Are financial independence bloggers like Mr. 1500, Root Of Good, Jim Collins, Millennial Revolution, or Mr. Money Mustache special snowflakes? Did they make millions with special investing abilities impossible for the average Joe down the street to replicate?
Or, did they have super-high income jobs before they were famous bloggers?
The beauty of the whole financial independence movement is that they’re NOT special snowflakes. These are regular guys (and gals) who “made it” without any special abilities or superior investing skills.
They made their millions before they gained the massive internet popularity they enjoy today.
These days the most popular personal-finance bloggers have reached “Money Guru” status, and are pulling-in tons of money (in some cases much more) than they ever did working a 9 to 5 job. While that’s impressive, I say just ignore it.
Look at who they were before they were famous, before the Business Insider features, before the book deals, and before the internet groupies. They were just regular guys (and gals). Many of them were engineers, pulling in nice salaries. But nothing outlandish.
So what set these “not-so-special snowflakes” apart? What trait did they all have in common that created wealth at unprecedented rates?
If I was to boil down the secret to a single word, it would be efficiency.
Efficiency Is The Secret
In my last post on Loser Industries, I wrote about how efficiency appeared to be the key that allowed certain industries to prosper and ultimately outperform the market. That same principle holds true for individuals trying to create fiscal outperformance in their own finances.
If we look back to early posts by bloggers like Mr. 1500 or Mr. Money Mustache (before they got famous), they were all about maximizing financial efficiency. This led to big savings rates, which built wealth far faster than early career investing returns.
I was able to achieve similar results because I saved efficiently … long before those bloggers wrote their first blog post. I followed a similar path, and got a similar outcome (minus the internet fame of course).
What was I like back in the “old days” before I met Mrs. Tako and had a couple kids?
Long before I was ever a millionaire, I was a saving fool. I spent over a decade living a frugal single lifestyle:
- I drove very efficient cars, like a two-door civic and an old beater Subaru (models that old didn’t even have AWD).
- Even though I owned a car, I walked to the bus stop and took the bus to work every day. It was far cheaper than driving.
- I rarely bought anything new. If I couldn’t find something at a thrift-store or craigslist, I usually didn’t buy it.
- I ate to maximize calorie count per dollar (if you can believe it). A meal would consist of a terrible $1 TV dinner bought on sale.
- I had low cost hobbies that were free or paid for themselves.
- Other than road trips with friends, I never went on vacations. No air travel.
- I lived in old run-down apartments and had roommates. While I didn’t always enjoy having roommates, it did save a lot of money.
Back in those days I had huge student loans and less than $20,000 in my bank account. Starting out, I only made about $50k per year, but I still managed to save about $25k per year.
You would never call me a “special snowflake”. I wasn’t wealthy by any stretch of the word, but I had a plan.
Still Just As Efficient
Today, (a couple million dollars later) I’m still the same frugal person I was back then. I didn’t get all fancy and start spending like a madman when I broke $1m or even $2m.
While I definitely eat a lot better than I did in those early days, our focus is still on efficiency and being smart with our dollars.
I still drive old cars, and buy most of my stuff at thrift stores.
So how much more efficient are we than the average household? Well, it’s hard to give exact numbers, but there are definitely clues…
Twice a year my power company sends out this neat efficiency notice that always makes me smile:
It always makes me smile because I get to see how much more efficient we are than our neighbors. Damn it feels good to be efficient.
While our power bill is only one small piece of our spending, you can easily go look at my monthly expense reports and divine that we’re still just as efficient in all other areas.
Early Retirees Are Efficient Asset Builders
What really sets the world’s truly wealthy people apart from everyone else? Many people might guess “A big salary”, but it’s not actually a large salary that makes the difference — It’s assets that make you wealthy, not your income.
Incomes come and go. For most people, income levels over our lifetimes look something like this:
Take a close look at that graph. Income goes up, and then it comes back down again. Yes, job income doesn’t climb continuously. At some point you’ll reach ‘peak income’ in your 40’s and then it’s all downhill after that. Age discrimination is alive and well folks.
For wealthy early-retirees however, income doesn’t matter — building assets is what matters!
Over the lifetime of an early retiree, net worth looks something like this:
It just grows and grows. Meanwhile, income is tiny compared to the growing mountain that is net worth. Yet the early retiree in this scenario sees that same large income-hit after age 45 … only because he/she quits at “peak earnings” to retire early.
Here’s the really interesting part: Because this early retiree only spent 50% of post-tax income during his/her earning years, income that can be spent never actually declines. Spendable income continues to grow even after early retirement and your standard of living never declines!
When it comes to building wealth, you don’t need to be a special snowflake. Absolutely anybody can do it if they’re determined enough. It all comes down to building assets efficiently with whatever income you happen to have.
High net worth individuals live off a very small percentage of their income and just continually stack-up those assets…over and over and over again. For a lifetime.
While it is true that some famous personal-finance bloggers now derive very large incomes from their internet fame, don’t be dissuaded — the principle of efficiency is still what builds true wealth.
No amount of fame is going to change that.