Financially Possible

I used to perceive myself as extreme in many aspects financially. After having read Early Retirement Extreme (ERE), I now think I’m quite moderate on the spectrum. Jacob Lund Fisker (the author) saved 75% of his income on a much lower wage than what I have earned throughout my career. His savings rate combined with his Do-IT-Yourself approach allowed him to retire after just 5 years of work. By most Americans’ standards, they would consider the author’s way of life extreme (hence his choice of title).

Lifestyle Design: So Much to Say

I have much to say about this book. So much so that I did not find it convenient to put all my thoughts into writing. I’ve placed much of my book review onto Youtube.

The focus of the book is really about lifestyle design. This concept calls into question many of the dogmas of modern American society. Instead of simply just accepting that things are a certain way, the author encourages his readers to question everything, such as finding new and better ways to doing things, learning to perform many tasks yourself (within reason — some things really are just cheaper to buy), and never stop learning.

Fisker’s writing style was a bit disjointed, but it’s very clear that the author had put much thought into life design and on a massive variety of topics. Transportation, investing, economics, career, education, eating, shelter, exercise, goal setting, creating a wardrobe, and adapting to heat and cold are just some of the many topics discussed in the book. The depth of each topic is amazing and the way in which he described each was very different from mainstream Western society.

My Biggest Personal Takeaway from ERE

One area I know very little about is ecology. Ecology is another topic described in this book and it’s clear that environmentalism and pursuing financial independence go hand in hand. While I was somewhat aware of this in the back of my head, my training in economics has limited my scope of thinking about the world just in terms of producers and consumers. The author suggested that by adopting our thinking in terms of ecological models, we’d come to view the life cycle as finite resources and decomposers.

I wish to become more of a decomposer within our economic cycle. While I have made use of Craigslist in the past to buy and sell used items, I definitely want to do more of that going forward. I’ll also be looking into Freecycle (as the author recommended in the book). The concept of planned obsolescence has always bothered me and companies that practice it are both greedy and wasteful (two traits which are highly correlated).

Four Trajectories Towards Retirement

Now that I have read Early Retirement Extreme, my understanding is that there are 4 personal trajectories toward financial independence/retirement:

• A person works 30 to 40 years saving 15% of income towards retirement. While this path is considered “normal” and even advised as a financial rule of thumb, however, when considering the family context of the past, this lifestyle is extreme living. Two generations prior, the typical American family was single income and that earner worked 30 to 40 years until retirement. Yet, today, most American families are dual income earners and productivity has doubled when compared to the productivity from two generations ago. (Extreme!)
• A person works 5 years saving 75% of income towards retirement. After that relatively short time period, they are free to pursue their passions and interests without worry or concern about money. (Extreme!)
• A person works 15 years saving 50% to 70% of income each year towards retirement. Typically, the savings rate is closer to 50% than it is to 70%. Following this, the person is able to self-actualize and not have to do activities that are undesirable (i.e. W-2 employment work). Work may still happen, but it does not feel like work because those activities are in line with what the person actually wants to do. (Moderate; me)
• A person works saving nothing from income each year towards retirement. Optionally, the person may even have a negative savings rate due to consumer debt (credit cards, car loans, etc.). Unless behavior changes, this person will have no choice but to continue to work into old age and during failing health. (Dangerous!)

My favorite chapter is the seventh chapter (also the last). First, Fisker illustrated several financial cash flow diagrams that are worth examining. Second, I enjoyed studying the inverse correlation between savings rate and the number of years you would need to work in order to afford taking a one year break from the workforce.

I recommend this book to anyone willing to consider (or at least be open to) alternative ways of living (such as becoming more self-sufficient, pursuing financial independence, being mindful of the environment).

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