once that sunk in I changed my outlook from chasing the next million just because it was a nice round number, and instead focussed on incrementallly buying my financial freedom via passive income streams sustainably replacing the need for earned pay cheques one bill at a time.

    • That’s a big one! I wish instead of only faulty retirement calculators online, someone would make “time buyback calculators.” ;-)

  2. For me, the whole thought that you could *buy* a retirement for 25x yearly spending (as a first approximation) did it. Until that point I thought of retirement as something nebulous that just happened eventually but that you couldn’t control directly (possibly because my relatives mostly had pensions), so retirement was something you bought with time. The fact that it was a set monetary quantity that could be calculated was a complete game changer for me and I’m extremely lucky I discovered it nearly right out of the gate.

    Explaining it to my family and older friends with pensions took some doing though. :)

    • I thought just like you. I thought you earned your retirement by doing your time. I never really knew how much money I needed to retire, I just saved throughout the years and hoped for the best.

      The first time I read about the 4% rule, it blew me away. Literally. You mean you can put a hard number on your retirement nest egg, and opt out of work once you hit your mark? Whoa!

      • I know you know this, but you weren’t alone! Most people don’t know the math, and think they just have to earn that retirement, without actually knowing what it is. (And re: that 4% rule, maybe consider the 3-3.5% rule.) ;-)

    • So awesome you learned that so early on! And I’m EXTRA glad you wrote the caveat of first approximation. That 4% rule is itself worth challenging. :-)

  3. For me it was the realization that increasing earnings wasn’t enough. You need earnings investments and savings. I started from a position of seeing having money made making more money easier as kid. But it took a few years early on for it to click that keeping my money was just as important as earning it. I have the recession of 2008 to thank for that perspective.

    • Man, that recession had so many lessons to teach! And I think having a lifestyle you can still afford on a much smaller income is always a good move — though we’ve for sure found increasing income to be our main mechanism of success!

  4. You can finance college for your kids, you can’t finance retirement.

    I found myself in my debt payoff journey feeling guilty that I was saving for retirement and paying down my own student loans, but saving hardly anything for my daughter’s education. I didn’t want her in the same situation that I am in with 1/4 of my take home pay going to student loans.

    Now the more I’ve learned over the last few years I’ve started talking to my daughter about other college payment options. About not going into debt at all if possible, and looking at the real value of a college given the job you plan on doing after school.

    • I’m SO GLAD to know you’ve made this shift in thinking. I think it’s admirable to not want your kid to have debt, but having some “skin in the game” isn’t the worse thing, either. So happy you’re taking care of your own non-financable retirement! :-)

  5. “It’s pretty likely that the Jones’ are heavily in debt.” Not worrying about what everyone else has or does helped us decide what was important for us.

    Also, not a blogger.

  6. I think the biggest game changer for me was learning that beyond covering the basics there is no link between spending and happiness. With that in mind, it becomes much easier to identify the spending that actually makes you happy and save and invest the rest.

  7. Thanks for the dollar-cost averaging study! I hadn’t run into that before. I always assumed that was true – you’re just shifting risk further in time – thanks to my econ/finance background. But it’s nice to know that it’s actually backed up by fact.

    As for truths, I totally second Tracy: realizing that retirement can be easily calculated, and, the corollary: actually calculating it out. All of a sudden I had a goal, and a reachable one. You’ve nailed my other favorite: YMOYL’s point about spending life force. I also think it helps me to think about the long-term cost of the spending…how much will I use this, or, how much would I have to save to continue X purchase every Y years? (E.g.: a latte per month = $60/year = $1,500 savings to sustain. I still drink lattes, but I’m a lot more conscientious about it.)

    Finally: your stuff owns you. I’ve known too many close relatives who have stuff (even reasonable amounts!) and aren’t able to take it with them once they move on from this world. It puts things into perspective. We’re just here temporarily. I look at myself as a steward now, or a temporary manager, rather than an “owner” of most of my stuff. Legally I may own it, but the stuff is likely to outlast me.

    • Thank you for providing this example of looking at each line item in your budget x 25. I had known about the annual expenses x 25 rule as a guideline for how much you need to save in order to retire and had been doing those calculations, but I hadn’t thought about looking at it a the item level. After I read all these comments last night, I did two things – sorted my monthly expenses from high to low – to see what that said about my values and then multiplied each line item by 25. When I look at how much I need to save to keep some of those line items going in retirement, I’m not so sure that I value those items. While I thought I was doing pretty well from an overall annual budget perspective, I was surprised at how high some of my individual items were and when I thought about the “life force” required to maintain them, it certainly makes me want to revisit some of the items asap.

      • Glad you appreciated that! Wish I could claim it’s my idea, but it’s not…I forget where I first ran into it, but it was transformational for me, too.

        That’s definitely what pushed us over the edge of no Netflix/cable/etc., and we’ve never looked back. (We’re spoiled, though, as our relatives gave us free Prime access for now, and we have unlimited access to a huge library selection of DVDs, books, and so on.)

      • We sometimes call it the “rule of 300,” which is the monthly equivalent. (To pay $100 a month for cable forever, you have to save $30,000 more than you would without that = $100×300.)

        It’s awesome you looked at all your expenses through that lens! When we put things in those terms, it’s a lot easier to see how the little stuff really adds up!

    • “Stuff owns you.” YES. We still have our fair share of stuff, but after helping a close relative downsize after MANY years of acquiring and not decluttering, we committed to never getting into that situation, both for financial reasons and just because it’s such a huge task (likely delegated to someone else) to undertake.

  8. I learned at an early age (yet did nothing about it – until now) that there’s no loan for retirement. Crazy, huh? I wonder if that will change. Anyways. We recently buckle down and started to work out our journey of early retirement.

    • I know that lesson seems obvious to you NOW, but considering how much of life we’re told to put on credit, I’m sure plenty of people subconsciously think this is an option!

  9. When I was in my early 20’s I knew an electrician who told me he was retiring (Probably early 50’s but maybe younger) I said: “You aren’t old enough to retire” He replied ” It doesn’t matter how old you are it’s how much money you have.”

    An instant light bulb went off for me

    • It makes me extra happy that you learned that lesson from a person working in a skilled trade, not a rich-seeming white collar person. Good for that electrician, bucking the conventional wisdom!

  10. Great post. Just one thing: the expression ‘More than one way to skin a cat’ has got to go!

  11. You actually gave me my favourite and most important money truth (that ‘safe savings’ isn’t a thing). It honestly changed the way I thought about my money and convinced me that investing was something I could handle. Now, I’m still in a balanced portfolio at the moment, but with time I’m sure I will grow some financial courage and shift to a ‘growthier’ portfolio. Thanks for helping me make the investment leap!

    • That’s so awesome! Yay!! Totally made my day to know that I helped you make the leap. :-D

  12. The biggest mental shift for me was truly internalizing that you could passively get money through investing, with essentially no effort, allowing you to live how you want. You simply earn money because of the value others get by borrowing your capital. Moving away from the mentality that money only comes through direct effort has motivated me to save a lot of my income and “buy” investments, which is how we reached FI.

    • That’s a big one! Congrats on making that connection and securing your financial independence! :-)

  13. The idea that how much you need for retirement is based on expenses, not salary, was life changing. It makes this whole concept of FIRE possible for me. As other people mentioned, being able to then quantify the amount needed has been eye opening.

    Along with your second point about savings accounts not being risk-free, my dad always said that you have to put money into stocks because savings will never earn anything. It was for this reason that my parents started buying shares of stock (3M and Xcel Energy) for birthday and Christmas gifts once I turned 18. I’m really fortunate that they instilled that mindset when I was young.

    Another saying in our family is “You don’t get rich by spending money.” Very true since our spending is 100% consumerism.

      • Well the banks and advisors want to scare you into saving as much as possible so they can make money off more assets! ;-)

    • I think the banks who make the retirement calculators still haven’t learned that lesson! I’m sick of being told we need $16M saved up to retire! ;-) And what an incredible gift your parents gave you, getting you attuned to investing so young!

  14. I love it! People before money–yaaaaas. And that also includes taking care of yourself and your health before money. I hate seeing people work themselves to death for the sake of a paycheck.

    • The guys at theminimalists have a similar saying which I think really strikes a chord – “Love People. Use Things. The Opposite never works”

    • :::Raises hand::: We are huge prioritizers of health, but we have also put money ahead of our health these last few years of work, knowing the end is in sight. If we had it to do again, I think we’d go slower and pay more attention to health.

  15. The one that sticks the most with me is all about choices: You can afford anything, you just can’t afford everything. If you really want something, figure out what you have to give up to get it. If you feel like you’re giving up something valuable, figure out why and whether that’s really worth the trade off.

    • This is one of mine too, Emily. I read it in an early PF book by an airline pilot. The other one is “Maintain what you have before you expand.”

    • I was going to say the same thing. To me, this really helps keep my spending in check.

      Suze’s People first is another big one for me and one of the reasons why we travel with our kids. We want that family bonding and memories with our children.

      • I LOVE that you are priortizing traveling with your kids. I’m so thankful I got to travel when I was young — that definitely shaped my entire worldview.

        P.S. I love your commenting name. ;-)

    • 100% yes. I am not a fan (as you probably know) of advice to stop spending just because spending is bad, or for some other sanctimonious reason. No, spending is just fine as long as you can afford it, and the thing you’re buying is meaningful to you.

  16. You can retire before your 60s.

    I grew up in an area where virtually everyone between their 20s and 60s had a job. Not working was just not a thing. So I had the same mindset until recently. About three years ago I finally realized that the ability to retire is linked directly to money, not to age or pensions or government programs. Since that has sunken in, my desire to FIRE is unstoppable.

    • So glad you realized that! Yeah, I think the view that you earn retirement through a certain amount of toil is certainly widespread.

  17. I try to remember to treat every dollar like an employee. If my “employee” is sitting in my checking account, it’s as if he’s lounging in the break room smoking a cigarette instead of working. I used to fear having close to a zero balance in my checking account, now I fear having too much of a balance in my checking account!
    Great post. Thanks for sharing your thoughts and pulling back the curtain a bit.

  18. Even though I had a decent understanding of investing, I decided to hire a financial planner to manage my investments because I wanted to concentrate on growing my business and leave management of my own money to the experts. I couldn’t be bothered with it! I didn’t pay attention to fees or investment choices and lo and behold when I filed for divorce, I had to gather up all my statements and take a long hard look at them. I was shocked and started called the FP and asking some pointed questions. Shortly thereafter, coincidentally, the markets imploded. It wasn’t a lightbulb moment because it took a couple months for this all to play out but, I decided that no one is going to take as good care of my money as I am. I’m not saying that all FPers are bad but when folks ask me for advice, I share that wisdom and urge them to manage their own investments.

    • Glad to see someone else mention this point (though sorry to hear you had to learn it the hard way)! I’ve heard this summed up as:

      Nobody cares about your money more than you.

      That doesn’t mean you have to do it yourself (esp. if you’re prone to emotional decisions), but it does mean you need to understand what is being done with your money, why, and how much it’s costing you.

      • Exactly. I was just a set it and forget it investor anyway plowing any excess funds into investments and it was good (in a way) that I didn’t pay attention, but bad in that I was in some costly and overly risky investments. But lesson learned. Had I done it all myself in Vanguard index funds I might have retired sooner! Problem was, I wasn’t clever enough to figure out that I was even on the retirement path until 2 years ago.

      • In the scheme of things, I count that as a TINY mistake. You still made it happen at a crazy young age! So awesome!

      • Absolutely true! I think the (natural) assumption is that money managers are acting in our best interest, and it’s a horrible shock to most of us when we learn that’s not the case. (And that most mutual fund managers also invest in index funds!)

    • You’re for sure not alone in having that experience — the Elephant Eaters often rail about the fees they paid FPs. And I know our 401(k)s were and still are in high-fee funds because of lack of options. (Grrr. Can’t wait to control them ourselves.) Don’t beat yourself up about it — what matters is that you realized it!

      • Ha! I don’t beat myself up over it. I just regret that more B-school educations don’t focus on the power of the index fund along with all the really important math… Also, I wonder how I could be so oblivious for so long about this whole early retirement thing/community/simple math. I’m curious, how did y’all stumble upon it? I can’t remember when I read through the back posts how you figured it out. Side story – my company changed 401K companies this year and my CFO told me that besides him, no one else was as appalled at the fees like I was! About twice a year, I’d email him and ask when would we be switching companies. Of course, I haven’t rolled it over yet, but plan to shortly. I have some deferred comp coming my way in January and they are going to let me invest it in the 401K (which will help reduce my tax liability so instant returns… ). After that happens, ba-bye.

      • I remember reading a study recently that showed that actively managed mutual fund managers themselves invest in index funds! If that isn’t proof, I don’t know what is. ;-) Awesome you got them to change the 401(k) and get to add more money to it with lower fees!

        As for us, honest truth is I can’t totally remember when/how we learned the ER math, BUT we have always known we didn’t want to work forever, so we were HUNGRY for info on how to actually make that happen.

  19. We invested in our sons to try to set them off on successful paths in life. When they graduated from college, we didn’t live it up, but rather saved it up, maxing out retirement contributions where previously our priorities didn’t allow.

    The second truth is that we were fortunate to not be forced to sell homes in down markets. Considering job losses along the way, part of that truth depended on home ownership that was less than all we could “afford”, the stability of my wife’s job, and limited debt. Selling our last home in a hot market to downsize put the last finishing nail in FI.

    • Funneling savings into something different after you reach one goal is such a great way to get ahead! When my debt was paid off, I started saving that money instead, and wow! What a difference it made! And hooray for good real estate market luck! It makes me nuts when people talk about real estate luck as though it’s skill. ;-)

  20. I would say hands down was the fact that stuff was such a waste of our energy. Senseless spending, always buying the new next best thing and having new vehicles on loans. It all goes back to Kate’s comment above where our stuff affects our monthly expenses and that alone is the biggest key to retiring early or being FI.

  21. That real estate is a way to get make money, and also investing is not just for rich people. Growing up, no one I knew did either of these things, so reading about them blew my mind. I jumped into investing immediately and have never looked back! Now, if only I could figure out a way to get some real estate…

    • Such BIG ones! Those are things that don’t feel like normal people activities, and feel elitist instead. And real estate can just as easily go bad, so don’t feel too bad about not being able to jump in when we’re in such a big, obvious bubble!

  22. For me it was for sure a combination of the YMOYL “life force” idea and the profile of millionaires from TMND. People who look rich usually aren’t actually rich, and in fact are wasting their life force trying to project that false ideal, ergo quit spending money on stupid shit, Erin. What a simple but novel concept!

    After that lightbulb moment the next was was the idea of passive income. I guess I’d always assumed that retirement happens because you eventually earn a high enough amount of money at your job to magically be able to retire, which looking back doesn’t make a lot of sense since not everyone ever gets to the point of earning six figures. The idea of being able to earn money while doing nothing is what led me to start investing in a taxable account as well as paying attention to what I actually held in my 401k.

    • I think the world would be a lot different if more people realized that the folks who look rich are actually the ones blowing their money instead of accumulating it! And high five for investing in taxable accounts, not only 401(k). You know I’m a big fan of not selling out your future self, and keeping big funds in reserve for “traditional” retirement is such a smart move!

  23. “Children are optional” was a big one for me. That does also expand to other parts of life, by the way: you are the one who makes the choices. You can make the standard choice (which will often come with “standard” costs and a “standard life”), or you can make different choices (which may come with less or more costs, but at least you decided they were worth it for you).

    The idea that you can retire before official/normal retirement age, if you only cared to save up some money, was also a biggie for me, too.

    • Such an important one! I’ve never especially wanted kids, but I remember saying that to a friend, who responded, “Really? You can just decide that?!” It was shocking to me that that wasn’t self-evident, but glad to spread the word, I guess! ;-)

  24. Here are two nuggets that helped me over the years. They may appear contradictory, but actually walk side by side down the FIRE path while holding hands.

    1. “Big Hat, No Cattle.”

    From one of the FIRE bibles: The Millionaire Next Door (and many other sources over the years).
    You all know it, and you all love knowing it: More times than not, people living in the mansions, driving the outrageously expensive cars, wearing the designer clothes, purses and Rolex watches, have a negative net worth. This is not the road to FIRE. They spend more than they earn and live pay check to pay check. BUT NOT ALWAYS:

    2. “Spending Below Your Means (SBYM) is not always synonymous with “Frugality” (also known as: “Badassity is Bull***t”).

    You know the FIRE drill: determine your desired retirement date and retirement spending levels. Determine the amount you need to save and invest to reach those goals. Adjust as necessary (increase income, savings/investing and/or decrease current and projected spending to make it work – or adjust your goals). It ain’t rocket science, but it requires significant SBYM, and that can be hard.

    Once you determine the numbers on a highly conservative level, you can spend the excess any way you choose. You can give to charity or buy a Mercedes; you can buy a Rolex or fly first class to spend a week in Europe. As long as the spending does not derail your FIRE SBYM, you are golden.

    Yet, there is a crazy ass belief out there that if you are not “frugal,” you are bad. The guilt trips are endless. MMM states, “The obvious reason to reject things like a fancier car or house is that they use up more of the planet’s natural resources that could be used to help someone else instead.” Good lord, who can live with guilt like that???

    Warren Buffet has a net worth of $76 billion. He lives in a house worth $650,000. Bill Gates has a net worth of $90 billion. He lives in a house worth $150 million. Warren is being “frugal” with his home. Bill is not. Both are spending well below their means with their homes, and both are contributing a phenomenal amount to charity.

    If one wants to be frugal well beyond SBYM, rock and roll baby. That is a personal choice. But too many are judging others who achieve their FIRE dreams through SBYM without utilizing someone else’s arbitrary definition of frugality. Time to shave that mustache.

    Now where did I put my Rolex, I mean Timex, I mean…?

    • Um, YES! Especially #2. I think a LOT of people assume we are frugal, and we aren’t remotely. We live way below our means, but our means are high. And our retirement standard of living will not look like a lot of FIRE folks’ because that just doesn’t sound that fun to us. So I love when people point this out — you don’t HAVE to be frugal to retire early if you can raise your means. ;-)

  25. I’m not with you on the market timing only because the high Shiller P/E (CAPE) number correlate very well with crashes or drops in the market. It’s not like looking at the Dow and saying, “Hey 22,000 sounds high.” And most of the time the Shiller P/E has been in the 16-20 range so being all-in most of the time makes sense. Whenever the Schiller P/E has been over 25 a crash followed within a few years. We are around 5 years of being at 25 with a recent spike to 30, the second highest valuation since the dot-com bust.

    I’m not suggesting that it is wise to get out of the market. However, I think it would be smarter to spend more time with that boring guy. The biker boy seems to be looking at this market and thinking it’s getting old. (Do I have to continue with this analogy?)

    Oh no, not Suze Orman. I don’t like when people turn yelling into entertainment. That goes for Jim Cramer too. Or the male version, Larry Winget. It feels like the whole can I afford it segment was designed to be entertainment not real personal finance advice. Oh and then there was the prepaid debt card scandal.

    • Take that as more of an evergreen bit of guidance (not from me!), not a point-in-time directive. ;-) And I want Mr. ONL to jump in and answer this one because he is good at articulating why old market figures compared to now aren’t apples-to-apples because of accounting rule changes. (I never bothered to learn that because he knows it.) Also, we are definitely padding cash right now, if it makes you feel better. :-) (Not quitting Vg altogether — just allocating more cash than usual, given both markets and our imminent exit.)

      I won’t defend Suze — I watched her show as entertainment, and she did get me to think about money differently, which is what I needed at that point in time.

  26. Tidbits that I’ve seen have great effect on people:

    “You can’t purchase ‘being rich’ on a payment plan.”
    “Conspicuous consumption only shows people how much money you DON’T have anymore.”
    “The younger you start investing, the sooner you can stop.”
    “You can’t expect above average results when you do what everyone else is doing.”

    Love this blog.

  27. “Debtors pay interest, but investors earn interest” made me debt-averse and caused me to invest as much as I felt comfortable with. I’m a big proponent of the “Anti-budget” so I can save/invest my desired percentage off the top and not worry about where every little dollar goes after that… And I often find I have money left over at the end of the month, and it gets invested, too! Back when I budgeted, it almost made me feel like I “had” to spend that much on groceries, or electronics, but now I can go over in one area by spending less on something else, OR by bringing in more money side-hustling.

    • Hooray for the anti-budget! And for crushing that debt. I DO think that’s true that budgets make some people feel like they should spend the leftover, when the anti-budget incentivizes more saving (at least for us!).

    • We call it the rule of 300 when you apply it to monthly expenses. Which sure puts those small ticket items in perspective!

  28. Our “ah-ha!” moment was when we realized we could use money to buy, not things, but our time back. That was when we got serious about retiring early (not your version of early, but early enough that we now have to worry about how to pay for health insurance on our own!). Owning your own life is the best kind of wealth.

    • That is one of my faves! Money = tool to buy time. And congrats on having the health insurance problem! ;-) (I know it’s a pain and hard to deal with the uncertainty, but you only have that problem because you achieved something amazing!)

  29. Inflation is the true wealth killer. Safe investing (aka money in the bank) is not safe at all. It is the one way to guarantee losses over the long run.

  30. “Compound interest is the 8th wonder of the world.” Once I understood compound interest we directed as much as possible to our investments. Over time interest begets interest.

  31. This one here was what convinced my wife to invest rather than save: “a guarantee that my money would lose value every day it sat in my savings account, thanks to the power of inflation.”

    And i also like the biker that takes a younger piece of ass… We need a system so that we are the biker: paying ourself first and investing each month the rest is a great way! Especially in the case that your emergency fund is at the desired level!

    • Yeah, that inflationary risk was SO powerful for me to learn about. Maybe the most powerful. And I think I’m missing something in your biker analogy. ;-)

  32. On the focus groups example, that makes me laugh a little because if someone was serving it gratis, I would partake of the fancy stuff, if I was in the mood. But that’s because someone else is paying. I’ll have a fancy cocktail on work’s dime if that’s the norm, like you and the Nitro, because I’m not going to pay for it out of my pocket.

    But the point stands, the glitz and glamorous aren’t likely to be the people in the position we’re striving for. It’s more likely that they’re living beyond their means or are multi-squillionnaires, neither of which are my ultimate goal. (But I won’t turn down multi-squillionnairehood if it comes a-knocking.)

    • Oh amen to going a little step up when work is paying. ;-) (None of it is extravagant, as you know — just more than I’d spend with my own cheap-ass dollars! Haha.)

  33. The simple equation of ‘retirement = when your investments generate as much as your spending’ was a revelation. This gave me two areas of focus: reduce spending and optimize savings rate to build my portfolio.

    I also remember reading somewhere that you should spend as much time and energy monitoring your finances as you would if you were a CEO of a corporation. This urgency of ‘taking control’ instead of just floating through life inspired me to dig deeper into financial planning and investment strategies.

    Finally, just finding people in the FI/RE community who had achieved their goals transformed my thinking. Just knowing that yes, it was possible, was a quiet but profound epiphany.

    • That’s a HUGE realization for so many of us! Good one. In terms of the energy expended, do you find that works well for you? I think we felt that was important initially, but now NOT following every market up and down makes us far less likely to monkey with things. ;-)

      • Initially, it took time to research options and find ways of optimizing rates of return, fees, and other ‘management’ tools. As time goes by, more and more is just on automatic and only minor tweaking is needed. But I think it’s necessary to know what happening with your money and not just hand it over to TNLATB (the nice lady at the bank) or an advisor because ‘they know what they’re doing’.

        I just helped my Mom move her portfolio out from a high management fee account and into something that will increase her returns. With the same funds, she’ll get more than a $250K increase over current earnings over the next 10 years. And all it took was asking a few questions…

      • How fantastic that you helped your mom get rid of those wealth-destroying fees! That difference is HUGE. So true that there’s much to gain by asking those questions.

  34. The less you spend, the more you can save but….the less you spend, the less you need to save. It continues to blow my mind!

  35. Get to a point where Income is Greater than Expenses = Savings (I call it Capital)
    Invest Capital, Re-invest Returns. Look to rule of 72 for inspiration.
    Financially model your future ( build from ground up) and Figure out how much money you need at each stage of life ( sounds daunting but it can be done)
    Discuss with spouse/family on the plan and begin their education in this area of family finance.
    Check and adjust plan according to your determined frequency (eg. I conduct my own family quarterly reviews)
    Be a voracious reader of financial news and happeneings. (ie don’t waste too much time on social media stuff )
    Be Disciplined and don’t panic/get emotional
    In whatever you do, if you can SWAN it, don’t do it. ( SWAN = Sleep Well At Night)
    Enjoy the ride!

    • I had meant to say – In whatever you do, if you can’t SWAN it, don’t do it. ( SWAN = Sleep Well At Night)

    • Some good tips! Do you think it’s been a net positive to stay up on financial news? We’ve found we stress far less when we don’t follow the twists and turns of the markets.

  36. A lot of these points hit home for me. I made my fair share of “big” mistakes – bought a brand new car just for the heck of it. However, I have come to understand that in order to be financially independent there are certain things that must be in order. The material possession mindset just doesn’t sit well with this ideology. Being from a country like India, I already am frugal to begin with. Even then I have a lot of stuff for my liking. Some essential and some non-essential. I am beginning to try to kickstart my journey into the FI space.

    • I’ll offer a counterpoint that having material possessions doesn’t doom us to FI failure, but being intentional about spending is essential! Good luck as you begin your journey!

  37. Viewing time as an asset completely changed my outlook. As obvious as it seems, it made me cherish and/or make use of every last drop once I saw the light. And I’ve been busy ever since!

  38. Like many commenters, learning that I needed 28.5 times expenses (I’m more comfortable with a 3.5% SWR) was really helpful. So far, my investments could safely throw off just a little over $500 a year. Two years ago, I only had cash, but now I’m investing in an IRA and making gains. It’s a definite improvement.

    • Big high fives for so many steps in the right direction! We all start somewhere. I absolutely lived several years of my adult life with negative net worth, and the flip to positive and then the slow growth after that felt like pulling teeth. But eventually things sped up, and now I still can’t believe that we are where we are.

  39. Great Tips! Such a great information.

    I agree with you that “We don’t walk around in the world feeling like some financial masters of the universe.” I have always been facing problems with Making Money and was trying to hire someone to help me.

    I will tweet your post. Thanks a lot for sharing.


  40. I’m still learning about my personal relationship with money and I wish I could save more. In saying that, at the moment I am making half of what I used to make 6 months ago and I am happier than I have ever been. I guess what I’ve learned so far is that doing something that you hate for a few more bucks is not worth it and I still have nightmares about those days.

    Also, I’m totally jelly that you and your partner are positive influences on each other when it comes to money! Me and my boyfriend are still working on that one!

    • I’m so glad that you’ve learned that HUGE lesson! Selling your soul for more money is never worth it. And don’t be jealous about our money dynamics — we were bad influences for a long time, and had to learn to be good influences. So it’s totally possible! It’s not a have or have not question. ;-)

  41. Oh my goodness, you’re so close now! My goal is to be all caught up by the big day ;) And we are also guilty of holding waaaaay too much in cash for way too long.
    I honestly think my lightbulb moment was just realizing that Early Retirement was an actual, real thing. I’d always assumed you just worked til 65, started collecting Social Security and withdrawing from your 401k (and/or pension if you were so lucky). The mere idea that you could walk away from work before then was just mind-blowing!
    I absolutely love the comment that the less you spend, the more you save/the less you spend, the less you need to save.

  42. Been a while since I commented and REALLY slow at catching up but definitely had similar influences. While I’ve always been pretty frugal I didn’t realize I should take that into account in a partner and I always expected I’d retire early, but assumed age 55 was “extreme”. So Suze taught me a few basic lessons, pushed me into learning a little more, but probably most importantly helped get my first wife more on board with financial responsibility so she was able to be debt free when we divorced.
    I also loved Millionaire Next Door, seeing that correlation between frugality and wealth spelled out was another step.
    After that it was a friend introducing me to MMM which led me to all the other wonderful FIRE blogs like yours and pushed me to read investing books. My current wife and I are now well on our way in the FI journey and having a partner who sees the value in ER is a dream come true!