the money
By Annie Lowrey
Photo: Courtesy of Mr. Money Mustache
A personal-finance guru has emerged in the postrecession era. He is a sweet-tempered, facial-haired Canadian named Pete, who goes by the moniker Mr. MoneyMustache.
Pete and his family live in Colorado, on little. His gospel, delivered on his popular blog, is one of pointed frugality and carefully engineered saving. Ride a bike instead of taking the car. Live with roommates. Wear the clothes you have. Travel on the cheap. Eat on the cheap. Date on the cheap. Save, invest your savings, and then live onthem.
Squint and you will see some Suze Orman and Dave Ramsey in there. (Personal-financial advice generally distills to the same few bullet points about maxing out your 401(k) contributions, paying down your debt, trimming your expenses, and employing the magic of compound interest.) But Mr. Money Mustache is radical in comparison. Don’t try to save 5 or 10 percent of your income, he advises. Save half of it or more. Doing so, he and his wife amassed enough to retire in their 30s. Their family of three spent exactly $25,142 lastyear.
It sounds puritanically austere, but Mr. Money Mustache manages to give it all a positive, laid-back, anti-consumerist, environmentalist sensibility. He likes Tim Ferriss and loves bicycling. He has a post on “honey-badger-style air conditioning,” to be used to cut fuel costs on road trips. He’s popular with the Reddit set; in a survey of his readers, engineers are heavily overrepresented, as are all desk-jockey types. So are the wealthy: According to a separate poll, most of the blog’s visitors have a net worth of over $100,000, and about 10 percent are worth more than amillion.
Of course, right now, many families are living on $25,142 a year or less owing to the constraints of circ*mstance, rather than choice, and are struggling mightily to save. The median household in America has a net worth of about $56,000, and 14 percent are in the red. About 40 percent of Americans would have trouble coming up with $2,000 to spend on an emergency. What do personal-finance gurus have to offer them? Too often, little more than moralism and the same old advice to give up life’s small luxuries, a point made forcefully by Helaine Olen in her book Pound Foolish. Quit buying that occasional coffee, bank the savings, and save your way to a secure retirement, they argue, often with faulty math and little acknowledgment of the broader economic forces atwork.
But even among the affluent, whose earnings have bounced back strongly since the recession, a deep economic anxiety persists. A recent Pew poll found that more than a third of Americans who make more than $100,000 feel they are falling behind. The billionaire hedge-fund manager Paul Singer, speaking for many of his more paranoid colleagues, believes the recovery is “fake.” Others may believe it but still do not feel it. There are the lawyers, bankers, and consultants haunted by the last bubble bursting. There are the college graduates saddled with student debt, suspicious that economic growth will buoy them through toretirement.
On Mr. Money Mustache’s blog, such apprehension morphs into aspiration: the idea that radically cutting back is its own sort of luxury. Pete does not want to give you control over your safe middle-class existence or to allow you to live it comfortably. He wants you to blow it to smithereens. “The standard line is that life is hard and expensive, so you should keep your nose to the grindstone, clip coupons, save hard for your kids’ college educations, and save any tiny slice of your salary that remains into a 401(k),” he writes.
His advice is to free yourself from the underlying premise that life needs to be so damn expensive in the first place. “Today’s parents believe they need a 7-passenger SUV for the ‘safety’ of their children, they need to take trips to Disneyland for family entertainment, and they need to put their kids into exclusive private schools and even fancy preschools,” he writes. “All of these needs happen to be very expensive ones that clever entrepreneurs and companies are making a lot of money from.” The result is what he calls an “exploding volcano of wastefulness.” Better to live like the Mustaches, borrowing library books, playing in nature, and making “robots out of scrap metal parts that we find sitting around in my toolboxes.”
Though the site is only a few years old, its following has grown and its adherents have fast become evangelists. (My most financially responsible friend likes Suze and loves Mr. Money Mustache.) The blog is less a platform for Pete to give edicts from on high than a community for sharing tips and success stories. Its forums are clogged with questions and overloaded with tales from readers who have delightedly slashed their spending. “How did we get to financial independence at 33?” writes one father of three. “We have been mustachians our whole life without even knowing it until a couple years ago when the concept of Mustachianism came about. Hard core saving and low cost investing and just letting the portfolio growpassively.”
There are folks who did their own house repairs, who switched to baking soda instead of store-bought shampoo, who eliminated their debts, who got rid of their cars, who haven’t bought a stitch of clothing in months, who retired years before they thought they would. And they love it. “Wanted to share all the badassity I’ve introduced to my life in the six months since I started reading MMM,” one writes, ticking off his accomplishments on the road to liberation through frugality. “I went from having to work for 35+ years and possibly have nothing to show for it, to working towards having 650K in 8 years and 1 million in 11 years.” Rejecting material expectations becomes an end in itself, its own sort of cult of lifestyle tailored to Wall Street survivalists and techie life-hackers as well as locavore aesthetes and plain oldfamilies.
Whether a broader culture of frugality has caught on in the postrecession era is hard to say. There is evidence that many more of us (including those who have never heard of Mr. Money Mustache) are eschewing the big cars and McMansions we once struggled or went into debt to buy. Younger consumers, for instance, have shown no interest in buying mammoth exurban homes, even if they can afford them. They have turned their backs on credit cards and have less interest in owning cars. The sharing economy (overblown though it might be) has also fast eroded the notion that every family needs to have its ownname-your-consumer-good.
All of this is taking place in an environment of stagnant incomes and tight credit. If more money started appearing in family savings accounts, and banks started offering no-money-down loans, would we still be holding back? Pete hopes so. And there is a profound truth to his notion that middle-class expectations have in many ways immiserated Americans. One major explanatory theory for the recession is that when incomes started stagnating in the aughts, we all kept on spending in order to keep up with each other, but could only do so by going into the red. We took out mortgages we could not afford, and then loans against the value of those mortgaged homes. We spent more on credit, and that debt became hugely, societallyruinous.
But Keynes’s famous paradox of thrift still holds: Six years after the crash, the American economy could use more consumer spending, especially among those who can afford it. Growth has picked up this year in part because Americans have started to open their wallets, and retailers anticipate a frenzied holiday season. Were we to suddenly start living like Mr. Money Mustache suggests, the implications for the economy would be dire; were we to start spending like we did in the 1990s, things would feel great. Mustachism may save us from our worst excesses, but saving, ultimately, isn’t the only point. A better economy requires more income growth, not just more personalthrift.
*This article appears in the November 17, 2014 issue of New YorkMagazine.
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