Meet the Realist

By Mr. Money Mustache

Thu, 07 Apr 2011 16:09:18 +0000

Whoa, did you read that opinionated garbage yesterday?

Who is this Mr. Money Mustache? The guy thinks he’s got it all figured out. And is he trying to offer financial advice, or just financial scorn to those less fortunate than himself? Sure, maybe you can retire early if you are born to a frugal family, get a good education and never make any mistakes. But what about the rest of us? Is there any hope at all?

My name is The Realist. I’m contributing to this blog to add some perspective to the hard-edged idealism of this “Mr. Money Mustache” (who needs a fake catchy name like that anyway?).

So, life is hard in the modern world. Rapid changes in the business environment mean frequent layoffs and difficulty in holding a steady job. Health care inflation means we waste more of our small paychecks on medical costs each year. Gas prices are higher than they used to be, and so are other costs like food, child care, and education.

Yet some people manage to get by while others go bankrupt. Is it all just luck, or is there something we can do to beat the odds ourselves? As the Realist, I’ll step in to present small but powerful steps to help you get ahead. There is sometimes a fine line between financial solvency and bankruptcy.

How fine? How about $25 a month?

Here’s your lesson for the day: say you are breaking even – paying all your bills, buying $500 monthly of necessities on a credit card which gets paid off IN FULL each month with no interest, but not able to save a cent.

Then a McDonald’s opens up next to the office where you work and you start buying lunch once a week instead of brown-bagging it. All of a sudden, you can’t quite pay the credit card bill each month so a small balance starts to accrue.

Ahh, one burger a week, 89 bucks after 3 months. That’s not so bad, is it? YES IT IS.

After 10 years, you’ll have a credit card debt of about $5,000. If you couldn’t pay it off when it was $525, things are looking much tougher now.

And that is $25 per month. Imagine someone so free spending that they went to McDonald’s once per DAY?

That person would be over $50,000 in debt after ten years.

Wow, that is truly extreme. So the lessons for the day are:

What if the person breaking even above found a way to save $10 a day instead of spending $25 more than she made each month? The quick answer is that the same person would would have a $50,000 stack of rapidly growing money in ten years.

And that’s just ten bucks a day – we can do much better than that, with some careful, surprisingly easy, fine tuning. Read on!