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There's an active subreddit for discussing Financial Independence (FI) that often links to MMM and recommends his blog to people interested in learning about th

There's an active subreddit for discussing Financial Independence (FI) that often links to MMM and recommends his blog to people interested in learning about the topic. If you liked the article, you might find the community there interesting: http://www.reddit.com/r/financialindependence http://www.reddit.com/r/financialindependence

jessedhillon 11y ago
Suppose that there are, broadly-speaking, two levers on a person's financial independence function: money brought in, and money spent. The FI subreddit and MMM focus, IMO, almost exclusively on reducing money spent. I subscribed to the FI sub hoping to find a lot of discussion about efforts to bring money in. Instead, I find a lot of people angling for a definition of financial independence that includes wearing the same clothes for seven years, barely ever eating out, and vacations that resemble nothing I'd call travel. Whatever discussion around increasing income does take place is usually centered around picking up another job. For me, as long as the income earned is a linear function of time invested, it's a losing proposition. There's a reason why "work 10 jobs" isn't commonly suggested as a way to get rich. I know this sounds snobby, there's not any way around that. My definition of FI is not having to deliberate, rationalize and bargain with myself when it comes to purchasing something I want. Yes, reducing wants is a major factor in happiness, but finally there will always be something that I want, despite pursuing a life of frugality and parsimony. The FI/MMM approach leans way too far towards ascetism for my tastes. Are there any communities, besides HN, which focus discussion more on strategies for increasing income and less on lifestyle amputation?
- lutorm 11y ago
  You kind of made his point there: Yes, reducing wants is a major factor in happiness, but finally there will always be something that I want If there's always something you want, where do you stop? It seems the key to happiness is to learn to live with that want, rather than try to satisfy a desire that can't be satisfied?
  - jessedhillon 11y ago
    To me, saying "want nothing more" is as naive as someone saying "I want everything". FI means freedom from scarcity, not freedom from ownership. I don't look at people who buy $100,000 homes in the suburb -- and have to consider a 1 hour drive into the city to see friends or a show -- as being independent, even if they are free from wanting a house in the city. I view them as prescribed by their scarcity to a life separated from their mates and a vibrant culture. MMM, and presumably you, might ask if dining with friends and taking in novelties like arts and culture are truly worth spending money on, but to me the answer is obvious.
    - lutorm 11y ago
      What I took away from the MMM approach was that the fundamental idea is not to always ask whether things are "worth" spending money on, but rather that by freeing yourself from desire, you are richer in many ways. The financial one is sort of trivial: you will keep more and need less money. The more interesting, philosophical side has to do with what it means to be rich. If you define it as "the ability to do whatever you want", then you really can be as rich as you want just by playing mind tricks on yourself. It sounds kind of like Buddhism to me.
      - oneiric 11y ago
        About the -isms, its not Buddhism, but Stoicism. http://www.mrmoneymustache.com/2011/10/02/what-is-stoicism-and-how-can-it-turn-your-life-to-solid-gold/ http://www.mrmoneymustache.com/2011/10/02/what-is-stoicism-a...
        lutorm 11y ago
        Yeah, I read that page. I wasn't familiar with Stoicism, but Buddhism sounds very similar in some respects: "• What is the Second Noble Truth? The second truth is that suffering is caused by craving and aversion. We will suffer if we expect other people to conform to our expectation, if we want others to like us, if we do not get something we want,etc. In other words, getting what you want does not guarantee happiness. Rather than constantly struggling to get what you want, try to modify your wanting. Wanting deprives us of contentment and happiness. A lifetime of wanting and craving and especially the craving to continue to exist, creates a powerful energy which causes the individual to be born. So craving leads to physical suffering because it causes us to be reborn. • What is the Third Noble Truth? The third truth is that suffering can be overcome and happiness can be attained; that true happiness and contentment are possible. lf we give up useless craving and learn to live each day at a time (not dwelling in the past or the imagined future) then we can become happy and free. We then have more time and energy to help others. This is Nirvana." (from http://www.buddhanet.net/e-learning/5minbud.htm http://www.buddhanet.net/e-learning/5minbud.htm)
- zrail 11y ago
  Ramit Sethi[1] focuses almost exclusively on increasing income. He thinks the "latte factor" is bullshit, since you can just bring in more money. Personally, I think that increasing income and reducing expenses are two sides of the same coin. You're either changing the numerator or the denominator in the time-to-FI equation. The really powerful stuff happens when you do both at the same time. [1]: http://www.iwillteachyoutoberich.com http://www.iwillteachyoutoberich.com
  - oneiric 11y ago
    Perhaps you know the math, but I think it is important to be clear to readers that a penny earned is LESS than a penny saved. Put another way, are making $10,000 more dollars per year and spending $10,000 less per year the same? No. You will retire exponentially (literally, if not colloquially) sooner by spending less. The MMM resource: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim...
- oneiric 11y ago
  I'd say that making money without spending time is investing. Maybe that's the keyword you've been missing. The obvious caveat is that on average people that try to do non-boring investing make less money. MMM talks about a bunch of non-stock investments. Real estate and peer-to-peer come to mind. If you want online communities for investing, pick your poison. https://www.quantopian.com https://www.quantopian.com http://covestor.com http://covestor.com https://www.reddit.com/r/investing https://www.reddit.com/r/investing
- steven777400 11y ago
  An issue here is that providing general advice about increasing income non-linearly is much more difficult and less reliable than decreasing expenses. Almost anyone can decrease expenses, but how many will succeed at increasing income outside of extra work? (Remember, something like 90% of new businesses fail). There are a few ways that are reasonably reliable. Owning multi-family housing has a pretty easy to understand cost and revenue, and property ownership can be leveraged to purchase additional property, and so on. If someone I don't know (we're talking about internet forums here), I don't know their personality, their strengths or weaknesses, they say "I want to become financially independent". Well I can almost guarantee if they eat out half as much, walk/bike to work instead of making car payments, they'll be in a much better financial position. If I tell them to create a tech startup ... well, that could end in several ways but probably not good. Additionally, what does it cost them to follow the advice? Spending less, by definition, has no cost. But saying "buy an apartment complex" or "start a tech company" has real cost. How do they get to the point where they can do those things if they can't afford it now? That's again where the "spend less" comes in.
- charlesdm 11y ago
  I actually had a conversation like this with a freelancer a few weeks ago. He was cutting back expenses to achieve financial independence (you know, 10-20 years from now). When I asked him why he didn't just increase his (seemingly low to me) freelancing rates by 10-20%, he said that was impossible. Little did he know I charge nearly triple his rate for sort of similar work, and spend about 50% less time than him working. You don't build wealth by saving on small purchases, you do it by earning.
  - Nadya 11y ago
    Charging more can increase sales without changing the quality of your product, assuming the product is already "good" or marketable. An increased price adds a perceived 'quality' or 'prestige' and you'll get bigger spenders, although fewer spenders. This is because of the bad reasoning that "more expensive = better". My mother did this with her home business by slowly increasing her prices. The product she delivers hasn't changed in the slightest - but she now makes 5x more than she was before! People fall into the trap of lowering their cost to increase buyers without paying attention to how much they are working. They see an increase of price "would ruin them financially" because they would get less clients. Of course, finding the balance is important. There was a story on HN where someone was setting up custom sites for $75. They quickly realized this was more work than they expected and began charging $2,000 a site (after charging more and more per site, from $200->$500->$1000). People were still purchasing. Same work. $75 --> $2,000.
    - charlesdm 11y ago
      Absolutely. I live by this. In contracting or consulting, you want to find critically important projects to work on and then almost shock people by what you're charging. Then overdeliver.
      - Nadya 11y ago
        >Then overdeliver. I feel this brings up another important thing. Set realistic expectations. Always set the bar at what they expect while remaining near the bare minimum of what you can realistically deliver...then do everything you can do deliver past that. 1) If you overpromise and underdeliver you give yourself a bad rep and have an unhappy client. 2) If you promise reasonably and overdeliver your client will be happy. Happy clients often lead to more clients. Assuming in 1 and 2 you did the same amount of work and the only difference was you didn't promise them the world and a field of kittens to boot. Marketing for 1 might land you the sale; but that's incredibly shortsighted. 2 will almost always do better for your business. You will likely lose some sales if you market with #2 in mind. However are those the types of sales you want to begin with?
- raintrees 11y ago
  There is a famous (many claim infamous) person who uses catch phrases like "don't live below your means, expand your means" and "savers are losers." He purposely uses hyperbole, possibly to break through the established messages being broadcast far and wide by the institutional investment consortium. Or maybe he just enjoys being a contrarian and having people sling hate at him, I do not know him personally, so I have no idea. Every time I use his name at HN I get down-voted, but I also know that SOME of his recommendations work. Such as "the best investment you can make is in your self/mind/thinking." He definitely rubs many people the wrong way, but just like when I read someone whom I think is a poor author but has a message to convey that contains truth, I find underlying reasoning/principles that work, or can be made to work for me, YMMV. For example, as stated in other comments here, multi-family rentals can be profitable, and are fairly straight forward to me, now that I have done the research. My wife and I are slowly accumulating properties that cash flow - They produce more in income than they require in expenses and debt service. Likewise arbitrage in paper assets and commodities is another way to structure gains - Having your money work for you, also called investing, in the more traditional sense of the word. I am currently studying Stock Options as a method for investing with insurance (hedging) and doing so with some leverage (buying a stock=1 to 1 - Buying an option is a ratio, like 1.50 to 100, depends on the option). The biggest rewards come from starting a business that can be grown to be so successful that it gets to IPO stage (financial exit), or is able to continue without the founders, if they so choose (royalty/profit distributions). That is the frequent path of the majority of contributors to HN, based on my reading. But all of it requires significant knowledge, the equivalent of another job. Knowing what/who to study is a challenge, mentors and coaches can speed up the processes significantly. If my conservative planning goes correctly, I expect to be earning more in passive income within 10 years than I have expenses to consume. Then, "work" takes on that optional quality. I will not stop working, but which projects I take may change drastically. I do not say this to toot my own horn, but to just state that it can work, if the person is sincere. All of that said, if you want to know more, please post such and I will answer any questions I can, what little I can offer, I have only been studying and doing this for about 5 years. An Internet search should definitely find who I am talking about, because as I said earlier, there are many who really dislike this author, but a number (like me) who have taken something away from him that works for them, and many people post. Again, YMMV.

jessedhillon 11y ago

Suppose that there are, broadly-speaking, two levers on a person's financial independence function: money brought in, and money spent. The FI subreddit and MMM focus, IMO, almost exclusively on reducing money spent. I subscribed to the FI sub hoping to find a lot of discussion about efforts to bring money in. Instead, I find a lot of people angling for a definition of financial independence that includes wearing the same clothes for seven years, barely ever eating out, and vacations that resemble nothing I'd call travel. Whatever discussion around increasing income does take place is usually centered around picking up another job. For me, as long as the income earned is a linear function of time invested, it's a losing proposition. There's a reason why "work 10 jobs" isn't commonly suggested as a way to get rich. I know this sounds snobby, there's not any way around that. My definition of FI is not having to deliberate, rationalize and bargain with myself when it comes to purchasing something I want. Yes, reducing wants is a major factor in happiness, but finally there will always be something that I want, despite pursuing a life of frugality and parsimony. The FI/MMM approach leans way too far towards ascetism for my tastes. Are there any communities, besides HN, which focus discussion more on strategies for increasing income and less on lifestyle amputation?

lutorm 11y ago
You kind of made his point there: Yes, reducing wants is a major factor in happiness, but finally there will always be something that I want If there's always something you want, where do you stop? It seems the key to happiness is to learn to live with that want, rather than try to satisfy a desire that can't be satisfied?
- jessedhillon 11y ago
  To me, saying "want nothing more" is as naive as someone saying "I want everything". FI means freedom from scarcity, not freedom from ownership. I don't look at people who buy $100,000 homes in the suburb -- and have to consider a 1 hour drive into the city to see friends or a show -- as being independent, even if they are free from wanting a house in the city. I view them as prescribed by their scarcity to a life separated from their mates and a vibrant culture. MMM, and presumably you, might ask if dining with friends and taking in novelties like arts and culture are truly worth spending money on, but to me the answer is obvious.
  - lutorm 11y ago
    What I took away from the MMM approach was that the fundamental idea is not to always ask whether things are "worth" spending money on, but rather that by freeing yourself from desire, you are richer in many ways. The financial one is sort of trivial: you will keep more and need less money. The more interesting, philosophical side has to do with what it means to be rich. If you define it as "the ability to do whatever you want", then you really can be as rich as you want just by playing mind tricks on yourself. It sounds kind of like Buddhism to me.
    - oneiric 11y ago
      About the -isms, its not Buddhism, but Stoicism. http://www.mrmoneymustache.com/2011/10/02/what-is-stoicism-and-how-can-it-turn-your-life-to-solid-gold/ http://www.mrmoneymustache.com/2011/10/02/what-is-stoicism-a...
      - lutorm 11y ago
        Yeah, I read that page. I wasn't familiar with Stoicism, but Buddhism sounds very similar in some respects: "• What is the Second Noble Truth? The second truth is that suffering is caused by craving and aversion. We will suffer if we expect other people to conform to our expectation, if we want others to like us, if we do not get something we want,etc. In other words, getting what you want does not guarantee happiness. Rather than constantly struggling to get what you want, try to modify your wanting. Wanting deprives us of contentment and happiness. A lifetime of wanting and craving and especially the craving to continue to exist, creates a powerful energy which causes the individual to be born. So craving leads to physical suffering because it causes us to be reborn. • What is the Third Noble Truth? The third truth is that suffering can be overcome and happiness can be attained; that true happiness and contentment are possible. lf we give up useless craving and learn to live each day at a time (not dwelling in the past or the imagined future) then we can become happy and free. We then have more time and energy to help others. This is Nirvana." (from http://www.buddhanet.net/e-learning/5minbud.htm http://www.buddhanet.net/e-learning/5minbud.htm)
zrail 11y ago
Ramit Sethi[1] focuses almost exclusively on increasing income. He thinks the "latte factor" is bullshit, since you can just bring in more money. Personally, I think that increasing income and reducing expenses are two sides of the same coin. You're either changing the numerator or the denominator in the time-to-FI equation. The really powerful stuff happens when you do both at the same time. [1]: http://www.iwillteachyoutoberich.com http://www.iwillteachyoutoberich.com
- oneiric 11y ago
  Perhaps you know the math, but I think it is important to be clear to readers that a penny earned is LESS than a penny saved. Put another way, are making $10,000 more dollars per year and spending $10,000 less per year the same? No. You will retire exponentially (literally, if not colloquially) sooner by spending less. The MMM resource: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim...
oneiric 11y ago
I'd say that making money without spending time is investing. Maybe that's the keyword you've been missing. The obvious caveat is that on average people that try to do non-boring investing make less money. MMM talks about a bunch of non-stock investments. Real estate and peer-to-peer come to mind. If you want online communities for investing, pick your poison. https://www.quantopian.com https://www.quantopian.com http://covestor.com http://covestor.com https://www.reddit.com/r/investing https://www.reddit.com/r/investing
steven777400 11y ago
An issue here is that providing general advice about increasing income non-linearly is much more difficult and less reliable than decreasing expenses. Almost anyone can decrease expenses, but how many will succeed at increasing income outside of extra work? (Remember, something like 90% of new businesses fail). There are a few ways that are reasonably reliable. Owning multi-family housing has a pretty easy to understand cost and revenue, and property ownership can be leveraged to purchase additional property, and so on. If someone I don't know (we're talking about internet forums here), I don't know their personality, their strengths or weaknesses, they say "I want to become financially independent". Well I can almost guarantee if they eat out half as much, walk/bike to work instead of making car payments, they'll be in a much better financial position. If I tell them to create a tech startup ... well, that could end in several ways but probably not good. Additionally, what does it cost them to follow the advice? Spending less, by definition, has no cost. But saying "buy an apartment complex" or "start a tech company" has real cost. How do they get to the point where they can do those things if they can't afford it now? That's again where the "spend less" comes in.
charlesdm 11y ago
I actually had a conversation like this with a freelancer a few weeks ago. He was cutting back expenses to achieve financial independence (you know, 10-20 years from now). When I asked him why he didn't just increase his (seemingly low to me) freelancing rates by 10-20%, he said that was impossible. Little did he know I charge nearly triple his rate for sort of similar work, and spend about 50% less time than him working. You don't build wealth by saving on small purchases, you do it by earning.
- Nadya 11y ago
  Charging more can increase sales without changing the quality of your product, assuming the product is already "good" or marketable. An increased price adds a perceived 'quality' or 'prestige' and you'll get bigger spenders, although fewer spenders. This is because of the bad reasoning that "more expensive = better". My mother did this with her home business by slowly increasing her prices. The product she delivers hasn't changed in the slightest - but she now makes 5x more than she was before! People fall into the trap of lowering their cost to increase buyers without paying attention to how much they are working. They see an increase of price "would ruin them financially" because they would get less clients. Of course, finding the balance is important. There was a story on HN where someone was setting up custom sites for $75. They quickly realized this was more work than they expected and began charging $2,000 a site (after charging more and more per site, from $200->$500->$1000). People were still purchasing. Same work. $75 --> $2,000.
  - charlesdm 11y ago
    Absolutely. I live by this. In contracting or consulting, you want to find critically important projects to work on and then almost shock people by what you're charging. Then overdeliver.
    - Nadya 11y ago
      >Then overdeliver. I feel this brings up another important thing. Set realistic expectations. Always set the bar at what they expect while remaining near the bare minimum of what you can realistically deliver...then do everything you can do deliver past that. 1) If you overpromise and underdeliver you give yourself a bad rep and have an unhappy client. 2) If you promise reasonably and overdeliver your client will be happy. Happy clients often lead to more clients. Assuming in 1 and 2 you did the same amount of work and the only difference was you didn't promise them the world and a field of kittens to boot. Marketing for 1 might land you the sale; but that's incredibly shortsighted. 2 will almost always do better for your business. You will likely lose some sales if you market with #2 in mind. However are those the types of sales you want to begin with?
raintrees 11y ago
There is a famous (many claim infamous) person who uses catch phrases like "don't live below your means, expand your means" and "savers are losers." He purposely uses hyperbole, possibly to break through the established messages being broadcast far and wide by the institutional investment consortium. Or maybe he just enjoys being a contrarian and having people sling hate at him, I do not know him personally, so I have no idea. Every time I use his name at HN I get down-voted, but I also know that SOME of his recommendations work. Such as "the best investment you can make is in your self/mind/thinking." He definitely rubs many people the wrong way, but just like when I read someone whom I think is a poor author but has a message to convey that contains truth, I find underlying reasoning/principles that work, or can be made to work for me, YMMV. For example, as stated in other comments here, multi-family rentals can be profitable, and are fairly straight forward to me, now that I have done the research. My wife and I are slowly accumulating properties that cash flow - They produce more in income than they require in expenses and debt service. Likewise arbitrage in paper assets and commodities is another way to structure gains - Having your money work for you, also called investing, in the more traditional sense of the word. I am currently studying Stock Options as a method for investing with insurance (hedging) and doing so with some leverage (buying a stock=1 to 1 - Buying an option is a ratio, like 1.50 to 100, depends on the option). The biggest rewards come from starting a business that can be grown to be so successful that it gets to IPO stage (financial exit), or is able to continue without the founders, if they so choose (royalty/profit distributions). That is the frequent path of the majority of contributors to HN, based on my reading. But all of it requires significant knowledge, the equivalent of another job. Knowing what/who to study is a challenge, mentors and coaches can speed up the processes significantly. If my conservative planning goes correctly, I expect to be earning more in passive income within 10 years than I have expenses to consume. Then, "work" takes on that optional quality. I will not stop working, but which projects I take may change drastically. I do not say this to toot my own horn, but to just state that it can work, if the person is sincere. All of that said, if you want to know more, please post such and I will answer any questions I can, what little I can offer, I have only been studying and doing this for about 5 years. An Internet search should definitely find who I am talking about, because as I said earlier, there are many who really dislike this author, but a number (like me) who have taken something away from him that works for them, and many people post. Again, YMMV.