Backdoor Mustachianism

I'll start off by saying that my girlfriend remains skeptical of Mustachianism. She doesn't view frugality as a virtue, more as a side-effect of being a cheapskate, I think. (Discussed this with her some more. She views frugality as being efficient with one's money.) One of my medium-term goals is to convert her to the cause. I'd like her to eventually believe that spending less money is a path to achieving her — and our — long-term goals.

As I was reviewing our food budget, I had an idea. Could it possibly be Mustachian to spend more money in the short term? If you recall, in November we instituted a grocery budget that's saving us hundreds of dollars per month. But there's another half of the food equation. I neglected to mention restaurant spending.

Let's look at both items together:

• June
• Restaurant - $145
• Groceries - $684
• Total - $829
• July
• Restaurant - $153
• Groceries - $606
• Total - $759
• August
• Restaurant - $665
• Groceries - $628
• Total - $1293
• September
• Restaurant - $132
• Groceries - $807
• Total - $939
• October
• Restaurant - $86
• Groceries - $831
• Total - $917
• November
• Restaurant - $0
• Groceries - $372
• Total - $372

What I interpret from these numbers is how little we used to go out to eat compared to the number of grocery trips we were making. The clear blip in restaurant spending is August, which contained restaurant week. Other than that we were going out maybe two or three times a month.

Aside from the numbers being high, here's what I think is really anti-Mustachian about the above spending distribution: our spending was massively inefficient. In terms of getting the most out of my money, I was failing spectacularly.

My girlfriend likes it when I take her out. It's one of those showing-that-I'm-thinking-of-her things. And until I get better at doing that without spending money, I think going out on dates is an okay arrangement.

Here's why November's restaurant spending was zero: my frugality kick was in full swing, and my girlfriend felt like we couldn't go out. She felt like, "Great, he's scrutinizing every purchase. Now I feel both restricted and poor." I'll tell you, for someone who isn't accustomed to squeezing every penny, and who has Mustachianism forced upon her — the above arrangement is not a recipe for domestic bliss.

So, I came up with a plan. Why not build a little good will and show her that, no, we aren't poor, just prioritizing our spending. Going forward, we'll have a food budget as follows: $300/month on groceries, $200/month restaurants. This is an increase in our typical restaurant spending. And by keeping this budget, we'll still spend $351 less per month than our June-October average of $851/month.

This is my idea for backdoor Mustachianism. By giving myself an explicit restaurant budget, we'll go out on more dates which will make my girlfriend happy. I'll be as cost-efficient as possible. In the future I'd like to get more creative with dates, find special things to do without spending money. It will take some getting used to, but I'd like to move toward an equilibrium where we spend little to no money on doing leisure activities together, while still maximizing our collective enjoyment.

Baby steps.

Opportunity cost: student loans vs. mortgage

Over the past two weeks or so I read through Dividend Mantra's complete archives. I was introduced to him by MMM; Dividend Mantra had a guest post at MMM which is a nice introduction to dividend growth investing. The only downside is that hearing his story made me want to spend all my disposable income on dividend stocks, instead of paying down my student loans.

I talked myself down from that ledge. I'm the kind of person who gets fixated on certain things, and I've been practicing self-talk to keep my more obsessive side in check. Dividend growth investing does sound awesome. But so does paying off my student loans, and so does paying off my mortgage early.

I specifically brought up paying off my mortgage early. Now that I've read all of Dividend Mantra's posts, I looked for another Mustachian-flavored blog and happened upon Death to the Mortgage. I started reading it from the beginning. It's really inspiring, and I think one of the coolest parts is that they actually paid off their mortgage. Like, they're done, success, the mortgage is dead.

Naturally, Death to the Mortgage has gotten me excited about paying off my mortgage early. But I've already committed to vanquishing my student loans first. The question became: should I switch my goal?

My first consideration was that my mortgage is way bigger than my student loans, so it's a much longer-term goal. But past that I didn't have a good way to weigh one option versus another. So I fired up Excel and started playing with numbers. I was looking for a metric to help me decide where I should focus my early-payoff efforts. Here's the result, explanations to follow:

Loan / Target	Principal remaining	Monthly payment	"Payoff cost"
Mortgage	$ 407,716.50	$ 2,176.63	$   187.32
PMI	$ 42,116.50	$ 147.39	$   285.75
Sallie Mae (before)	$ 5,883.18	$ 69.88	$     84.19
Sallie Mae (after)	$ 3,883.18	$ 69.88	$     55.57
Federal	$ 25,957.91	$ 192.85	$   134.60
Both student loans	$ 31,841.09	$ 262.73	$   121.19

Here I'm listing various expenses that I can eliminate by paying them off early. PMI isn't a debt but we can remove it when we have 20% home equity (that's where that "principal" number came from). I included two numbers for my Sallie Mae loan, since this weekend I sent a $2k payment to pay it down early. And I lumped both student loans together as the last line-item to offer additional perspective.

The last column is "payoff cost", which I got by dividing the principal by the monthly payment. Basically it's the average cost of decreasing your monthly expense by one dollar. For any given amount of money you want to use to reduce your expenses, you get the most bang-for-your-buck by going after the lowest "payoff cost" item first.

Notice how my Sallie Mae monthly payment is the same in both rows, but after I decreased the principal by making a big extra payment, the "payoff cost" number dropped. This illustrates that, now that I have less principal remaining on my Sallie Mae loan, it's cheaper for me to get rid of the Sallie Mae loan expense.

A downside to this "payoff cost" metric is that it doesn't consider term or total interest paid. That's fine because it's not meant to. What I'm looking at here is: how can I allocate my scarce money to best reduce my monthly expenses?

It's clear from the chart that paying off my student loans is a more effective way to reduce my monthly expenses than paying off my mortgage. What amazed me was how ineffective going after PMI is. I mean, $285 for each dollar per month of expenses saved? Expensive! Though, as a side note, a Safe Withdrawl Rate (SWR) of 3% corresponds to a "payoff cost" of $400, so there's another perspective for you.

Of course this isn't an apples-to-apples comparison. PMI isn't a debt, it's akin to throwing money away, and since by going after the mortgage I'll also be going after PMI, etc etc. But in terms of lowering my monthly expenses, targeting PMI should be at the bottom of my list.

I'm glad I did this exercise because it vindicated my focus on paying off my student loans. After my Sallie Mae loan I'll go after the federal loan, and after that I can worry about the mortgage. And some time in there I'll get started on dividend investing :)

Student loan update 12/23/11

Merry (almost) Christmas everyone. I stayed home from work to hopefully vanquish this cold so I'm not sick for weekend holiday travel celebration fun. In the meanwhile I've been looking over my student loans. I figure it's about time for an update.

Remember that time I said my principal balance of the larger of my two student loans was $25,706.29? Well imagine my surprise when I logged into my account and the balance was instead $25,945.14. That's $240 more! That and my next due date changed to January instead of February. I smelled something fishy so I decided to call customer service.

It turns out my double payment didn't actually go through. The customer service rep I talked to said the ACH withdrawl was declined. The checking account I use for auto debit is an Electric Orange account from ING Direct. It has an overdraft credit line that would more than cover the $385 payment, so I'm not sure what's going on there. Maybe you can't use any form of credit to pay off student loans? Or the DoE's system checks your account balance first so your bank won't charge you an overdraft fee?

At this point I'm willing to chalk it up to the DoE trying to be nice. Still, it went counter to my expectations. I'm glad I've been keeping my eye on my student loans. Diligence is very important to a Mustachian.

The old pre-Mustachian me wouldn't have even noticed. He wouldn't care what the payoff balance on his student loans were — only that the auto payment was set up successfully so he wouldn't have to think about it anymore. And he'd continue making payments every month for ten years and wind up paying interest through the nose so he could go on consuming things he didn't really need.

Update: the balances

• Direct Loans (US Dept of Ed): $25,945.14
• Sallie Mae: $5,880.40 (expected)
• TOTAL: $31,825.54

The balance is up about $200 from last time on account of my extra payment not going through. Sallie Mae debited my payment today, so it hasn't posted yet but that's how much I'm expecting to owe after it goes through.

I'm getting ready for a big move. Along with the money I've been saving up, I got a year-end bonus of about $2k after tax withholdings. That plus my paycheck means I have around $4700 in my savings account and I'm gearing up to throw it at the Sallie Mae loan. If all goes well, I'd like to have the Sallie Mae loan totally paid off by the beginning of February.

Parting words

Now that I'm logged into my Sallie Mae account, I have some information to leave you with. Here is the net effect of having interest accrue while I was in school, just for this particular loan:

• Original principal balance: $4,725.00
• Capitalized interest: $1,517.74

Mustachian or not?: the Nest learning thermostat

On Sunday I bought a Nest. This is an expensive purchase with potential Mustachian implications. Let's get down to it.

What's a Nest? The guy who designed the iPod decided he was going to design a thermostat — essentially, Nest is the iPod of thermostats. It learns your schedule and what temperature you like from just your adjustments. It knows when you leave the house and adjusts temperatures accordingly. It connects to wifi, keeps track of stats, and allows you to set it remotely from your smart device. And it looks really slick. I encourage you to watch the video and learn for yourself how awesome it is.

Nest sells for $250. It is a ton of money. It would be a ton of money even if I didn't already own a programmable thermostat. The big question is how I can possibly justify blowing $250 on something I don't need, when I am trying to live according to the precepts of Mr. Money Mustache.

I was thinking about my thermostat before I knew about Nest. I thought it would be a good idea to start paying closer attention to heating and cooling bills. I decided there must be some Linux-based thermostat or something I could get my hands on, connect to wifi, throw together a web interface. Maybe I'd have to build a thermostat myself out of a microcontroller. It would be a big project. I decided it was definitely something I was interested in but I wouldn't have the time to embark for a while. So I tabled the idea.

Then I heard about Nest. It's everything I wanted and more. I really don't know why I got so excited about a thermostat. The fact that I thought it up about two weeks before I heard about it — it was too perfect, and my brain decided I had to have it. This was before my conversion to Mustachianism. Even once I started this blog, I didn't want to give up my Nest, even though I knew I'd have to fess up afterward.

The answer to this post's title question is obvious. It's not Mustachian. A true Mustachian would make do with the thermostat he has. He would turn that thermostat down as low as he could tolerate, learn to program it so it would only heat or cool when people were around, and turn it down when he was leaving on a trip.

But with Nest I may be able to save money on heating and cooling even beyond the Mustachian-with-programmable-thermostat baseline. Specifically I'm thinking of the remote control ability. When we're out, we can set the temperature to 60 degrees, and schedule it on the fly to get back to 68 before we're home. Nest utilizes this little green leaf to denote temperatures that are more eco-friendly, to subliminally encourage you to turn the temperature down lower. And the auto-away functionality means I won't forget to turn the heat off when I leave the house.

I'll have two winter months of heating bill data to compare post-Nest results with. I am hoping to see a noticeable difference, but that's probably wishful thinking on my part. I'll post the info here when I have it.

This will be my last splurge purchase of 2011. Not to make excuses but I don't make many splurge purchases. In the new year I want to be diligent about exercising my frugality muscle. I'll have Buy Nothing Days, maybe even work up to Buy Nothing Weeks.

Most importantly, I'll try to avoid splurge purchases all together going forward. I'll post about the big things I want to buy before I decide to buy them, and really ruminate on the decision. You know, get it out there, make it public, maybe get some opinions. Give me the opportunity to step back from the consumerist brink and decide that, no, I really don't need that thing that I want.

Here's hoping I can make impulse purchases a thing of the past.

Weekly update 12/18/11

How am I doing with growing out my Money Mustache? It's time for a retrospective on last week. I think retrospection will be quite valuable so this may turn into a recurring thing. We'll see.

Grocery shopping

If you recall, my girlfriend and I have an $85/week budget for groceries. We've been consistently under budget and this week is no different. We made stops at Harris Teeter ($52) and Giant ($21).

Big-ticket items at Harris Teeter were buy-one get-one chicken breast ($10 for ~4lb), frozen berries ($4.5), shredded cheese ($5 for 3), sliced cheese for sandwiches ($5), and flour ($5 for 5lb packages, one each of bread flour and all-purpose). "Savings" at HT was nearly $30. Giant was mostly Gatorade ($4 for two half-gallons), cold cuts ($8), and dry beans ($3).

Last week I made chili in the crock pot and it was a big hit. I'm planning on doing it again this week, this time with dry beans instead of canned. I figure the crock pot mitigates the fact that you have to cook beans for >30min even after they're soaked overnight. That and it's more cost-effective to use dry beans. I'd like to post my recipe once it gets better after a couple of iterations.

Also last week I didn't make tuna casserole like I originally planned, so that's on the docket this week. That, chili, and sandwiches will probably comprise most of our meals. We've been doing sandwiches a lot since getting our bread maker — I can't wait to blog about it soon because it is fantastic (thanks MMM). I am really enjoying the sandwiches.

Selling stuff on the internet

I listed just a few books on Amazon this weekend. Sold one already, a text book from grad school, for $60. After commission, shipping, and buying some bulk bubble mailers, I should have around $30. Not a bad start.

I'm shipping it tomorrow. This was my first Amazon sale in a few years and they've streamlined their processes. I like that you can buy shipping directly through their site, they fill out the addresses for you and debit your Amazon account automatically. Easy peasy.

Now I just need to list the rest of my stuff.

Christmas shopping


This one is burning my Money Mustache off. I didn't have a plan going in, which in retrospect was a weak move. Luckily my family instituted a kids-only policy for gift purchases so Christmas doesn't completely wreck our collective budgets.

By my count I'm at around $220 including stuff I'm going halfsies on with my sister and girlfriend. I think I'll drop another $100 at least by time I'm done with the holidays, maybe more.

Luckily our overall spending (my stuff and joint stuff) is about in line with last month. I'm winning some and losing some but at least I'm still moving in the right direction.

Applying the theory of constraints to your spending

Adherence to Mustachianism entails the reduction — nay, the obliteration — of one's expenses. While Mr. Money Mustache has laid out myriad money-saving tips, frugality principles, and lessons to live by, the path toward Mustachianism is necessarily personal. Just because MMM tells you to bike doesn't mean he's going to sell your car for you, figure out how to adapt your lifestyle to one of a cyclist, and then give you rides to and from work in his bicycle trailer. You do the legwork yourself.

I'm the kind of guy who relies on gradual improvement over time. There's a part of me who wants to go cold-turkey on spending, turn the thermostat down to 65°F, run to work every day, and subsist on Ramen and PB&J sandwiches. That's not me though. Not to mention my girlfriend would break up with me after a week. So I'm trying to take an iterative approach to my spending.

My general plan was to identify the biggest expense that has the most fat to trim, then focus on it until it's meaningfully reduced or I hit diminishing returns, then repeat the process. I'm not the genius who came up with this first, though, I'm just applying an awesome management philosophy to Mustachian goals.

The theory of constraints is a management paradigm that's meant to keep an organization continually focused on its goal. It's based on the premise that achieving the goal has at least one bottleneck — one link in the value chain that's lagging behind the others.

Paraphrased from Wikipedia, the steps are:

1. Identify the constraint
2. Decide how to exploit the constraint
3. Subordinate all other processes to the above decision
4. Focus all effort on breaking the constraint
5. If the constrained has moved, return to Step 1

This is my strategy for reducing my spending over time. There will always be one or more things I'm spending too much money on, or I could find a better deal on, or a way to more efficiently spend my money to achieve my goals.

One of these days I'm going to take a high-level analytical view of my spending and expenses, and make a sort of theory-of-constraints road map. I want to be more explicit about what's on my docket for budgetary improvement, not least of all to keep myself focused.

But I wanted to get this out there sooner rather than later. The theory of constraints is a valuable tool for thinking about your budget as you make your way toward financial independence.

Cost of commuting: minimized

There's a reason this blog is called "Toward Mustachianism" and not "Doubling-Down On Mustachianism Hardcore Extreme". There are a lot of dudes on the internet who are more willing to live the frugal life than I am. No More Harvard Debt comes to mind, and I've been reading a lot of Dividend Mantra lately courtesy of MMM. I'm not gonna lie, these guys have frugality muscles that are way more developed.

I really like this simile of "frugality as a muscle". I'd characterize myself as a frugality girly-man, albeit with a latent goal of working out at the frugality gym more often. More on this later.

But it's not all bad. I didn't walk into this blog a completely hopeless high-income high-spending anti-Mustachian loser. Before I started down this road I held one Mustachian belief very strongly: commuting is the devil.

Eerily accurate map of New Jersey

I grew up in New Jersey — Springsteen Country, to be precise. Since I was a kid my mom commuted to north Jersey for work, somewhere around Poor Minorities and Hipsters; then later she worked in Executives Living in Mansions Driving Mercedes-Benzes (all too accurate). Her commute was (and is) between 60 and 70 miles one-way, for around two decades now. That's between two and four hours in the car every work day.

She's not the only one. My girlfriend's family lives in the same town, and her dad works in NYC (over 70 miles one-way). My childhood best friend, same deal, his parents both worked in north Jersey. Commuting is the culture of living down the shore — that or dealing with jackass tourists I guess.

Kids learn by example. I learned that, whatever the consequences, I'm not interested in a lifestyle that involves or entails commuting. When I got my job we settled on an apartment complex barely three miles from my office. Now that we own a house, the commute is about the same distance — a little over three miles. It's an easily bikeable commute with paths the whole way. I could even start running if I want to double-down on badassity.

Yes we're paying more to live in a nicer area. But we're making at least part of that up in reduced commuting expenses and more time at home. Even driving a particularly anti-Mustachian SUV (more on that later), I fill up maybe twice a month.

So you see, even if your focus isn't frugality qua frugality, your life can take on a distinctly Mustachian flavor. That said I'm definitely interested in streamlining our vehicle fleet, biking to work more, and spending less money on gas. It's that much easier when you decide to live where you work and work where you live.

How far away from work are you deciding to live?

Cable bill: lowered

Yesterday I called up Verizon to see about lowering my cable bill.

I kind of chickened out and didn't give the woman a hard time. I didn't threaten to cancel my service, mostly because I had no intention of following through and I'm a bad liar. And the woman I talked to was nice and walked me through the examples I asked her about, which included different combinations of lowering the service level of internet and cable.

The best savings I found was in keeping Triple Play, and reducing internet and cable to the second-lowest tiers. It turns out Verizon's internet-only option is still like $55/month on a yearly contract, and $70/month on a monthly basis. So it doesn't look like pushing to turn off cable is going to save much money, and it's definitely not worth the pain at this stage in the game. In the future I'll need to look up other internet options to see if dropping cable could ever be a reasonable cost-saving measure.

With my girlfriend's company discount, we're taking our monthly bill from $95/mo (after tax) to $70/mo (after tax). The door is still open later to call up and threaten to cancel my service. I need a better game plan for that though. Like knowing what Comcast is offering. Maybe calling Comcast up first and ask them what they'll offer me to switch. Many possibilities. But $25/month savings for basically the same thing is good enough for now.

Just to make me feel better, here's some numbers:

$25 monthly is $300 yearly. At a SWR of 4%, you would need a 'stash of $7500 to finance that difference forever. At a SWR of 3%, it's a $10k 'stash. So with one phone call I reduced the necessary size of my 'stash by somewhere in the ballpark of $10k. Not bad.

Everything in perspective.

To advance your due date or not

I got one particular thought-provoking comment from yesterday's post from Pat. I'll reproduce it here:

I still don't quite follow. Is it better to check the do not advance checkbox or not? My wife has some federal student loans that I would like to pay extra on each month so that we can decrease the total amount we have to pay over the lifetime of the repayment. Is this not possible with these federal loans?

The tradeoff between advancing your due date and not advancing your due date is an interesting one, and one I want to talk about in more detail. From what I've seen it's very peculiar to even have that as an option on loans, though it may be standard on Federal student loans, or student loans in general.

Before I get started I should come clean. In ranting yesterday I was a complainypants, which is the antithesis of Mustachianism. I want to apologize, especially to the Department of Education, who after all is trying to make my life and the lives of a lot of Americans a little better. Now that that's out of the way, let's talk about tradeoffs.

To answer Pat's second question right off the bat, it is possible to pay off your loan early so that you reduce teh total amount you pay over the lifetime of the repayment. The DoE is giving you extra options and extra decisions to make, which means your payoff is going to be more complicated but will wind up being better for you in the end. Let me try to explain with an example.

Long-Winded Example: Commence!

Let's say I lend $1000 to my friend Victor. Let's also say that I'm going to charge him 1% interest per month (12% per year) on the principal, and I'll compound it every month. But let's also say that I don't care when he pays me — I know he's good for it. So the first month goes by, I charge $10 interest, and add it to the loan. Now he owes me $1010. Then another month goes by, $10.10 accrues in interest, which makes his balance $1020.10. Say at the beginning of the third month, Victor pays me $520.10; now his balance is $500. At the end of the month $5 interest accrues, his balance is $505. And then let's say he decides to pay it off at the beginning of the fourth month, gives me $505, and he's done owing me money.

Over the course of his three-month loan, Victor wound up paying me $25.10 in interest. Most was from the original balance, but that ten cents was from other interest that accrued. Because I trusted Victor and I didn't make him pay a certain amount per month, he could have waited a year before paying me anything. All that time the interest would have been rolling and some would have compounded, so that he would start paying interest on interest on interest.

Now most financial institutions aren't as trusting as I was of Victor. After all, Victor and I go way back. And I don't trust all my friends that much. What if my friend Charlie wants me to lend him $1000?

Let's say I agree to lend Charlie $1000, but with the following stipulations. I'll charge him 2% interest per month (24% per year, because he's riskier than Victor), and additionally he needs to pay me $50 at the end of each month until his loan is repaid. So the first month I charge him $20 interest, he pays me $50, of which the remaining $30 is principal. Next month he owes $970, interest is $19.40; of his $50, $30.60 is principal, and at the beginning of the third month he owes me $939.40. And so on and so forth, Charlie keeps paying me the $50/month until his loan is gone after 26 months.

Notice how Charlie just paid the minimum. He could have paid additional money toward his principal and reduced his term duration and total interest paid, but he didn't. Even if he did I would have made him keep paying the $50/month, but he would have gotten out of his loan sooner. By the way, Charlie paid me a total of $289.87 in interest.

Okay I hope everyone is still with me so far. We got through the free-for-all case and the standard fixed-term loan case. Now for the advance-the-date case.

My third friend, Mike, is in between Charlie and Victor in terms of risk. So I make him a deal: same terms as Charlie, so that he has to pay me $50/month; except that if he pre-pays, I'll let him "advance the date". Every extra $50 he pays me will count towards that $50 I'm expecting at the end of each month. If one month he pays me an extra $500, I won't make him pay the $50 at the end of each month for ten more months. And I'll apply his payments first to interest, and then apply the remainder to principal.

Let's see what Mike does. First month is the same, his $1000 accrues $20 interest, he pays me $50 at the end of the month, $30 gets applied to principal, now he owes me $970. Next month interest is $19.40, but let's say he pays me $89.40 since he wants to shed this debt more quickly. $19.40 applies to interest, his principal is now $900, and I let Mike know he doesn't have to pay me his $50 at the end of the next month. Now, what happens at the end of the next month?

At the end of the next month, $18 interest accrues. Mike is trying to decide if he wants to pay the $50 — he doesn't have to, but maybe it would be best for him. So let's play out the example:

Say that Mike decides to pay up. He pays $50, $32 gets applied to principal, so now he owes $868. At the end of the next month $17.36 of interest will accrue. So that's $35.36 for the two months.

Now let's say Mike doesn't pay up. After all, he doesn't have to. He lets that first $18 interest recapitalize so now he owes me $918. By the end of the second month, the interest on that amount comes to $18.36. In total he's owing me $36.36 for the two months -- a full dollar more. Part of that extra dollar is interest from the recapitalized interest, and the other part is because he didn't pay down any principal during the second month.

What would you want to do if you were Mike?

Whew! Now let's talk about real loans


That example went on a little longer than I originally intended, but I think it illustrates exactly what's happening with the "advance the date" option. The DoE is giving people enough metaphorical rope to hang themselves with. When you advance the date, you're giving yourself flexibility. Maybe some emergency will come up and you'll be glad you don't have to make a payment this month. After all, you can still make payments even though you don't have to.

But, for me, the trade-off is always one between giving myself flexibility and creating commitment devices for doing what I know I should be doing. Is it nice that I don't have to make a payment on my big loan until February? Yeah, I guess. It also means I have less incentive to make sure I pay up on time. If I forget then interest will just silently accrue like a slow carbon monoxide leak, eventually suffocating me.

So my recommendation, for those of us who have an "advance the date" option on our loans, is to strike a balance between flexibility and forced commitment. Remember to make the minimum payment at least every month even if you don't technically need to. When you make an extra payment, advance the date only part of the time. As long as you're making your monthly payments it doesn't hurt you to advance the date, and you have a "just in case" ready if an emergency comes up and you need the cash. You'll still pay the loan off just as quickly. But beware of the temptation to slack on your minimum monthly payments, because with that only comes many more years of debt.

I hope that helps.

Tricksy student loans

Today I found something about about my student loans that I think is just diabolical. Or at least it's not what I expected, so I'm going to lay it all down and hopefully we'll all learn something from it.

Let's start from the start. Last month I logged into myedaccount.com (for Federal Student Loan Servicing) only to find that I was a day past due. Now, I had signed up for automatic debiting; it must not have gone through yet. Not to fret, I schedule a manual payment for the full amount, $385.70, or twice my monthly payment (maybe I was a month overdue? :-/). I ignored the warning that for those signed up for auto debit, a change to their system causes the debit to come the day after the due date, but it doesn't count as being late, so don't worry. Sure enough the next day they withdrew $192 or so per the automatic debit.

That's all well and good. I had the cash to cover it and I was planning on making extra payments anyway. But I noticed that the "Next Due Date" updated to 2/7/2012. I didn't think much of it at the time. It's been niggling in my brain ever since, so I checked it out today. Sure enough, $145 of interest has accumulated over the past month, and I didn't have a payment due on 12/7. I have no doubt that interest is going to accrue until my payment date, at which time my payment is going to be paying entirely interest, and some interest will probably even recapitalize to the principal. Unless it doesn't work like that and it's just more interest to pay off the next month. Still.

I had assumed this loan would be like other fixed-term loans like a mortgage or car payment. The monthly payment stays the same, except the amount for principal and interest changes by the month. If you pay extra, it pulls in your final payment date, but you still make a payment every month.

I didn't know another loan arrangement even existed. Maybe it's nice that an extra payment will buy you a month of no payment. However, I consider it diabolical. The thought that interest would accrue for another two months such that the entirety of a monthly payment would go toward interest, reducing zero dollars of principal, is repugnant. Pre-payment results in pushing your loan off into the future, rather than pulling in the date where you will be debt free.

I've never heard of this kind of arrangement. I did some Googling but I don't even know what to search for. Does anyone know what's going on? Is the government trying to be nice? Or do they want to keep this crushing debt load over my head for as long as possible?

Knowing what I know now, I'm going to log in a few times a month and make payments as I have the money. I want to dispatch my $5900 loan first but I'd rather not let the interest build up too high on this one while I'm at it. And it will probably make me feel better to continually chip away at my big block of debt.

UPDATE: Apparently there is a "Do Not Advance Due Date" checkbox option on manual payments. I must have missed it before! From the website:

Unless you advise otherwise, your due date will be advanced one month for every full payment received (see example below). If you do not wish for your due date to be advanced more than a single month, regardless of payment amount made, you need to check the "Do not Advance Due Date" checkbox.

 Now it seems like my creditors are just trying to be nice. I should not be so quick to assume the worst intentions :)

Should I open a ShareBuilder account?

I've had an ING Direct account since January 2006. It is fantastic as I'm sure most of you know. High interest, great website design, easy to use, easy to move my money around. Now you can even order check books which you used to not be able to. Yes, I'm very happy with ING Direct.

I've been debating opening a ShareBuilder account for a few years now, ever since they first offered it in fact. ShareBuilder is ING's brokerage service. From what I understand you can purchase fractional shares, they charge low commissions, and even lower commissions if you invest automatically.

I've avoided it because I've never had much money saved up, so I've never wanted to tie my meager savings up in stocks. I've definitely had the goal of building a portfolio but I've also been liquidity constrained for most of my adult life. This, in turn, is because I've been a spendypants. Since my conversion to Mustachianism I'm not as much of a spendypants though I'll still be relatively liquidity constrained because of my massive looming student loan debt.

Here is my dilemma:

I got an email from ING that if I open a ShareBuilder account before 12/23/2011 and deposit at least $100 (and have the appropriate promotion code), they will credit $75 to my account. Pretty sure I also have to make at least one trade. According to the fine print my ShareBuilder money won't be available for withdrawl until 120 days from the date it's deposited; I assume that applies to my $100 as well as their $75. If I were to deposit $100 and then wait three months and then withdraw $175, I'd feel kind of dirty since I'm deliberately cheating the system. And although that is a massive return, the securities could lose value, again assuming I need to make a trade to get the $75.

The other option is roughly equivalent to taking a $100 step in the wrong direction from paying off my student loans. Drop the $100, wait for the $175, and then buy shares of stock I'd be interested in owning anyway. Get a head start on investing. I don't like taking my eye off the prize though. $100 in the context of $31,000 doesn't seem like much, but 6% guaranteed returns (the rate on my loans) is hard to beat.

I have a similar situation involving my retirement account. I've already reduced my 401(k) contributions from 7% of my salary to 5% of my salary — the minimum I need to get all my company's matching contributions. Why not turn it down to zero? Because that would be stupid. I would be leaving a 4%-of-my-salary matching-contribution-sized pile of money on the table.

Then, is foregoing ShareBuilder leaving money on the table as well? I'm not so sure. First, I'm pretty sure there will be similar ShareBuilder promotions in the future. ShareBuilder may not be the best brokerage for me, though I'm leaning that direction at this point. Honestly, $175 isn't a lot of money to start investing with. Definitely small potatoes.

In the end I don't know that I'll be opening a ShareBuilder account this month. I need to keep throwing money at my student loans until they go away. What do you think?

On the market for a Universal Men's Grooming Device (UMGD)

We have a problem. My cheap plastic beard and mustache trimmer I bought from Macy's four years ago is dead. It ran out of battery after having its terminals badly corroded so that charging is no longer possible. At the same time, my beard will not stop growing so that I'm playing beat the clock before I look unacceptably unkempt and slovenly. I need a Universal Men's Grooming Device forthwith!

I'm looking for something of high quality, that will last virtually forever, but not something overly expensive. In other words, something that Jacob would approve of. I wasn't sure the difference between clippers and trimmers, but Yahoo Answers (!) told me that trimmers are probably what I want. That collapses the field somewhat.

MMM does not specify which model of UMGD he owns, though I can see from the picture that it is an Oster. My office mate at work told me he has had not one but two positive reviews from his friends regarding the Wahl brand. Here are two different trimmers from Amazon that look acceptable and have gotten mostly positive reviews.

Anyone have ideas on brand or models? With Amazon Prime two-day shipping, if I buy one by tomorrow afternoon, that means I should have it by Friday. It will be an uncomfortable few days but I'll tough it out because it's the right thing to do. If you have pertinent information I want to hear from you ASAP because otherwise I'm going to flip a coin.

Thanks in advance, fellow Mustachians.

Expense: student loans

The mortgage isn't my only massive pile of debt that I have to deal with. I have quite a bit of student loan debt from undergrad and a year of grad school. Let's dive right into the numbers:

• Direct Loans (US Dept of Ed): $25,706.29
• Sallie Mae: $5,922.31
• TOTAL: $31,628.60

Listen, kids. Be extremely wary of student loans. I went to a "New Ivy" (whatever that's supposed to mean) that cost around $40k/year. I had a $15k/year scholarship. My parents paid the difference. But included in my financial aid package were Stafford loans, one per semester. I only ever took the government loans, which I think I had to in order to get any financial aid. My point is that I didn't think much of it at the time, and while it's not a huge crushing debt load it's pretty substantial and definitely something I have to deal with.

I studied engineering and economics in undergrad. Economics education has this brainwashing effect when it comes to money and financial decision making. I'm not going to rant too much about this today, but here's the anecdote you need to know:

Some time in your first or second year of macroeconomics, you come across Milton Friedman's Permanent Income Hypothesis (PIH). He was theorizing about the determinants of a person's spending in a given year, and decided that a rational actor would have some expectation about his future path of earnings, and then consume some "average" amount so that he would end his life having spent all his money (I'm paraphrasing here). It turns out that the PIH has approximately zero predictive power, which is to say it's complete malarkey, but they still teach it in undergraduate courses. Also Friedman was making things up to "show" why a temporary tax cut won't increase consumption because he had an ideological bone to pick — just sayin'.

Anyway. When they teach you about the PIH, they also explain how debt of all kinds can be "rational". When you're young, you don't have much human capital and your earnings are comparatively low. You expect your future earnings will be higher. You can borrow money now and pay it back with your future earnings. People seem to prefer steady levels of consumption rather than ups and downs (assumption alert!). Ipso facto young people should go into debt.

That's the gyst of it anyway. I was fully expecting to carry along my student loan debts as long as possible. It's cheap money, right? Maybe add a car loan to that while I'm at it. I may as well enjoy my future richness today.

No, that is stupid. I owe a lot to MMM for showing me the light, that my economics education had me worshiping false idols and making me a slave to creditors. Okay I've gotten ahead of myself, let's get back to the numbers.

Here's my monthly expenditures on student loans:

• Direct Loans (US Dept of Ed): $192.85/mo
• Sallie Mae: $69.88/mo
• TOTAL: $262.73/mo

This is a substantial chunk of my expenses, not to mention a big negative number keeping my net worth down and preventing me from building up any investments. It doesn't make sense for me to put my money in the market until these are paid off. To generate $262.73/month from my 'stash I would need $78,819 invested if I'm using a 4% Safe Withdrawl Rate (SWR) or $105,092 with a 3% SWR. That is insane. I don't know how they're getting away with charging me 6% interest on student loans, but they are, and that's after I consolidated.

The student loans have to go. Luckily I'm pulling down around $1300/month in discretionary income, which is enough to vanquish my student loans in two years.

GOAL: Pay off all student loan debt in two years, by Dec 31, 2013

I'm hoping to do it sooner too. I'm expecting something of a holiday bonus come Christmastime, plus a sizable tax return come April, so between those two and my regular paychecks I want to pay off the smaller loan by next spring. That starts a little debt snowball and I can throw everything at the big loan.

I'm really itching to start investing. That's another incentive to double down on Mustachianism and really try to squeeze my expenses lower and lower. Every additional dollar I can save now means I'm pulling in the date when I'll be free of student loans, and that means I can invest the shit out of some shit. I can't wait.

Grocery shopping 12-10-11

First a shout-out to MMM for his recent shout-out. In case it's not obvious I'm prone to hero worship. It's kind of awesome that I'm on the master's radar. I'll try not to disappoint.

Let's see. Today was a mixed bag for Mustachianism but a good day all around. I went to get a hair cut — not very Mustachian — $17 with tip. I should have bought a Universal Men's Grooming Device weeks ago, but I didn't because I convinced myself it was small potatoes compared to getting my grocery bill down. I'm torn between feeling like I have to do everything correct right now and accepting slow incremental improvements. In any case my company's Christmas party is this evening which meant I had a reason to go out and get a hair cut.

Then came grocery shopping. We had $30 carry over from last week's budget, plus this week's $85. Spent a surprisingly low $38 at Harris Teeter: the big ticket items were Progresso soup, crackers, lunch meats, and ground beef. Don't worry, we bought everything on sale, as usual — we saved $28 on our $38 this trip. Dinner this week is going to include (home-made) pizza, tuna casserole (mostly for leftovers to freeze), Asian stir-fry, and chili. We also stopped by Trader Joe's to pick up vegetables and eggs. I splurged on a few different kinds of chocolate since I felt like we were operating well within our budget, so the bill came to $24. On one hand I like the idea of rewarding ourselves for spending less money, but that's hardly Mustachian and those extra dollars would be really nice too. I'm looking to resist those urges in the future and have frugality be its own reward. We'll see how that goes.

So we have $30 + $85 - $38 - $24 = $53 left in our budget. Not bad. That's well more than we need to cover a run to the store in case we forgot something. I'm debating whether to allow surplus grocery budget money to go towards alcohol since we have zero wine in the house. That's a decision for another day.

Selling things on eBay / Craigslist / Amazon

I, like most Americans, have entirely too much stuff. Luckily I live at a time when it's never been easier to divest myself of my excess stuff and make some money in the process. Mr. Money Mustache got me thinking about Craigslist; a few years ago I bought and sold some items on eBay; and I unloaded a ton of extra books on Amazon during my high school / early college years.

Here is a load of stuff I'm looking to get rid of, and enhance my 'stash in the process:

Those boxes on the right are all Beanie Babies. Both my dad and my girlfriend's dad were collectors back in their hayday, which introduced me to the concepts of market bubbles and rampant consumerism at an early age. There are stacks of books I'm no longer interested in, including some from grad school that I hope are still worth something. A coaxial cable still in its packaging; a stock video card that came with my Dell; an iPad case; a Dell keyboard; and a laptop lap pillow surface thing. This isn't everything I want to get rid of but it's a start.

Most everything I know I can sell on some combination of eBay, Amazon, or Craigslist. The Beanie Babies, though, are going to be trouble. From my cursory research on eBay, there's virtually no market for them anymore. This doesn't surprise me. My strategy is to go through these boxes and look for relatively more sought-after Beanies, unload those on eBay, and then donate the rest at either Toys for Tots or Goodwill or whatever charity can make use of them. (I don't want to just dump them on a charity who can't use them; that's how I came to possess them in the first place.) If anyone has a better idea I'm all ears.

With the holidays fast approaching I don't know when I'll make time to list some of these piles. I need to man up and make it happen. I know that it's not hard or time consuming, but for someone who hasn't done a great deal of online sales, it seems daunting when it's nagging in the back of my mind.

Here's hoping my new-found readers will keep me honest.

Lowering the cable bill

Cable is a sacred cow around here. My girlfriend has been very supportive of my new-found frugality, but she has threatened me with terrible consequences if I so much as talk about trying to axe television. I'm no masochist and so I've largely left this expense alone.

I was surprised when yesterday she suggested that we could save some money by bumping down our internet speed one or two levels. We have FIOS and are paying $95/month for a triple play plan, after her company's discount. I logged in to our account and priced out a few different options.

First, we're signed up for the highest tier of internet, 35 mbps up, 35 mbps down. That's total crap. We haven't seen anything approaching those speeds. Okay, maybe it's because we connect over wifi; I just ran a speed test and the downlink said 25 mbps. But still that's not 35 and the up was only 3.5. Not acceptable. In any case I don't need that much bandwidth. This isn't high school anymore and I'm not ripping off terabytes of illicit Hollywood wares, you know?

The top-tier internet is +$10/month. Bumping the TV down to a lower level would net us $20/month. The only interesting channel I found that we'd lose is G4, and we never watch that anyway. Even these prices are misleading since Verizon only shows you the "first month" price. After two months it's going to be $70/month, and after taxes we're looking at a savings of roughly $20/month.

I think I can do better by calling up customer service and giving them a hard time. I'm going to lead off telling them how they've gypped me on the internet. "I'm not paying you $10/month extra so you can give me 25 mbps down and 3 mbps up" I'll tell them. "This is not acceptable. How are you going to fix this?"

I wonder how much I can save per month. I'll report back with my findings.

Grocery budgeting

Yesterday I mentioned that the biggest way I saved money in November was instituting a grocery budget. It all started, as most things here do, with the master, MMM, and his post about grocery shopping. Really good info, highly recommended. Jacob over at Early Retirement Extreme also had a grocery post and I internalized that too.

Here's what we do. Each weekend the girlfriend and I sit down and go over weekly specials. We'll see what meats and main course items are on sale and target three to four meals. Maybe a pasta dish, something with beans or lentils like lentil soup, grilled chicken with vegetables, that sort of thing. The other days and lunches are leftovers. Go through the flyer, look for specials, make a list of what we want to buy. Check the refrigerator and cupboards for staples we're running out of: milk, eggs, tuna, pasta, that sort of thing. Put anything that's running low on the list too. The grocery store we frequent often has this or that on super sale, like buy-two-get-three-free or buy-one-get-one-rings-half-off sales. We stock up if it has a long shelf life and it's something we would want to buy anyway.

We have a budget of $85/week. Why $85? Well it used to be $50/week (big round number), and we would get this CSA-like box of fruits and vegetables delivered once a week for around $35 (a bit expensive, but better quality produce than any of the grocery stores around here). But the vegetables built up too rapidly and since we can choose which weeks we want the veggie box and which weeks we don't, we just made it part of the weekly budget. I don't explicitly total the prices of our grocery list before we leave for the store — it's pretty easy to tell when your list is too long if you have it all written down in front of you.

We go together to the grocery store, she drives the cart and I navigate. Which means I read through the list and  call out a few items at a time corresponding to what types of things we're near. Like "onions broccoli chicken" when we start and "pasta beans cereal" in the middle aisles. Sort of like Rain Man if he went grocery shopping. And I'm writing down the prices of things and totaling them and crossing them off my list.

By time we check out I know to within a dollar or two how much we're going to spend. Here's a bit of advice: always always always check your receipt. Two or three times the specials didn't ring up correctly and we were almost overcharged. Vigilance will save you money.


We've been doing this for the past four weeks and we've come in under budget every time. And guess what? We still have a fully stocked refrigerator and pantry. I don't know what we were spending hundreds of extra dollars per month on before, but I don't miss it. During week #2 we even splurged on filet mignon — half price of course. Not strictly Mustachian but hey, I'll take it.

Where does this leave us financially? Here's our grocery spending for the past few months:

• June - $973 684*
• July - $606
• August - $628
• September - $807
• October - $831
• November - $372

These are ball-park numbers but they're mostly categorized correctly. But do you see that? What the hell were we spending money on? How are groceries that expensive? Well, they aren't, I was just being a wussypants. We spent an average of $769 $711/month on groceries from June to October. November's bill was less than about half that.

In all, a huge epic win for Mustachianism.



* Errata: I found some items that Mint didn't categorize properly, like a liquor store purchase and home supplies at Costco.

Upper bounds on monthly spending

I spent a lot of time last month on Mint. Mint.com, for the uninitiated, is a personal finance aggregator of sorts. It automatically pulls data from all your financial accounts and gives you a command-and-control view for situational awareness over your finances. I highly recommend it. Though it's not the be-all-and-end-all of personal finance, I'm happy enough with it that I've never thought to look for alternatives. And yes, at first I was leery of the security implications of having all my bank account information (and passwords) in one place. I'm not anymore and you shouldn't be either.

Mr. Money Mustache planted the seed in my brain to spend less, cut expenses! Every day I found myself on Mint, agonizing over my purchases. Silently cursing myself for going out to lunch at work twice at the beginning of November. "No more!" I resolved, no more blowing money for lunch. In October I was lax with my finances and I let a credit card bill slip for two days. I saw the late charge on Mint, called Bank of America and got them to refund the fee. I'm not worried anymore about forgetting to make payments. For one, Mint has friendly automatic reminders, and secondly I'm way too interested in my finances now. Mint makes real life like playing a video game, and I'm hooked.

I'm going to give you the general trend of my monthly spending, but first a word about the way my girlfriend and I do our finances, because otherwise the numbers will have no context. We adhere to the Yours/Mine/Ours strategy of joint finances. She has her personal bank accounts, and I have mine. Then we have joint checking and savings accounts for expenses and joint purchases, like furniture and groceries. Our paychecks are split and direct deposited into the joint account as well as our own accounts. This was the arrangement we settled upon when we first moved in together in our last apartment and it's been working pretty well so far. So all my Mint numbers are for my accounts and the joint accounts — good enough for our purposes.

Here's some numbers. I'm starting in June since that's after we bought our house and the numbers got relatively "normal":

• June - $7,981
• July - $9,085
• August - $6,682
• September - $9,375
• October - $8,841
• November - $4,545

These are some high spending numbers, I'm not going to deny it. November was the first month after I converted to Mustachianism, and you can see the difference. Now there's a few caveats, we did have some big payments we needed to make that are skewing the numbers. June was car insurance for the year ($870), July was a bunch of car repairs and maintenance work ($1500) and earrings for my girlfriend's birthday (not telling), September was getting the house exterior painted ($2400), and October was a storm door and a bunch of handiwork around the house ($1100). That said, the vast majority of the expenses were little things, various assorted shopping, buying groceries multiple times per week, etc etc.

So I'm hopeful. Here we can see a massive improvement from a previously cavalier financial situation. All I really did was scrutinize every purchase, stop buying lunch, and set a budget and weekly plan for grocery shopping. And I'm sure I can do even better, but damn, I can't believe I was spending so much money.

Expense: the mortgage

To become financially independent we need to save up a ton of money. And for that we need to lower our expenses. My number one expense — the great big mortgage-sized elephant in the room, if you will — is my mortgage.

I wanted to own a house before I got started down this path toward financial independence. Renting never rung true for me, felt too much like "throwing [my] money away" (though it isn't really). Couple that with low interest rates, low housing values, building equity, and the mortgage interest deduction, and surely you can see why I was interested. My girlfriend and I closed seven months ago, in early May. We're paying a bit less than twice as much, in the same neighborhood, for three times the space. I think it's a great tradeoff (or else why would I have done it?), but it will seriously affect my ability to build a 'stash.

Let's get down to numbers:

• Total Principal & Interest: $2170
• Property Tax / Escrow: $630
• PMI (included in escrow): $150
• Principal (this month): $520
• Interest (this month): $1650
• Total mortgage expense per month: $2800

Of course the amount going to principal and interest changes every month, and I rounded the numbers to keep things simple. The house is worth around $450k and we put 10% down, which means we're dealing with PMI. Sucks, but I'd make the trade-off again if I had to.

Now, in the context of Mustachianism, keeping expenses low, saving money, etc. etc., splurging on a super awesome house isn't the best thing to do. This is kind of a moot point since Mustachianism wasn't on the radar when we were buying the place, and I'm absolutely not interested in trading down. So this expense is going to stay more-or-less intact until it gets paid off.

The long-term plan is to pay the mortgage off early and thus reduce our expenses to a relative trickle. How early? I don't know, but I'm definitely going to set a stretch goal for it. Ballpark, I can shave around 15 years off by making an additional $1k/month payment. Totally feasible once I get my student loans paid off. But I'm getting ahead of myself.

What we can do in the medium-term is eliminate our PMI payment. Personally I find PMI (Private Mortgage Insurance, to the uninitiated) repugnant — not so much because it's this extra fee tacked on, but because that's not how loans should work. If you don't like that I'm a higher credit risk, charge me a higher interest rate. If you want to take out insurance on your loan, then you pay for it. But you make me pay for it? Not cool, guy. Anyway.

If we don't make any extra payments, the PMI will go away by itself in 2017. I'd like to shave a few years off that number. I'm going to be a little conservative since I'll be dispatching my student loans first. Then I want to tighten this goal up a bit since I think we can do better.

GOAL: Eliminate PMI in 3 years, by 2015


Not too shabby. Now, eliminating PMI entails getting our Loan-to-Value ratio at or below 80%. That means either decreasing the loan amount (making extra mortgage payments) or increasing the house value. Increasing the house value is actually a big option here. First, and less interestingly, I'm counting on the housing market being at least a tiny bit better in 3-5 years. But that aside, the house we bought is sort of a fixer-upper for its neighborhood. The guy who owned it before us owned a number of properties and held them as rentals. Didn't take great care of them. Little things like not keeping up the exterior paint; leaving the exterior light broken and dangling while the house was on the market; spraying the walls, trim, and ceiling of the entire house with the same drab beige color; saying he'd be willing to go make concessions on the sale price before we made an offer, to account for the above (and more), and then going back on it. Honestly he was a pretty big tool. Our HOA president has horror stories of dealing with him, how he was two years late on his HOA dues, how he forgot to turn off the water to the exterior faucets in the winter, on not one but two of his houses in this neighborhood, and had the pipes burst. And then the HOA president had call up the water company to get things sorted out. In the end a reason we got this house for the low low price we did was because the dude was going bankrupt. Turns out he overextended himself and he had to liquidate his entire holding of over a dozen properties. Score one for karma. But I digress.

So another reason we could buy this house cheaper than others in the neighborhood is because very little has been upgraded. The roof is original and should be replaced in the next year or two. Kitchen is original, and honestly it's fine, but all the other houses I've seen for sale have stainless steel appliances and granite counter tops. (At this point I feel obliged to say something about how living in a high-spending neighborhood can turn you into a high spender yourself. What they say is true, and my only hope is constant vigilance.) The central air unit is original and could go at any time but otherwise doesn't need to be replaced. Carpets are builder grade and worn out, so I want to replace them eventually. We replaced the first floor carpet with hard wood before we moved in, thanks to a very generous gift from my girlfriend's dad. I think that's it for the big stuff. There's a lot of little stuff too, some landscaping, painting, window treatments, etc. All in all there's plenty that we can work on that will increase the value of the house. I'm not nearly as handy as Mr. Money Mustache, but I need to learn. It's the only way not to break the bank with all this pending home improvement work.

That's a good enough window into my housing situation for now. More to come on expense reductions later.

Goal #1

Why am I overhauling my life for frugality instead of continuing my path as a middle-class consumptionist suburbanite? Mr. Money Moustache struck a chord in me and awakened a passion I forgot I ever had.

I was six years old when my mom took me to the local bank. She opened up a savings account for me and with it came a passbook. Each time we went to the bank they would print a record of deposits and interest payments in the passbook – super high tech for 1993, I'm sure. I loved seeing a few cents at a time accumulate every month on the $100 or so I had from birthday and Christmas gifts. And then, when we deposited some more money, instead of $.09/month, they'd pay out $.10/month! Getting paid to do nothing? Just from storing my birthday money at the bank – money my mom wouldn't let me touch anyway. Talk about something for nothing. I was hooked.

I knew that the more money I saved, the more I could make in interest. I thought about how cool it would be to win the lottery. With $2 million in a savings account (I didn't know about other investment vehicles at the time), the interest payment would be like $70k/year (hooray for mid-90s interest rates), which was/is a pretty respectable income. And I wouldn't even have to work! Now, how to win the lottery...

And that leads me to:

GOAL: Become financially independent

I want that salary-sized interest payment from my massive 'stash. What MMM has shown me is that there's another way, one where the odds aren't stacked against me (as much). Cut your expenses. Raise your savings rate. Forego material possessions you don't need and conspicuous consumption that's holding you back, and build your 'stash like it's your job.

I know that any goal worth it's weight will have a deadline or a timeline associated with it. This is a big one though and I've been finding it tough to make assumptions and start pinning down specifics. I don't know how marriage and kids are going to fit into my plans for financial independence, and there's a lot of short- and medium-term goals that will lead to The Big One, like paying off my student loans and paying off my mortgage. But I think 10 to 20 years is a good range to target.

Yeah, let's update my goal with an upper bound, to keep things interesting.

GOAL: Become financially independent within 20 years (by 2032)


Much better. By 2032 I want passive income from my investments to equal or exceed my annual expenses. Good goal if I do say so myself. Now let's make it happen.

New shower head

This weekend I installed a new 1.5 gallon-per-minute shower head in the master bathroom. The thought that maybe I should replace the shower heads that came with my house had been surfacing in my brain for a few weeks or months. Last week a blog post from Mister Money Mustache himself convinced me that the time for shower head replacement was nigh.

I was surprised and delighted to read MMM's post. Not only did he lay down a bunch of calculations demonstrating a favorable cost-benefit analysis, he even recommended a cheap super-low-flow option off Amazon. With Amazon Prime it was here by Friday.

Check out how awesome it looks:

My new 1.5 gallon-per-minute shower head

Super awesome indeed, like a shower head out of Star Trek. It works great too. I thought I'd have trouble convincing my girlfriend that a new shower head is a good idea, but she prefers it over the old one. It's a win-win-win situation.

I didn't do any calculations myself, but seeing as how my Annual Household Shower Minute Total is significantly higher than MMM's, I'm looking at at least a $40/year savings and probably a bit more. Granted, for my as-yet-unoptimized household budget this is small potatoes. But it's something I've been wanting to do and it's still a net win for Mustachianism. I'm going to go order another one right now for the guest bathroom.

Thanks Mr. Money Mustache!

It begins

I've been following Mister Money Mustache for maybe a month and a half. I was hooked almost immediately, specifically after reading this post, which I'll get around to writing about in great depth. Mr. Money Mustache promises a life of joy and freedom to anyone willing to hunker down, spend less and save more, and wean themselves from a lifestyle of consumerism. It sounds too good to be true, and it almost is. Achieving financial independence in one's 30s isn't something the average middle-class American would call "easy". Many would say it's impossible. I'd be surprised if more than a handful of folks considered it on their own, and just a short while ago I was one of them.

Mister Money Mustache has shown me the light. That even an average guy like me can work hard and plan for a life of leisure decades before I otherwise "should" retire. There's something profoundly appealing to me about having a 'stash big enough that I can live off the interest forever. It's entirely possible — it will be difficult, but I can make it happen if I cast aside my wussypants ways and live the life of a Mustachian.

I'm starting this blog for a few reasons. One is as a commitment device, as a way of keeping me honest when the initial shine of a frugal lifestyle wears off. Second is because I realized I really enjoy telling everyone I can about the things I'm doing to save money, about the progress I'm making toward paying off my student loans, about my plans and goals for my future 'stash. I'm sure I enjoy talking more than my friends and family enjoy listening, so the internet will be my new outlet. And third, I hope my story can be helpful to others. I want to chronicle the specific steps, the day-to-day ups and downs of trying to lead a quiet normal life while sticking to the Mustachian ideal as best I can.