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How This Family Man Retired Early At 32

By Ellesse

If you’ve been thinking of how to retire early and live well, or be financially independent at a young age, this family man’s story will definitely give you an insight.

Affectionately known to his readers by the moniker Mr Money Mustache (“MMM”), MMM currently lives in the United States and is married with a young son. He and his wife retired in their early 30s (around 2005) in order to become parents and they’ve been going strong since then.

What’s most amazing is, they didn’t exactly retire with a million dollars! Contrary to what most financial advisors’ tell you to! And yet, they’re able to have a comfortable, wholesome lifestyle and raise a healthy kid at that. They’ve also paid off their primary house’s mortgage a few years after quitting their jobs.

So how did he do it? How did this family man retire so early when most people are still struggling with their bills? Join me as I get him to spill the beans in this interview.

Hi MMM, it’s great to have you with us today! Before we go into the interview proper, can you tell us a bit more about yourself and how you came to early retirement?

My wife and I both grew up in the Great Lakes region of Ontario, Canada. I got a Computer Engineering degree and my wife (known on the blog as Mrs Money Mustache) ended up with a Management and Information Systems degree.

When I graduated and started working as a software engineer in Canada, I soon realized that the great advantages of higher salary, lower cost of living and nicer weather & scenery were available if I moved to the United States. So I moved to Colorado and fortunately, my future wife decided to join the fun as well.

We enjoyed our new jobs for a few years, but realized that life is too easy for professional workers in the US. With higher incomes and lower costs, the logical choice is to save most of what you earn, rather than adopting an incredibly high-consumption lifestyle to use it all up. So we started saving, and then realized if we saved enough, we’d be able to retire from real work before starting a family, giving us a chance to be home with our future kid(s) for all of their most important years. We felt this would be a worthwhile improvement over splitting our efforts between parenting and high-energy careers.

Yes, both of you are amazing savers! I noticed you’re able to accumulate a combined household stash of $720,000 in just 9 years when you retired! How did you figure out this amount was enough?

It’s actually pretty easy. All you need is a set of investments that produce enough cash flow to cover your annual expenses, plus a reasonable safety margin. We added up our spending for each year, and found it was about $24,000 plus our housing costs. So by paying off the mortgage, and then getting investments that pay $24,000 per year, we were basically done.

The easiest way to accomplish this is by investing in a mix of dividend-paying stocks and bonds that yield a return of, say, 4% per year. To generate $24,000 per year at 4%, you need at least $600,000 in investments. Inflation protection is built in, since you are living only off the dividends and never touching the principal – both dividend payments and principal on average will rise with inflation.

So that’s all you’re doing for investments? Putting your stash in stocks & bonds and living off the dividends?

We don’t actually live off dividends these days.

I happen to enjoy buying, building, and renting out houses as a landlord. Owning a house and renting it out usually pays considerably higher than a 4% return, so you need less money to retire this way. If you own two $200,000 houses or apartments mortgage-free, and rent them each out for $1600 per month, you might end up with $28,000 per year after paying all expenses on the properties. That works out to a 7% return on your $400k investment, in exchange for just a bit of your time managing the houses.

In the long run, I’ll probably get out of rental houses and more into dividends, but for now it is great fun. Rebalancing a portfolio is a great idea every year or so too, especially for people who are living more on market-based investments like stocks and bonds. I also think REITs as a form of investments are a great invention, as they are a way to become a lazy landlord.

I agree with your observation on REITS. I own a few local based ones myself and realize they’re convenient & much more affordable than properties. Apartments & houses can be really expensive here! Taking about that, MMM, do you advocate buying your own home or renting and does this has any impact on retiring early?

In low-cost areas like the one I live in now, buying is definitely a win. In high-cost areas like San Francisco or New York City, renting wins. If you own a house, paying off your mortgage is a good safe investment to get done by the time you retire. If you will be renting an apartment forever, you just need to set aside the extra money to generate your rent payment for life.

But putting the money into stock markets is risky, isn’t it? How do you manage your portfolio to cater to any global economic uncertainties?

I don’t react to it at all! I don’t care about the current price of my stocks or bonds or rental house, only about the cashflow from them. The only exception is that when prices are unusually low on any income-producing asset, I’d be tempted to buy more. So, I think of stock market crashes as “stocks going on SALE!”. Backing up all of this, I like to make sure I have a good safety margin in all areas for when life throws its inevitable curveballs.

You’re cool, MMM! It’s not easy to buy when everyone’s selling! But are you always so calm and collected? I mean, do you get frustrated at times because of the sacrifices you’ve to made? And how did other people like your family or even naysayers respond to your decision to retire early?

There were really no sacrifices or downsides. It is fantastic from our perspective! Because we chose to retire as early as possible, we locked ourselves into a lower level of spending than most people have, meaning I can’t buy expensive cars and have a housecleaner, pedicures and various other luxuries that have become normal in the US these days. But we like it this way. There is still plenty of money for necessities and even lots for travel and charitable giving.

Our families were always very supportive of our decision. They are happy that we can now visit them for much longer periods than we would have if we were still working full-time. I also didn’t have any naysayer for the first 5 years of retirement, but now as Mr Money Mustache, I have plenty. My usual strategy is to ignore them, but occasionally I also like to make fun of them on the blog, as the regular readers tend to egg me on and encourage MMM to show his bossy side.

Haha, I admit I do like those posts too as some of them are really funny! So is that what you’ve been doing every day now? Blogging?

Blogging is just part of it! In truth, every day is different, but I tend to spend lots of time with my family, either at home or within biking distance of our house. We have great friends in the neighborhood, and there are parks, creeks, mountains, and all facilities very close by. The biggest tradition right now is the Family Breakfast. We never let outside responsibilities get in the way of a full night’s sleep, a great breakfast together, and some playing in the living room. After this, the day branches off and the boy might go to school and the parents usually do some sort of work or exercise. Both my wife and I are still somehow pretty busy. But by insisting on never-rushed mornings, it makes waking up a pleasure each day.

A lot of people must be very envious of your lifestyle! And I’m just curious, is there any aspect where early retirement has actually changed your perspective or outlook of life?

It has allowed me to branch out and study many more fields and meet many more people than I would have if I had kept the single full-time job. By trying different things every year, and reading more books, I get to learn much more about how the world works. This blogging hobby is a good example – it opened my eyes to a whole new world of people and ideas I never would have come across.

And if you had to identify 3 important habits that has brought you this far – what would they be?

Loving hard work, hating debt, and learning to enjoy delayed gratification and figuring out things for myself, rather than making purchases immediately as desires pop into my mind. Oh, and marrying someone who was willing to adopt the same three basic ideas!

I’m looking for a partner like that too! Oh by the way, you mentioned your son is going to school now. On your part, how have you been educating your son to be as financially savvy as you do?

We want him to have a realistic idea about money and the things you can buy with it. So he already earns small quantities of allowance for achieving certain things at home, and he likes to save it up and use it to buy his own toys. This way he gets an idea of money being finite and having to wait and save if you want something. He is also aware that buying manufactured things comes with a cost to the Earth, so they should be considered carefully and not wasted – and passed on to other kids as he grows out of them.

As he gets older, I’ll just make sure he has a good healthy fear of consumer debt and a knowledge of saving and investing.

You’re a great dad! I’m sure he’ll be very grateful for the knowledge you imparted and will grow up to be a very financially responsible and environmentally friendly lad! Before we end off, do you have anything to say to those fresh college grads with ZERO assets, a hefty student loan but who wants to retire as early as you do?

Well, since I graduated with no student loan (by saving up through high school, living cheap and working in good jobs every summer), I might have a 1-3 year headstart over the hypothetical person in your example, unless he has a higher salary than I did.

But either way, the advice is the same. Work hard in your job. Negotiate and switch jobs when you get a chance to increase your salary. Live close to work to free yourself from the time and money-sucking waste of car commuting. Never borrow money for anything except a house. And keep a simple, pleasant and efficient lifestyle, regardless of how high your salary goes. Learn about very simple investing in Index Funds (perhaps through the book A Random Walk Down Wall Street), and real estate too if you are interested in that area. And last but not least, read Mr Money Mustache regularly for inspiration from like-minded people. :)

Ah… Now that Mr Money Mustache has spelled out everything on how to retire early, what’s next for you? Do it. Go ahead and make it a reality!

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