The Simple Math Behind Early Retirement
MMM has a philosophy that is mathematically sound, and might even work for some people.  Unfortunately, it's proven to fail for just about everyone (the spend less, save more advice has been around since the industrial revolution, and it isn't working to well: the average American has $16k in <i>credit card</i> debt).  The reason it fails is because it ignores basic psychology.<p>The key quote in this article is:<p>>>But simply cutting cable TV and a few lattes would instantly boost their savings to 15%, allowing them to retire 8 years earlier!! Are cable TV and Starbucks worth having two income earners each work an extra eight years for???<<<p>Again, mathematically accurate, but not helpful (pick up any financial "advice" in the last 30 years and you will see this exact argument).  Americans are busy.  When most of them get home from work, they want to relax and be entertained.  There's no medium ever invented that does this better than television.  Americans are also rushed.  They want coffee, and buying one at the starbucks next to work is a lot easier and tastier than brewing it yourself.  People firmly believe that these things make their lives appreciably better.  That's why they pay for them.  Telling them to go without is foolhardy.  Yes, they may do it for a bit, but then they slip and get a coffee one morning.  Then they're back to their routine.<p>The insidious problem with this is that it sucks up attention and breeds a mentality of failure.  You've now got this guy constantly worrying about the $20 a week he spends on coffee.  Then, when he inevitably heads to starbucks he thinks he's failed.  "Man, I can't even stop paying $4 a day for coffee..."  How likely is that guy to focus on things that actually matter, like setting up an automated draw from his checking account into his retirement account?  He's not.  That's one of reasons the average American nearing retirement has less than $100,000 saved.  It’s not for lack of education.  People are well aware that cutting expenses and saving more means they can retire earlier.  It’s for lack of execution.  People think the path to retirement starts with lattes and cable.  That’s a much bigger daily sacrifice, so people don’t even start.<p>Finally, this quote is complete nonsense:<p>>>The most important thing to note is that cutting your spending rate is much more powerful than increasing your income. The reason is that every permanent drop in your spending has a double effect:(1) it increases the amount of money you have left over to save each month, and (2) it permanently decreases the amount you’ll need every month for the rest of your life.<<<p>Giving up lattes, cable, or any other luxury, is not permanent.  As millions of Americans can attest to, these spending habits nearly always recur.  It’s psychologically no different than the people who make new years resolutions to work out, sign up for a gym membership, go three times, and then continue to get fat the remaining 50 weeks of the year.<p>If you want to retire early, focus on the things that will have the largest impact: automate your finances.  Set up a system that automatically deposits a portion of your paycheck into your savings, investment, and retirement accounts.  Automate your investment and retirement accounts to purchase the bond/equity ratios that suit your age (or if you’re lazy, just buy lifecycle funds).  Once you’ve got this down, you should focus on building skills to earn more money.  Your skills, unlike your ability to stay away from lattes, won’t diminish over time if you use them.  Or, if you’re lazy, then you can focus on cutting lattes and cable.  But good luck with that.