Financial Freedom Through Badassity

Mr. Money Mustache retired early from work and has achieved financial freedom by leading an “extreme lifestyle.” He lives half as expensively as his peers while investing any savings accumulated due to doing so.

These habits, including eating inexpensively, reducing energy use, and forgoing commuting time, can dramatically impact your finances. You may quickly achieve financial independence by learning and applying the underlying principles effectively.

1. Invest 4% of Your Take-Home Pay

Finding joy in spending money on new clothing, expensive cars, or home renovation projects may seem impossible, rather than providing savings opportunities that lower expenses and help lower living costs.

Pete Adeney of Mr. Money Mustache fame argues that even small changes can add up over time and significantly impact finances. His blog encourages readers to tackle excessive spending by investing their dollars instead of simply spending them.

MMM made headlines for retiring early at 30 by living frugally and consistently saving and investing a significant proportion of his income. His story inspired many within the Financial Independence Retire Early (FIRE) community; his piece, The Shockingly Simple Math Behind Early Retirement, quickly went viral online. But MMM’s journey didn’t happen overnight, nor will yours either.

2. Save 10% of Your Take-Home Pay

Personal finance advice generally boils down to making the maximum 401(k) contribution, reducing expenses, and paying down debt. But according to Mr. Money Mustache, this alone isn’t enough: they suggest setting aside 50% of take-home pay as savings goals.

That means setting aside 10% of your salary into a lifestyle bucket to spend on daily luxuries like an indulgent cup of coffee, an enjoyable commute, and a comfortable bed – as well as minimum payments on debts.

He recommends allocating 50% of your income toward long-term savings such as contributions to an IRA and 401(k), extra debt payments, and investing money to turn passive income into early retirement. This strategy is known as FIRE or Financial Independence Retire Early, one of the primary reasons this blog has such a cult following.

3. Save 20% of Your Take-Home Pay

Contributions to retirement accounts like 401(k)s, and IRAs, extra debt payments, the minimum required payments on credit cards and student loans, as well as non-essentials like vacations, entertainment, gym fees, pets, and dining out should be prioritized in your budget. The remaining 30% should go toward non-essentials like vacations, entertainment, gym fees, pets, or eating out.

Saving enough can help you quickly meet your daily necessities and pay all debts on time, meaning fewer setbacks and reduced stress levels.

MMM states that many people tend to shy away from being good with money because they fear it means being dull or greedy, but that isn’t necessarily the case – optimizing expenses and choosing options that align with your priorities will bring greater happiness!

4. Save 50% of Your Take-Home Pay

Applying this approach, 50% of your take-home pay should go toward meeting financial priorities – such as savings for future needs and extra debt payments – plus minimum payments on car loans, credit cards, and student loans.

Assuming you live within your means, 30% of your take-home pay should go toward lifestyle options and non-necessities – such as gym memberships, vacations, clothes, entertainment, hobbies, or pets. Remember that this doesn’t mean giving up everything that brings joy – instead, it means saving more of your funds for what matters to you most.

Adeney has earned himself a strong following among people who read his blog and embrace his principles, known as Mustachios, who frequent the internet community to exchange workarounds, calculations and relish in curbing excessive spending.