Early Retirement Extreme

Well after doing a guest post over at Early Retirement Extreme.  Jacob was kind enough to do a guest post for me as well.  For those of you not familiar with the blog, it’s kind of like my dream to retire early on speed…he became financially independent in five years.

Rule 1. You do not talk about early retirement extreme.
Rule 2. You do not talk about early retirement extreme… Sorry I got a little bit carried away there, but I
recently got a kick out of a comment on one of my posts hailing me as the Tyler Durden of personal finance. Tyler Durden was the protagonist of Fight Club, which was a protest against consumerism and the loss of
masculinity that gathered quite a cult following particularly from young suburbanite males.

My issue was not so much the problem of losing my masculinity by building a portfolio of Ikea furniture and knowing the difference between a plaid and a blanket. My issue was more the loss of independence and control over my time inherent in a traditional career.

The problem as I saw it was the prescribed definition of middle class success that involved getting oneself deep into student debt followed further indebtedness in the form of a mortgage. Add to that some underwater car loans for good measure, and the banks have a nice deal of keeping one working for the next 30-40 years. Talk about golden handcuffs.

The problem is that the wasteful race for bigger cars, bigger houses, and more things to fill them with is slowly wearing many people down. However, in addition keeping up with the Joneses is also making people
stressed and disconnected from the friends. Remember in college when you could just hang out? Who has time for that anymore? Now we just run around trying to meet deadlines and pad our resumes to pay installments on the stuff we buy to justify spending most of the time we’re physically and mentally awake at work — or is it the other way around?

I think the many people don’t see that there are alternative choices to getting student debt, mortgage debt, car debt, etc. and spending the rest of one’s life paying them off. Thus the first I did what any self-respecting intellectual would do: I sat down and wrote some manifests about the evils of consumerism, credit card debt, and mortgages. As with most manifests these were promptly ignored.

So I figured … well … if nobody wants to listen, I’ll just do it myself. I am a big fan of learning by doing. So immediately I cut back my consumption and adopted a simpler life. Within a few months I saw my bank account grow. You can read the whole story here. I also developed an appreciation for small luxuries. I had started eating very simple meals, so eating over at family and friends or going out with colleagues was always a special treat. This is much like NOT paying extra for a house with a lake view. Those with a lake view might find it interesting for the first couple of weeks but after that they rarely look at the lake. Therefore I say, let someone else pay for the lake view so that you can appreciate it every time you drive past the lake.

After a few years I had enough money to buy a house in cash and/or several cars in cash (I did not have a car but either walked or rode a bicycle). If you don’t spend any money it’s amazing how fast savings grow. At that point I realized that if I invested my money I could derive an income that could pay all my (significantly reduced) expenses. Thus by not buying into the American Dream of outright consumerism, I could essentially play the role of the other side namely the banks and the factories. This took me only five years.

Now I am at a stage where I have the financial resources to reclaim my time. I would not call this early retirement since I am too young to play golf on a full time basis. Also I can’t see myself not generating
an income again ever. I have, however, reached a point where I can choose to spend my time as I see fit: blog full time, freelance, consult, get another education, or read all the classics. I don’t have to go to work to pay the bills. I have 24 hours a day, so I am officially rich – in time.

Now many pf bloggers and financial advisors say that one needs a at least a million dollars to retire. In fact “I have a million dollars can I retire” is the most popular google search that leads to my site. I don’t have a million dollars. I have something which in my opinion is better. I know how to live like I spend $40,000 (the safe withdrawal rate of a milion dollars) a year but at one quarter of the amount (at a level where you don’t have to pay taxes). Of course this takes some effort and learning, something which I discuss on my blog.  In particular it requires a completely different mindset from the traditional, work, get paid, pay the bills, and drive down to the mall and spend the rest. However, the extra patience and self-education needed to avoid having to work for another decade or two and taking control back from the death grip of consumerism is totally worth it to me.

If you liked this post, head over to early retirement extreme to read more about iconoclastic ways to turn the “system” against itself, extreme ways to save and invest, and how to live economically efficiently. You can also subscribe to early retirement extreme’s RSS feed.

6 thoughts on “Early Retirement Extreme”

  1. I love the Tyler Durden reference, I’d take that as a compliment!

    Great post. After reading it and some follow up links on your blog I had an interesting idea. A question you asked is how long can you go without spending any money (except base necessities).

    I’m not as extreme as you, but I like this idea because it would force you to question your purchases more and you can potentially pile away a lot of savings.

    The idea I had was a variation on that, what if you alternate every month between a spending month, and a non-spending month.

    On the months you can’t spend you write down the things you want to buy. The next month you weigh your choices and get the things you really wanted now that you’ve had time to consider them. This way you aren’t so extreme that you don’t enjoy anything in life, but you don’t waste money on things you really don’t need or maybe don’t really want and you have the time to find the best deal.

    What do you think?

  2. @Jordan – I keep a list for “wants”. If I want something but don’t need it, it gets on the list. If something stays on the list for a long time (typically a month or more), I buy it, otherwise, I remove it. I used to keep the list on a piece of paper, but now it’s mental. I also have a ton of little rules that have to be followed to buy something e.g. must have been on the list, must generally be used, must not take up a lot of space, must not be easily improvised, …

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