Oct 16, 2016

Notes From Mr. Money Mustache

Mr. Money Mustache is one of the very few blogs that I subscribe to. This blog has had a huge impact on my financial wisdom and habits. Financial freedom, which is the theme of the blog is a pursuit worthy of working dedicatedly toward. I dream of the day when I no longer have to work for money and only work if I have to. Money Mustache tells you how to achieve this seemingly impossible pipe dream, with a barrage of thought-provoking posts, each post augmented by comments by a lot of smart people bringing in varied perspectives.

Of late, I realized that I've been consuming the blog only passively, without really internalizing what Mr. Mustache advises that we do, and without really understanding the math behind the numbers he comes up with. So I've decided to restart working my way through the blog's articles from the very beginning and make detailed notes and mathematical formulas as I go along, so that I can start running calculations similar to what Mr. Mustache does, only difference being that the variables are suited to my own life. We start at the very first post, here.

Definitions:
- Savings: The amount of money you save on your take-home pay. Deductions such as your investments in ESPP, retirement account contributions and any other investments can be added to your take-home pay.

Apr 8, 2011
- Save at least 50% of your take-home pay every month.
- Your car shouldn't cost you more than 10% of your annual gross income, and only if you can pay in cash without having to finance the purchase.

Apr 10, 2011
This post talks about what to do with the money that has been sitting idle in your zero-interest checking/savings account.
- After paying off debts, start with conservative investments such as buying units of the Vanguard VFINX mutual funds or SPY shares if you have a brokerage account.
- 7% is a fair and conservative rate of return to target, after adjusting for inflation. So if you can live on $49,000 a year contingent upon the fact that you own a house that has been paid off, you need to have $700,000 invested in a financial product that kicks back 7% every year.

Apr 13, 2011
You can retire when you achieve the below two goals:
- You adapt to a lifestyle that prepares you to live on 25% of your income, while you sock away the remaining 75% toward investments.
- Your investments and savings generate the above stated 25% for you forever.

Apr 15, 2011
- $29,000 invested over a period of 10 years with interest compounding at 7%, would yield you $57,000. How do we determine this? Here's the formula.
[Principal Amount] * [1 + (Interest)/100] ^ [Number of Years.]
For instance, 29,000 * (1 + 7/100) ^ 10 = 29,000 * (1.07) ^ 10 = 29,000 * 1.967 = $57000.
- To get a weekly expense compounded over 10 years at 7%, multiply by 752.
- To get a monthly expense compounded over 10 years at 7%, multiply by 173.
- An array of tools for various kinds of calculations: Calculator Soup.

Apr 17, 2011
- Aim to spend 25% of what the average indulgent person spends in product categories. If your regular guy spends $600/year on clothes at branded outlets, you'd do better by spending $150/year by shopping at Target.