I’ve posted a few links to individual articles on Facebook, but I’ve really been enjoying the Mr. Money Mustache blog. The author is a young man who, along with his wife, was able to achieve financial independence and quit full-time work in his early 30s. It’s not strictly a personal finance blog; rather, it’s more a series of articles about leading a less expensive, more fulfilling life.
He also endorses bicycle riding as often as possible. What’s not to like?
I think he’s a bit sanctimonious. Sometimes people have their reasons for doing things the way they do, he seems to assume that everyone but him is motivated by the desire to have 32gb iPad instead of the 16gb.
I think being sanctimonious sort of comes with the territory when you’re convinced that you’re qualified to give life-changing advice to strangers on the Internet.
I guess, but I’ve met several people who also had high-paying jobs that allowed them to save up enough to quit in their 30′s through 50′s. Except they quit there jobs to pursue some other path that they wanted to take, like doing scientific research, starting a company or in one case going to Optometry school so that he and his wife could start a NFP bringing glasses to children in Africa and the Carribean.
So your objection is that being a full-time parent and a part-time carpenter and landlord is an insufficiently noble reason to retire?
No, insufficient to be sanctimonious.
It’s interesting to think about my neighborhood. There’s quite a few people who either inhereted their house, and I mean the whole building, which is generally a duplex, or bought it 30 years ago when the area was a post-industrial depressed neighborhood. The people who are renting downstairs from us pay between $2000 and $3000 per month, and they say these days it’s getting closer to $3000. How’s that for independently wealthy.
Real estate is funny. If our house was one block to the west, it would have cost twice as much. One block to the east, half as much. One more block to the east, I could have bought it from the city for a few thousand dollars.
Apparently in the late 1960s, when there were riots in the city and the white flight really starting kicking in, you could buy houses in my neighborhood for pennies on the dollar. People were so desperate to get out that they’d take anything. Serious bargains to be had.
Single family houses are so rare around here that they get a huge premium per area over normal space. There’s a woman who lives a block away from me who bought her house (a single family) in the 60′s with several other friends as a hippie commune. She’s the last one to stay, and now owns a nearly $1M property.
I suppose 20 years from now people may be telling this kind of story about you guys. You know, when the rust belt comes back and the Bills win the superbowl.
I’ve been having this discussion with Katie lately. About saving money, and real estate. I did some digging, and found that the last time interest rates were what they are now, which was ~1950, the average household income to average house price ratio was about 1:1.9. Nowadays it’s about 1:3. And even that’s skewed, because a good chunk of the average household income increase since 1970 has been the woman going to work. If you were to compare single-earner average household income to average home price ratio now, it’d probably be more like 1:3.5 or even 1:4. It’s insane. Add to that the extra things your average household is paying for now (cable, internet, cell phones, 2+ cars) and it’s no wonder the savings rate in this country is essentially 0.
I agree with Brian, and I’m sick of reading all the sanctimonious crap on teh interwebs about people shedding their personal possessions and liing the simple life. I read one recently about a couple who build a house under a boulder in the desert and lived there essentially for nothing. And all the comments were “Oh, how great is this, Americans are owned by their possessions, we really need to see what’s important”, and all that horse shate. Really? You believe that? Then what the heck are you doing on your computer? I personally don’t want to live under a boulder, crapping in a hole, without electricity or plumbing. I’m willing to exchange some of my time for some money to buy a nicer house and some things that I want. That said, I do believe there is value in looking at what you’re spending money on and determining if it makes you truly happy- or at least happy enough to part with whatever it costs you. Or even go into debt.
I think I’m going to write my own book, studying micro-economic changes and lifestyle, and offering financial advice. I’m going to call it, “Living Like it’s 1950.”
I live in a modest house, my wife is a stay-at-home mom, and I eat fried eggs and toast with black coffee for breakfast almost every morning. Then I have a Manhattan when I get home. If anyone’s writing “Living Like it’s 1950″, it’s me.
Anyway, a big part of the point of the MMM site is that you don’t have to shed all of your possessions and live under a boulder in the desert somewhere. It’s surprisingly non-hippie, which isn’t surprising, since the guy is a retired software engineer. Most of the articles are about analyzing how much things really cost in the long run and what sorts of trade-offs have to be made.
An example from the other day: I was looking at cars online, which I like to do. The Chrysler 300 Glacier caught my eye. It’s a beautiful car, with a powerful engine and all-wheel-drive. Perfect for Buffalo.
I looked up the sticker price — $36,000 or so.
For comparison, I looked at a practical used car for me, seeing as how I only drive a few thousand miles a year in “my” car. A used Toyota Matrix with low mileage is about $16,000 from a dealership. In addition to all of the money I’d save on taxes and insurance and gas, that $20k difference would compound to well over $150k by the time I retire if I dump it into an index fund instead of a car.
I’m not going to live in a tent in the park to save money, but I sometimes have to consciously think through what I’m considering spending money on and why.
We’ll co-write.
Actually, I think a lot of the points you’ve raised and articles you’ve pointed to in the past few years would be good references. People did used to use public transportation, walking, and bicycling much more back in 1950. This was pre-Eisenhower Interstate days, but post-WWII.
I’ll put my fried egg, black coffee, and Bourbon consumption up against yours any day, matt.
I skimmed the site a bit. But it sounds like he’s on the same track as I mentioned above, that is, figuring our your utility for expenditures.
I, like you, love looking at cars (though I’m usually on Craigslist searching for sub-$1000 beaters). My current daily driver is a 1967 Volvo Amazon I picked up for $650. I replaced the gas tank, rebuilt the brakes, and replaced anything rubber in the drivetrain. Most of the parts I had on hand from parts cars, but if I’d had to buy the parts, I would have been out another 300 to 400. The parts I did purchase were about 300 to 400 again. So I have at most $1500 into a perfectly serviceable automobile that I drive EVERY day. And my daily round-trip commute consists of 50 miles of autobahn-esque highway and 10 miles of the harshest urban conditions you’ll find anywhere- Baltimore streets are terrible. That’s 60 miles per day- 300 miles per week, 1200 miles per month since early November. My operational costs have been an oil change and 4 used tires, at $100 for the set. And it gets about 25 mpg. There’s no depreciation- I could easily turn around and sell the car today for $1500. And honestly, I _prefer_ driving an old, cool, slightly weathered car over something new and shiny. I get thumbs up and grins. I’ve left the keys in the ignition with it parked on Baltimore streets. I know I can fix it with a leatherman if I need to.
“That’s 60 miles per day- 300 miles per week, 1200 miles per month since early November. My operational costs have been an oil change and 4 used tires, at $100 for the set. And it gets about 25 mpg.”
So, this being the end of January, we’ll call it an even three months at 1200 miles per for your commute. At 25 MPG, that’s 3600/25 or 144 gallons of gasoline at $3.42 per gallon (average price in Baltimore according to this link), for $492 in gas, another $100 in tires and ten bucks for an oil change. Assuming the best case scenario of no depreciation, and ignoring the cost of insurance, that’s still a $200 per month commute.
Now imagine how much people are spending when they insist on leasing their cars, or buying a new one every few years, rather than buying something cheap and used. People who take their car to the dealership every time they need an oil change or a new set of wipers. It adds up QUICK.
This is in no way intended to be a value judgment, just an observation that a lot of modern life is expensive in ways that creep up on you without warning.
I know I beat this drum all the time, but the Robert Moses school of urban planning — work in a city, live far away in a suburb, commute on a highway built by knocking down poor neighborhoods — only works when you have an inexhaustible supply of cheap energy. We’re finding that we don’t any more, and from expensive commutes to baby boomers who shouldn’t be driving but can’t do anything without a car, we’re paying a huge tab for decades of poor planning.
Matt, you can onlyq say that because you live in an area that doesn’t have an enormous premium for living in carless commuting distance. Many people around here live in New Hampshire and commute to Boston, spending one sixth the housing costs, and avoiding a shitload of taxes and fees, all of which adds up to far more than a few hundred per month. Also, if your wife works your chances of finding two jobs where you can both commute without a car is pretty slim. And then once you buy your house you have your house, are you going to move if you find a better job across town? Its good that people make different kinds of choices, I don’t think you should assume it’s because they are stupid.
I’m not assuming that anyone’s stupid – I’m just pointing out that commuting, at least by car, is one of those sneaky-expensive elements of modern life. That’s all.
I apologize if it seemed like I was being condescending.
How’s the public transportation in Boston, anyway? I remember riding the T when I was a kid, but I haven’t been there in years.
Oh, I’ve done the math already. In fact, I was discussing our budget last night. The number I came up with for our total household monthly car expenses wasn’t $200 either- more like $700. The $200 is a snapshot, but over time you’ve got insurance, other repairs, etc. Her Jimmy just needed a new heater core and radiator- a job even I didn’t want to do. That was a $1000 bill right there. You’re right, it’s staggering how much we spend on our cars- for us, it’s our second largest out-of-pocket monthly expense, right behind the mortgage. We spend about half as much on food- and that’s including beer, wine, and liquor.
Now imagine a couple, each with a fairly new car because they’re not mechanically inclined or just don’t want to deal with it. So you’re looking at $700 per month just in payments for a relatively modest (ie, your Toyota Matrix example) car for each of them. Average cost/ mile ignoring depreciation is anywhere from 20 to 30 cents, figure 1500 miles per month between the two of them, and you’re well over a thousand dollars per month.
We’re looking for a house in Baltimore now, and I actually did the math to figure out how much extra we could spend on a house depending on the commute distance. The baseline was assuming the house was within walking distance to my job- essentially a zero-cost commute. For every mile beyond walking distance, you know how much extra house we could afford? $1000 worth. That’s essentially what the cost of one mile of commuting is for an average 20 day work month, for the amount that $1000 worth of house costs extra in mortgage, taxes, and insurance. So a commute that’s 20 miles away versus a commute that’s 40 miles away is a $20,000 difference in house price. Around here, that amount is practically in the noise. As I’m sure it is in most major cities. Granted, that 20 extra miles each way adds up to about an extra hour on the road every day, so if one adds a time value to that equation the numbers change somewhat. Still, I can’t stay at work an extra hour every day and get paid for it.
There is a public transportation option- it’s $3.20 per day for a roundtrip ticket, and would save me roughly half of the total car miles, assuming that 40 mile each way commute, or a net savings of around 6 dollars per day. Another option would be a more fuel efficient car- a car that got 40 mpg would save about 9 dollars per day even without the public transportation option, though the monthly payment on such a car would wipe out most of that, even on a modest used appliance- car. And who wants to drive a Prius, anyway.
Public transport in Boston is creaky and old. like everything around here. It can be very crowded, Jin and Jake take the subway to school, and Jin has been all over the city these days. At rush hour sometimes you have to wait for another bus or train. It is convenient, though.
Also, the MBTA is chronicly short of money, despite the highest ever ridership, and can’t seem to get a project done. There is supposed to be a new line built near our house. Despite the fact they already own the right-of-way and the stations are already there (from an old commuter line), they haven’t even started the project that was supposed to be done last year.
Also, it’s not that cheap, I don’t remember the monthly fee but I think it’s like $150. They recently raised it, so I don’t know.
I think what Mike and I are trying to say, is that in many places people have already made the calculations your talking about and decided to live close to the city center. This increases the value of that limited space, changing the economics to favor commuting. It’s just not a solution for everybody. It’s more widespread than you might imagine, even smaller places like Austin have a premium for living downtown.
When Katie and I went up to visit the Nasipaks last summer, we flew in to Boston and subwayed everywhere. I think a couple of times we all went somewhere in the Prius. I agree with Brian’s assessment of MBTA- creaky yet convenient. Creaky doesn’t bother me. I forget what we paid for a multi-day pass but compared to the cost of renting, parking, and fueling a car for that time in Boston it was peanuts.
I like public transit- which I guess is a good thing, since I work in it. We used it to go to DC a few weekends back on a Saturday night. Drove to the WMATA stop, about 5 miles, took the train in, went to a charity thing my work was doing, went bar hopping, train back to the car. I think the two train passes were $14- about what we’d have paid just to park in DC for a few hours.
Incidentally, if you ever find yourself in DC, check out the National Building Museum. It’ll be 8 bucks well spent.
I think my perspective is also skewed because economically depressed cities like Buffalo or Rochester work in reverse — it’s generally cheaper to live within the city than it is to live in the suburbs, which is not the case in the cities you’re talking about. So I don’t just get the benefit of an inexpensive, bikeable commute by living where I do, but I get it in addition to a huge discount on my mortgage and taxes.
Pitt, I don’t understand this part of your comment: “For every mile beyond walking distance, you know how much extra house we could afford? $1000 worth.” It sounds like you’re saying that you could spend more on a house if your commute was more expensive and time consuming, which I don’t understand.
Ironically enough, I got a ride to work with Sue this morning because the Saturn is in the shop getting a new exhaust system. Money money money.
As for this:
The actuaries at the IRS have the mileage reimbursement rate at 55 cents a mile, last I checked. I imagine that’s a pretty accurate figure for a typical driver and a typical newish car. So 1500 miles a month per person is not just 25 hours each at highway speed — half a workweek spent in the car! — but also $1650 in expenses. Yikes.
Why do you assume the actuaries as the IRS are accurate? Depreciation of your car/mile is pretty hard to calculate, and pretty car dependent. My car has gone 145K miles, all I’ve done to it is change the oil and tires (knock on wood). It’s major damage actually happened while it was parked. Twice! F’in New England drivers.
Also, on the wasted time issue: it’s also hard to calculate. I work 45 miles from my home, my wife often has to work downtown, maybe 5 miles away. It takes me 1 hour to get to work, it takes her 45 minutes (in traffic it takes almost the same amount of time to drive), with some transfers. So sometimes living close isn’t that big a time saver.
I wish I could draw cartoons to illustrate the difference between some people’s perception of “opportunity cost.” I spend my time driving learning a language, listening to the news, and thinking about how to organize my day. I image I might use the “free” time i gained by ending my commute to make an extravegant dinner for my family, or do that one extra experiment that would cure cancer. But probably, I’d just surf the interwebs and look at cat videos.
“Why do you assume the actuaries as the IRS are accurate?”
Because we’re talking about a Generic American Couple with an unknown pair of newish cars, so it makes sense to me to use a value from a sufficiently broad data set.
Prius depreciation probably is lower than average, both because they have a high resale value and because they’re well-built, reliable cars. But that’s not what everyone drives. You’ve never known someone who went out and bought an impractically expensive vehicle with steep depreciation?
@matt,
I may have mis-stated what I was trying to say. I think you understand what I’m getting at though- 1 mile of commute distance (one way) costs me the equivalent of what an extra $1000 worth of house would for a 30 year mortgage at today’s rates. So if I were looking at a 100,000 dollar house with a 20 mile commute, it would be equivalent to an 80,000 dollar house with a 40 mile commute, or a 120,000 dollar house with no commute, in terms of monthly costs.
The IRS mileage rate is based on ALL car costs, but this number varies hugely depending on what kind of car we’re talking about. I read that the Toyota Prius has the lowest per-mile cost of ownership of any new car at about 25 cents/mile. Brian’s experience bears this out. But a used car may have an even lower cost/mile, depending on fuel economy, reliability, insurance cost, and depreciation. My aforementioned Volvo, for example, gets 1/2 the fuel economy as Brian’s Prius, but has very low insurance costs and almost zero depreciation. So the cost/mile is about the same. I stand by my above estimates.
I too enjoy a bit of time every day behind the wheel. Listen to the radio, organize my thoughts, catch up on current events, read the paper, shave, do a crossword…
Brian: better start saving up for some batteries. About 175 to 200k is about all they’re good for, and it’s about a 4 or 5k bill to change them out.
Don’t worry, though, cuz that’s only 2 and a half cents per mile.
$40k financed at 3% over 30 years would add about $170 to the monthly cost of a mortgage. (I used this site for a quick calculation.)
That seems too low to cover the cost of a 40 mile commute.
Add taxes (higher in the city) and insurance to that. And 3% is pie-in-the-sky. Even with excellent credit, the best available out there right now is 3.5%.
We’re also a unique situation. Try finding a house with even a 2 car garage and 2+ acres anywhere within 20 miles of city center for under 400,000. For someone who doesn’t want to farm and doesn’t have an old car hobby, it would be easier.
I understand there are other considerations in play for you in particular — you like living on a large plot of land out in the country, and that’s obviously going to lead to a longer commute. I just didn’t understand where the numbers were coming from.
Even at 5%, using the current 2.26% tax rate for the city of Baltimore, it’s only another $290 a month.
On a more positive note, apparently the terrible sounds that my exhaust were making were just a matter of replacing some rusted-out hardware, not the pipe itself. Yay!
I’ve heard about the batteries, what I don’t know is if the car stops working or if you just get worse gas mileage.
A former co-worker of mine had one of the first-gen Prius,and when it got to about 190,000 miles the car did actually quit running, necessitating a tow. Luckily, her ambitious EE husband sourced replacement cells and put the car back on the road for about a grand in parts.
@matt,
I did those numbers in my head during my long-ass commute, so I can’t say they’re 100% accurate. I figured they were close enough for a ballpark.
We’re going to go look at houses this weekend. We have our eye on a couple in particular that seem like good fits for us. Here’s hoping…
BTW, here’s our SC home, on the market:
http://www.realtor.com/realestateandhomes-detail/8510-N-Tigerville-Rd_Travelers-Rest_SC_29690_M67593-70304
(I didn’t do the write-up, FYI)
You sure you didn’t do the writeup? “Exposed wood beams and pine walls warm you as you walk through the home” sure sounds like you.
Good luck with the sale, and better luck with hunting for a new place. Hope this weekend goes well.
I just picked up the Saturn from the shop — apparently fifty bucks worth of flanges, gaskets, bolts, and labor was all it needed. Ready for another 100k miles.
(Is that a tow-behind popup camper in the one picture? When did you get that?)
Wow, 50 bucks? I’ve never left a mechanic without being out a C note or more.
Yep, that there is an Arr- Vee. Picked it up from a friend last year. It’s a 1985 Esterel, a folding, French-made, hard-sided pop up. Basically the sides fold like a cardboard box. It’s pretty nice- and tows great. It’s about a 1 mpg penalty towing it behind Katie’s Jimmy. And you can see over the top of it with it folded down. Perfect for races, weekend getaways, or extra room for company.
I have the most honest mechanic in the world. He’s the only person who’s ever handed me a bill for way less than the estimate, because “the book” said a job would take eight hours and it only took three.
I’d like to get a popup — the kids are still too little for tent camping, but I think that would be a good compromise.
Your Subaru should tow a small popup with no problem. I’ve even towed ours around with my Volvo wagon. I believe the camper weighs about 1200 pounds. Its great- you guys have a lot of cool parks and stuff to visit up there, you can get a small propane heater to keep you warm at night. We don’t even bother with electricity- use LED lights and candles. Most campgrounds have toilets and even showers, for 20 to 30 bucks per night- about 1/3 of a decent hotel room, and you get to sleep on your own sheets. We got this one from a friend, so it was only $300, but decent used pop ups go for 1000 to 2000 all the time. They depreciate FIERCELY from new.
I was looking at them on Craigslist. I think once I get rid of the Matador, that driveway space will be dedicated to a camper.
We had a popup when I was a kid — Dad towed it with a four-cylinder AMC Hornet. I don’t think the Subie would even break a sweat.
It’s not complete without Christmas lights and a pink flamingo to put out when you park.
We keep some of the LED grapevine balls Katie made for our wedding in the camper. Makes for festive evening illumination.
No ostentastiously- colored fowl, however.
We’ve brought our dog, Sadie, with us camping, so if the pop up will handle a hyperactive dog, it’d be fine with kids.