How I Retired at 30
By Farnoosh Torabi | Yahoo! Finance
Meet Mr. Money Mustache. Hundreds of thousands of readers follow his bold advice on his self-titled blog — and for good reason. He has cracked the retirement code while many of us were struggling with student loans. At 23 years old he began working and saving…and saving some more. By age 30, he’d amassed some $800,000 in cash and investments, and then entered early retirement.
How, exactly? I flew to his home in Longmont, Colorado, where the now 38-year-old lives with Mrs. Money Mustache and Mustache Junior, for the scoop.
The Rule of 70%
While a popular rule of thumb is to try to save 10% of your income every month, in the race to retirement Mr. Money Mustache saved and invested close to 70% of each paycheck until he had about $800,000 racked up. At that point he felt comfortable quitting his job, as the dividends from his stock portfolio and income from a rental property were finally enough to support his family’s lifestyle. “I just figured based on a 4% withdrawal rate of your savings, if you have $800,000 saved, you could draw an income of $32,000 a year from that. Our needs are less than that, so we actually don’t need $800,000 in savings.”
But wait. How does the family live on less than $30,000 a year with a child? “It’s by cutting out stuff, the invisible stuff, that’s most expensive. I kept the headline items, like a house, trip to Australia and good friends and good food, but I cut out stuff like spending $50 on coffee a week or having a brand new car every few years,” he says. “We do a lot of stuff ourselves. We go to parks. We do music together. We ride our bikes, go to the library. Kids love it. Costs almost nothing to do.”