Ah, it’s just not a good week unless we have a healthy article from Mr. Money Mustache taking on another ridiculous article stating how impossible it is for a middle class family to retire. You should head over to read the original article, wherein the author states that a family with a $150,000 income would take 110 years of work to retire; or the reply from the ‘Stashe about how absurd the tone of the article is and how it draws a populist CEOs-get-paid-too-much-and-that’s-the-problem conclusion.
I’m not entirely sure how I ended up looking back at Mr. Money Mustache’s old post: A Millionaire is Made Ten Bucks at a Time, but the post struck me recently, and I wanted to expand on his idea here.
People often look at the nest egg necessary for retirement and get easily discouraged. We’re here telling you to shave off relatively small amounts from your spending: A few bucks here, $20 there. That’s great, but don’t I need to end up with millions of dollars to be able to retire? Well, I think there are plenty of resources out there to show you that the numbers that banks and financial advisors give you are inflated quite a bit. (I use ING as my savings account, but they used to run TV ads that showed people carrying around their “number” which always was more than a million dollars). So, I think the issue here is at both ends of the spectrum. People think they need much more than they might actually require to retire; and people underestimate the value of small changes to their expenses.
Why should you respect your tens? Because in the long view, saving $10 actually means shaving $3,000 off of your nest egg!
There’s been a long-standing bias going back generations towards owning your own home. The US tax code has a couple benefits for home owners: mortgage interest deduction and the ability to exclude capital gains of up to $250,000 on the sale of a home. Clearly our lawmakers have decided to try and coax more of us into “home ownership”. The idea being that it tends to force us to be better citizens and more responsible people. While that may or may not be true, it also may be costing the US economy as a whole. (See Why Don’t People Move Anymore?) It may also be forcing people to make poor financial decisions in favor of owning: when they are likely to move, or it’s cheaper to rent. It may also be forcing people into home ownership who are a bad fit personality-wide: they don’t have the ability or personality to do regular maintenance and all that owning a home typically entails. I guess that’s why we have HOAs now, though that obviously skews the numbers back towards renting…
My water heater started leaking on the ground a couple weeks back, a sure-fire sign that it needs to be replaced quickly before it rusts out entirely and we’re stuck with no hot showers or dishwasher.
I happen to live in a town that has it’s own electric company, affording me the luxury of having electric rates that are somewhere near one-third the cost of the next town over. My electric rates are $0.03591 / kWh.
So my immediate inclination was to replace my old dying natural gas water heater with a new electric water heater. It felt like it should be the cheaper option for us to run. But I never did the calculation, so I thought it’d be a fun exercise to geek out and see what my bills should look like for my old natural gas heater versus a new electric or natural gas heater. We can see whether or not I was correct to choose electric out of hand just because I have super cheap rates compared to the norm.