mr money mustache the shockingly simple math

It was fancy (although impractical) stuff which we occasionally used for big holiday dinners when I was a kid. One of these was a complete set of sterling silver flatware. Many years ago, her own parents passed on, leaving various antique things in their estate. Assuming you’ve already got enough stuff yourself, this can require some serious strategy to deal with properly.Īs a case-in-point, let’s take my dear Mum – the same Grandma Money Mustache who was featured in the Cost-Effective Renovations article. But this natural progression of life also brings with it some practical considerations: a whole load of material stuff that gets passed on from one generation to the next. I love the many positive aspects of a family that shares its stories and values from one generation to the next. That means our parents are even older, and our grandparents – if they’re still around – are sagely pieces of living history. What are your thoughts? As always, comments are welcome.So, some of us Mustachians are getting pretty old. Spending mindlessly is pretty much always a waste in my book. Spending money only really makes sense if not spending it costs you (or others around you) happiness. Sometimes it’s better just to spend money and not think about it so much.īut I would add an addendum to his mothers counterargument. The counterargument to all of this, is the point that his mother originally made. These are all powerful wealth multipliers. We should all be doing everything in our power to maximize our participation in tax-deferred savings vehicles such as 401(k)s, IRAs, backdoor Roth IRAs, and health savings accounts.

This article elegantly drives home the power of tax-deferred savings. For higher income earners like myself the marginal tax rate is much higher, and so the actual benefit of tax exempt savings is much much greater. His calculator is actually very conservative. True wealth is a function of saving and discipline. When money is looked at from the Mad fientist’s perspective, Spending money now becomes the opposite of wealthy behavior. This article kind of flips that conception on its ear. This discussion very much goes to the question of “what is wealth?” I think the common conception in our culture is that wealth means having lots of money and spending it on nice things. Here are some additional philosophical reflections on this article. Check it out! You may find it very motivating. If you’d like to figure out your effective income based on different savings strategies, the Mad Fientist has a nifty calculator for you to play around with. So there you have it, a very compelling argument to maximize your savings!

That last point is an excellent example of the compounding nature of stock returns small changes over long periods of time yield dramatic results.

If that $13.39 is not pulled out in retirement and is instead invested in a bond at a yield of 3.5%, then you will make that original $.80 of value (had the the dollar been spent immediately,) every two years without losing any of your principal!.

A dollar not spent now, matched dollar for dollar by an employer, and invested for 30 years will be worth $13.39 in retirement.

A dollar not spent now, and invested in a tax advantaged retirement account (401(k), 403B, IRA… Etc.) for 30 years will then be worth $6.70, assuming a 12% marginal income tax bracket in retirement.

If invested over 30 years the new value would be $5.33.

Note that this is assuming only 10 years of investment not 30 as is the case below with retirement accounts.

A dollar not spent and invested in a taxable account for 10 years yields $1.45 of present day value assuming a real 7% return on the stock market.

In my particular case, each dollar spent today actually costs closer to two dollars due to my higher marginal tax rate, FICA taxes, and state income tax.

I would actually express this somewhat differently: each dollar spent today actually costed you a $1.25 of wages.Each dollar earned and spent today achieves only $0.80 of value because of tax loss.So to sum it all up in bullet points (italicized bullet points represent additional points that I am making.) There is nothing to see here…proceed to Mad Fientist Money Mustache’s life altering post The Shockingly Simple Math… which I’ve referenced several times before on this blog.īut this past week I made references to an excellent article by the Mad Fientist entitled The Triple Value Of Income.īefore you read another word of mine, I urge you to click on the link above and read this article in it’s entirely. The first such blog post that comes to mind for me is Mr. (There are some blog posts that are so good, they demand separate blog posts about them.) This may be a little bit Meta, but tonight’s blog post will be a blog post about another blogger’s blog post. 0 Flares Twitter 0 Facebook 0 Filament.io 0 Flares ×

Mr money mustache the shockingly simple math