Friction

One of the blogs that I truly enjoy is saverocity.com.  (Just look in my blogroll to the right.)

Matt, who runs the blog, writes with great passion about both the miles game and financial planning.

He’s a good writer with a lot of great ideas and I encourage you to check out his site.

The post up on his site today however, is a somewhat controversial one.

It seems that someone on the Mr. Money Mustache forum nominated Matt for their “wall of shame.”

Matt’s “offense” was playing the miles game, and spending a significant amount of his own cash to support what can only be described as an enviable year of travel.

Now first things first, nominating someone for a “wall of shame,” just because their personal philosophy doesn’t line up perfectly with yours is definitely infantile.

But in response to this attack, Matt launched a series of criticisms against the Mustachians, which I think merit further discussion.

They are moochers.  All of their financial plans involve retiring ASAP (say at 30 or so) and then relying on the Affordable Care Act and Social Security and welfare.  That’s not only bad for society but going to bite them in the arse when the rules change.

I think this is an erroneous statement on multiple levels.

First of all many of these early retirees, Mr. Money Mustache included, has been retired for years.

The Affordable Care Act has yet to be implemented, even now, so it can’t have been too instrumental to their retirement calculus.

In fact until this point, what Mr. Money Mustache has advocated was enrolling in high deductible cheap health care plans, the very plans which will cease to exist under the Affordable Care Act.

The second point here is that Social Security cannot be collected by a healthy person until they’re 62, and the level of funding you get from SSI is determined by your earned income history. So from the perspective of the Social Security Administration an early retiree is neither more costly nor cheaper than any other worker.

The welfare angle is also a stretch as the average investment income for a Mustachian (say 25-30,000$/year) far exceeds the elegibility levels for welfare.

(In fact a more on the mark criticism of the early retiree might be to compare him to a hedge fund manager:  both fail to pay their fair share in taxes.)  See this excellent post from Go Curry Cracker more on this angle.

Finally the “bad for society,” angle is a huge value judgment, and one that I disagree with.

I could make a convincing argument that having a high deductible cheap health care plan, that could legally stop covering you the exact minute you needed expensive coverage, (thus forcing the state to pick up the bill,) is far worse for society then everyone buying in under the affordable care act, early retirees included.

They don’t all show understanding of value, just money saved as a cash amount.

This is not a very specific argument so I may be interpreting Matt’s intent here incorrectly.

But if I understand right, what he’s is saying is that he values spending money on somethings more than he values saving it.

And I will admit that some adherents of early retirement theory display a disturbing religiosity in their desire to be frugal.

But I also consider myself an early retirement enthusiast. And my view is (I hope) somewhat more nuanced.

My golden rule for spending might look something like this:

“Do not spend money on anything that is worth less to you than the freedom that you can buy by saving it.”  

(So if, say, shoes make you really really happy; purchase away, Imelda)

And Personally, understanding how my savings rate affected my time to Financial independence, has proven to be a very useful tool for making such value judgments.

Some of the financial plans are too lean, and they are at serious risk of being in trouble later in life.

While this may be true, this risk is easily remedied.

Don’t like the 4% rule? Employ the 3% rule and save 33 times your yearly living expenses before declaring yourself financially independent.

Furthermore, let’s compare the typical financially obsessed early retiree, to the average American who spends too much, saves too little, and gives almost no thought to his or her own future economic situation. Doesn’t this make this criticism of the Mustachians seem a bit misguided?

Finally, I think it is worth stressing that this post is in no way meant to pile on the criticism of Matt’s own economic philosophy.

My lifestyle is far closer to Matt’s than to that of the typical Mustachian, and I continue to learn a ton from saverocity.com (and Mr Money Mustache for that fact.)

But these flame wars bring up very interesting clashes of ideas. And this one was simply too enticing for me not to offer own two cents.

(Don’t worry Mustachians, I offset the two cents, and then some, by investing in an energy-efficient lightbulb.)