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the long view

You expect to hate anyone who could retire at 30. But it's awfully hard to dislike Mr. Money Mustache.

I recently contacted Mr. Mustache – the nom de web of an expat 40-year-old Canadian engineer named Pete – to find out more about his take on financial freedom.

It's a take that's fascinated me since I stumbled on his website a year ago. Mr. Money Mustache ( is filled with practical advice for middle-class people about how to save money and get off the paycheque-to-paycheque roller coaster.

Penny-pinching tips are nothing new, of course, but the site offers something far more valuable – hope. In contrast to the horde of financial experts who warn of retirement doom ahead, Pete (who declines to divulge his last name) insists that an early departure from work is eminently practical if we just rein in our consumer demons.

It doesn't hurt that he mixes his frugality with fun. His site's slogan is "Financial freedom through badassity." That sums up the worldview of someone who describes himself, tongue in cheek, as "a bossy and opinionated financial superhero."

He's earned the right to boast. After graduating from McMaster University in Hamilton, Ont., with a degree in computer engineering, he moved to the United States to work in the tech industry. He and Mrs. Money Mustache – also Canadian, also a techie – saved a big chunk of their generous but not overwhelming incomes for nine years and retired in 2005, at an age when many folks are still paying off their student loans.

Nearly anyone can follow a similar path to financial freedom, he insists. All that's required is a steady savings habit and low-cost index-fund investing.

In contrast to many similar financial advocates, Mr. Money Mustache doesn't preach radical austerity – just a relentless attack on waste. He lives with his wife and son in a nice house in Colorado and appears to enjoy life, as well as a good joke.

Plus, he's an engineer: When the topic turns to whether big cars are safer, or how to trim your power bill, he goes to the data in search of the right answer. All of that adds up to a much more compelling combination than the usual frugalista rant.

He recently answered several questions about his approach. Here are some edited highlights.

Who is Mr. Money Mustache?

On the Internet, Mr. Money Mustache is a bossy and opinionated personal finance superhero, who uses stories and equations – as well as sarcasm and profanity – to share his lessons on how the average person can live a better, wealthier life.

In real life, I'm just your standard small-town Canadian boy (I grew up in Caledonia, Ont.), now living my own version of the good life in Colorado, with a wife and our awesome nine-year-old boy. I went to McMaster [University] for computer engineering, enjoyed a reasonable career in the industry, and spent less money than I earned, which resulted in sufficient investments to retire just before my 31st birthday. That was over nine years ago, as I turned 40 this year.

The early retirement part was just pretty mundane financial nuts and bolts – I'm not the first person to retire early. The more amazing part to me is that I started writing about the concept in 2011 and the blog has taken off and unexpectedly gained this audience of millions. It has become a great opportunity to share my secret agenda of making the world a more rational and efficient place, with the side effect of decreasing the rate at which we destroy the world.

How did a Canadian engineer wind up so interested in personal finance? And why did you start a blog?

I find that many engineers end up pretty interested in money, because it's a system that you can learn and optimize in order to become wealthy, almost like any other game or puzzle. I have always loved making things work better, and feel almost a moral rage at things that are blatantly inefficient. For better or for worse, this is a common affliction for us engineers and that's probably why they are a big part of the blog's readership.

So I started out by just getting my own money situation taken care of – my wife and I had this goal of retiring before our first child was born, so we could both share the work of raising him. But about five years into this new life, I started becoming shocked that my high-income peers who had stayed in the work force and continued to pull in good salaries were still broke and trying to make the next payment on their all-wheel-drive BMWs. I started to realize that good money management is not as self-evident as I had assumed, but advice in the mainstream media was way too bland and not addressing the root cause: people are spending way too much on money on ridiculous stuff. I figured I should share my own perspective.

So let's cut to the chase: How much money do I need to retire?

You need about 25 to 30 times your annual spending, invested in low-fee index funds or some other reasonable investment like rental properties. This chunk of money will generate passive cashflow (dividends and capital gains) that should sustain you for a lifetime, especially if you are flexible in your spending or have some safety margin in there, like occasional income in the distant future or a government pension. It's a pretty safe general rule.

The key to this is that "annual spending" is much more flexible than most people realize. It's possible for a family of four to live an astoundingly good life on about $30,000 per year in Canada, and here in my area I can't seem to spend more than $25,000 even with a seven-figure net worth that keeps growing and unexpected income every year. The only 'cheating' involved is that I paid off my house long ago, so there is no mortgage in this figure.

But to get there, you need to understand and optimize most of life's major life expenses – housing, transportation, food, recreation, great health and fitness, and so on. That's the focus of many of the blog's articles, when I'm not ranting about broad social trends or efficient investing, or making fun of pickup trucks.

Don't you feel deprived?

Of course not! If my wife and I felt we needed more spending money, we would have just worked longer to save more before retiring. Or we'd go back to work right now and build up some more assets. This whole early retirement gig was designed as our best effort at balancing material comforts with a solid life that requires some effort in order to stay active and healthy – to keep the good challenge of being alive.

For example, I ride a bike as my primary form of transportation and only bought two tanks of gas for the car in all of 2014. This wasn't because I was trying to save money on gas, it was because cycling and getting outside every day makes me feel great. The fact that a more effort-driven life happens to cost a lot less than living a complete fat cat lifestyle is just a convenient side effect. It means that we all need a lot less to retire than we thought we did.

What are the biggest, easiest fixes most people can make to their financial situation?

In the middle income ranges, the biggest weakness of most people is their cars. We buy much more car than we need with far too little regard for fuel efficiency, drive it far more often than necessary, and exchange it for newer cars far too often. Just changing your mentality towards auto transportation, making it a last resort rather than a first choice, is good for a $10,000 to $20,000 annual improvement in the typical multi-car household's budget. To improve on it, you need to place living close to your work (and the activities you love to do) at the top of your agenda.

And of course never, ever borrow money for a car. If you can't pay for it in cash easily with just a few months of saving your paycheques, you can't afford that vehicle.

Then you can look at your other consumption – insourcing your pleasures rather than outsourcing them, for example making your own food, taking care of your own health, looking to nature for your family's recreation rather than paid entertainment, even maintaining your own house and the stuff therein. The neat part is this builds up a reinforcing mesh of life skills and makes your entire life more rewarding and empowered, and very quickly strips down your desire for shopping-based pleasure.

I know you're a big fan of gas-sipping compacts. I'm sure that's fine in those balmy southern climes you now inhabit, but don't Canadians need something big and safe to navigate our winters?

Very funny. Remember that I grew up in Hamilton and then worked my engineering career in Ottawa before moving down here. I rode a bike to work for most of that time, and always designed my life to minimize winter driving, because it truly does suck in the Great Lakes region. But if you need to do it, the only factor that matters is your tires. A 1995 Civic with beefy snow tires on dedicated rims will outperform a 2016 Cadillac Escalade SUV running your average all-seasons in winter driving. But again, if you find yourself driving frequently in winter snow, you've made a lifestyle design error and you should work on that as the top priority.

As much as my wife and I might enjoy the Mustache-lifestyle, I'm not so sure my 11-year-old daughter is into it. And someone (me, I suspect) will have to pay her tuition bill when she goes off to university. So how do kids and college expenses fit into the Mustachian $25,000-a-year lifestyle?

Every young Mustachian needs to go through a transition period while they learn the craft through the example of their parents, just as I did as a kid. I didn't realize it at the time, but it was the single best part of my education.

My parents ran a tight household as they had to raise four kids on a single middle-class income. That meant you had to buy your own video games, find your own ways to have fun with neighbourhood kids, and you were expected to save throughout high school and work between terms to fund most of your own university education. If you wanted to borrow the family car, you'd pay for your own insurance and gas.

This taught me that money is something you earn for yourself, and thus you don't want to squander it and reverse your own progress. I think every kid needs to learn this, because it is the only skill that allows you to become wealthy on your own terms in the future.

Canada, as you know, has a very, um, enthusiastic housing market. With prices so high here, should Canadian Mustachians be renting or buying?

Yeah, things are ridiculous in the major Canadian cities and even in many places that have no logical right to be expensive. I'd avoid buying a house over about 2.5 times your annual income, and then get it paid off quickly. If there is no housing in that price range, rent wisely and share a house with friends or family as necessary. Somewhere and someday there will be a solid housing crash in a desirable city, and at that point you can move in and rake up several properties for yourself if that is what you want.

But even better, choose your career and employer (and gradually build up your own business) in such a way that you can live somewhere beautiful that is affordable. With good Internet access, you can pull in a six-figure salary while living in some seaside haven in Nova Scotia where the houses might cost 80 per cent less. Or you can do what I did and choose any other country in the world, figure out the immigration rules and expand your life to include this great new location. Living in Colorado where it is always sunny and I can ride my mountain bike on red rock trails in the middle of January, we also come to Canada and spend every summer there with family and friends. This was well worth the hassle of getting a degree in a portable field, deciphering a few government forms and going to some job interviews.

The key is to think a bit bigger and start to see past our natural human response of excuses and fear. Instead of wishing for a better life situation, realize that it is possible and then insist on it. At that point you'll start taking the steps that are required to get it done.

If I start following the Mustachian way right now, how long until I can retire?

It all depends on how much of your take-home pay you can manage to keep for yourself. The average person spends over 90 per cent of what they earn and saves less than 10 per cent, which sets them up for a 40-year working career or worse. But if you can live on 50 per cent of your income and invest the rest, you'll reach financial independence in about 17 years. In my own case I lived on about 30 per cent of my total earnings and saved the other 70 per cent, which was good for a nine-year working career, from ages 21 to 30.

Most people think of a higher income as the ticket to freedom, but if you read the stories about high-earners who are still struggling to get by (some of them right here in The Globe), you realize it's all a trick: it is possible to blow almost any amount of money and still be a wage slave through your whole life. And it is also possible to live a life even better than your current one, on much less than you are currently spending. So by all means go out and earn lots of income, but focus on your spending as the key to converting this income into real wealth and a better life.

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