I retired last year (October 31) at the age of 45. I worked for 23 years in the actuarial field, the first 16 of them full-time and the last 7 of them part-time. I had an awful commute from where I lived on Long Island (New York) to Manhattan for the 16 full-time years and to Jersey City (New Jersey) for the part-time years. My company became a for-profit company in 1997 and I took a big company stock payout (about 300k) last year, invested it in a high-yield (not junk) bond fund to generate enough money (along with my other considerable savings) to cover my expenses with room to spare. I have an IRA from my old 401(k) which has bounced back nicely in the last 12 months. After 23 years, it has nearly $300k in it and it waiting and growing until I can tap into it in 14 years. I have a frozen pension waiting for me, too, at age 65. So, all I have to do is live off my dividends for 14 more years until the “reinforcements” start arriving. Even if I have to tap into principal in 10 years that is okay. I checked this out with a financial advisor. Playing with numbers is something I became very good at in my 23 years in the actuarial field.

I have been debt-free since 1998, having paid off the mortgage on my co-op apartment. I found a decent and affordable individual health insurance policy last year. I bought a new car (a Toyota Corolla) in 2007. My monthly expenses are both affordable and mostly predictable. I am single and am childfree, the latter my biggest reason for being able to retire.

The last 12 months have been great. No more alarm clocks, no more trains, no more commute, no more office stuff (I actually liked the work most of the time, though), no more lousy lunches in New Jersey. Even working two days a week from mid-2007 to my final week at the end of October, 2008, was an awful experience, mainly because of the tiring, annoying, and often sickening commute.

Once I began working part-time in 2001, I was able to reclaim my life. I resurrected an old dancing hobby (at night, something I had no energy to do while I worked full-time) and began doing volunteer work in several area schools as part of the school Scrabble program. Otherwise, I come and go as I please, including spending time with my ladyfriend of 5 years.

I am enjoying the start of my second year of retirement and look forward to many more.

My first step toward early retirement began when I was 20 years old. That year, I made the important decision that I did not want to ever have children. That step, I believe, makes it much easier for someone to retire early. Children are a huge financial burden, so unless you feel the benefits of having them offset the costs, then don’t have them.

Here are some other reasons I was able to accumulate the large sum of money I needed to retire early.

1. I never smoked anything (i.e. cigarettes). Now I don’t want to start a debate on smoking. I am only mentioning the money I did not spend by smoking. Today, depending on where you live, it will cost you about $7 a pack. One pack a day will cost you about $2,500 a year. That’s a lot of money available to invest.

2. My attitude on paying interest on non-mortgage debt is this: It is a waste of money. I paid off 60% of my student loans before the 6-month grace period ended. I had already saved up some money from working and still had some money left over in an old custodial account I used to pay for some of my college tuition and room/board. Back in the 1980s, the tax deductibility of personal interest was being phased out, so there was no indirect subsidy of my student loan interest any more. I have always paid my credit card bills in full each month.

   Similarly, I saw paying off debt as a surefire way to get a better return on an investment. For example, if I am using money earning 2% in a bank account to pay off a student loan with an interest rate of 8%, then I am automatically earning a 6% improvement on my money. I am aware that I should keep a “Rainy Day Fund” of several months but I was not as insistent on that back in the 1980s.

   Another example of avoiding interest was to pay cash for my cars and avoid the costly car loans. I bought my first one in 1986 (for $6k) when I did not have a lot of money but because I had just moved back with my parents for a few months (and paid them rent), I knew I would rebuild my account balance quickly (and wasn’t too concerned with a “Rainy Day Fund” at the time, either). By the time I bought my second car in 1992, I had more than enough money to pay for it with cash while maintaining a “Rainy Day Fund”. Doing good (and inexpensive, despite no Internet back then) research on that second car saved me a lot of money not having to buy another car for 15 years.

   I refinanced the mortgage on my apartment in 1992. Back in 1989, interest rates were very high, especially for co-op apartments. Banks don’t like making loans for co-ops. I shaved nearly 5 points off my mortgage interest rate and saved $200 a month. It took only about 18 months to recoup the closing costs.

3. I was lucky enough to start investing in stocks in the mid-1990s just when the market was beginning to take off. I was tipped off to a good stock mutual fund by an investment advisor in 1996. I took some of my gains off the table and used them to pay off my mortgage in 1998. This made me debt-free. At that time, I was working full-time so one bi-weekly paycheck more than covered all my monthly expenses, so I was able to quickly replenish the account whose value had doubled in the 4 years I was in it up to that point. I was basically investing with the “house’s money” for a while. When I wasn’t buying cars, apartments, or paying off loans early, my personal savings rate was between 20% and 64% every year.

4. I was lucky that my company went from not-for-profit to for-profit in the late 1990s. They set up an Employee Stock Ownership Program (ESOP) and I was given lots of shares during my peak earning years (1997-2000) before I switched to part-time in 2001 and earned fewer shares. But it was my years of hard work which earned me above-average raises in the 1980s and 1990s, resulting in many extra shares proportional to my annual compensation. The ESOP exploded in the 12 years I was in it, so when I cashed it out last year (before it tanked a bit), I still cleared a big chunk of money (nearly 300k) after taxes.

5. I do live a frugal lifestyle. I have local, low-maintenance hobbies including my volunteer work.

6. While I still had dental insurance coverage, I had some expensive dental work done in 2007 and 2008 before it disappeared in 2009. This saved me a good chunk of money.

7. I cook my own food, so I rarely go out to eat. But if I want to go out and eat or bring something in, I can do it. Same for my ladyfriend (who is not wealthy). This saves a lot of money over the years.

8. I spend little on optional monthly services. Due to a good break from my cable TV provider, I pay little for it. I am not stealing services, as they are fully aware of the channels I am receiving (which do not include any premium channels). I do not own a cell phone, as I have no interest in it. Therefore, the total monthly charges for phone+cable+internet is well under $100.

9. I found an individual health insurance policy for less than $500 a month (for 2009).
   

Put all these things together, and you have a financial plan for retiring early. Get rid of debt, keep the monthly expenses low, buy a small place to live, keep the car for a long time…..combine that with hard work at my job and some luck with the ESOP and good personal investments…….and some luck by earning a lot while the market was booming in the 1990s…..and carefully project out a long-term financial plan with the help of an investment advisor…..(and be childfree)…..and you have a recipe for retiring at 45.

Thank you for reading.

(*) Ironically, I once wrote a list of tips on how to become an expert

The novice can not tell the difference between experts and pseudo-experts and he is thus much more likely to follow the pseudo-experts simply because there are more of them. Since pseudo-experts do not know what they don’t know and often fashion themselves experts or at least well-informed (perhaps they follow the news?)—after all, have they not accumulated an enormous amount of information—they can appear supremely confident which makes them so much more dangerous and likely to be followed by the novice.

Not being an expert, the easiest way for a novice to tell the difference between a real expert and a pseudo-expert is to observe the way they communicate, specifically the kind of knowledge that is being communicated. If all that is being communicated is long lists of rules or tips, you are dealing with a pseudo-expert. He may well know how to operate just fine, but if he ever leaves the comfort zone of his rule-zone he will be lost.

Unclear writing also indicates a pseudo-expert. Unclear writing typically means unclear thinking as thoughts are mostly words and writing is a direct mapping of such thought. An expert should have clear thoughts and with just a little practice be able to put down even complicated thoughts on paper in a way that is simple to understand. Conversely, a pseudo-expert will have no chance doing that because he does not understand the overall mapping of the original thought.

The best thing a novice can do is to become somewhat of an expert himself. Of course, there are no end of pseudo-experts telling you that you need to consult a (pseudo?)-expert before you even think of doing anything. This very prevalent attitude propagates the system and it is as dangerous as believing in people that appear confident in their knowledge.

My journey to early retirement actually began quite unintentionally in the late 1990’s. I work for a large municipal fire department. My father has always been a financial guru of sorts, so when I came home after my second day of rookie school loaded down with benefit booklets filled with health/dental/disability/life/retirement options to peruse I went in to see my dad for recommendations. After looking at a health insurance book for a minute, he grabbed my 457 (like a 401k) deferred compensation enrollment form, wrote “25%” in the salary deferral line and said, “Fill the rest of this out, turn the form in, and don’t look back.”

The department I work for automatically enrolls employees in a pension plan which takes an additional 7% out of my paycheck for funding (this is separate from SS). Together, these two deferrals took away almost 1/3 of my paycheck without me even seeing it. I was saving 32% of my pay almost unconsciously.

I should say a little bit more about my dad and the eccentricities of my family. I think my father’s three great loves in life are my mother, golf, and the Roth IRA. We have an unusual family tradition of getting together New Year’s Day and writing out checks to make our new tax year Roth IRA contribution. “Too good of a deal not to.” and “This won’t last long…eventually Congress will realize the mistake it made” are frequent rants of the old man. So, not putting aside a few hundred dollars a month for the yearly Roth check really wasn’t an option for me. There’s another 5-10% of my pay out of my hands. 40% of my pay…gone.

Well, until I got married five years ago, I never had a credit card. Debit card, yes, credit card, no. It was a hassle once or twice while trying to establish utility connections (they wanted a credit history), but I worked it out. No credit card necessitated my keeping some cash in a readily accessible account for emergencies. Yes, the old boring emergency fund. So I had 10% of my pay set aside for that. After the cash balance accumulated to a level I felt okay with, I kept the 10%+ going into a savings account at a brokerage firm (with a 3-day delay on transferring money out) and bought some blue chips. This left me with ~50% of my pay being saved with very little willpower or budgeting necessary. All I had to do was look at my checking account balance before I bought anything. There really was no way for me to go into the red.

As Jacob has pointed out in a more extreme way, one neat facet about saving 50%+ of your income is that for every year you work, you have at least one full year of living expenses saved up. This has held up for me. I started working full time at 21. 12 years later, now married, my wife and I have a little more than 12 years living expenses saved up. My wife and I plan to have 20 years living expenses saved up for retirement at age 40 (age 38 for her). Assuming my wife and I will be able to continue to save 50% of our pay for the next 7 or so years, we’ll be ready. Here’s how saving 50%+ has been the past 12 years:

• The first seven years were easy. As a single guy, saving 50%+ did not crimp my lifestyle at all and my paycheck was by no means large. I lived with my parents some of that time and frankly, I’m embarrassed that I didn’t save 75-80% at that time. It would have been easy. Age 20-25ish can be incredibly important for retirement savings. Quite frequently at work, we see young people who, upon getting a nice, “stable” job with the fire department, go out and finance a new car. This purchase is so common, it’s known in the firehouse as “the rookie mistake.” They fail to realize that the 25k they just spent on a new vehicle will likely cost them 100k+ down the road in retirement savings. Well, I didn’t make that rookie mistake, but I certainly could have saved more without sacrificing much.
  
• The next three years were even easier! I got married and it was even easier to save! My wife is reasonably frugally minded like myself. She made a decent salary as an elementary school teacher. We continued to save 50% of my salary, lived on the other half and saved almost 90% of hers. In her job, she was eligible for both a 403b and a 457, so we maxed both out, and really never even saw her paycheck. We got an awesome dog, life was good and saving was easy, until…
  
• The last two years have been a savings challenge with the arrival of our son. My wife decided to stay home to referee between our action-oriented son and the sheep/child herding dog. No more 90% saving there. Good friends, family, and a baby shower took care of most of the “start-up” costs of child rearing, but left us with plenty of additional costs including diapers and doctor’s visits. (As far as health insurance goes, the birth of my son was a double whammy, because we had to make the additional payments for him and my wife, since her coverage through her work ended.) After a little scrambling, we were able to get the savings rate back above 50% with the help of a small promotion at my work and a part time job I got working a couple days a month.
  

So we’re on track and just a teeny bit ahead of schedule. We have saved almost 13 years of living expenses for 3 people (and one dog). Our percentages are different, and so is our timeframe, but just like Jacob we will stick with the high savings plan. Our goal is to have 20 years living expenses saved up by 2016 and retire with enough passive income to generate $3k/mo- 1k/mo for the Mrs., 1k/mo for our son, and 1k/mo for me. Astute readers of Jacob’s may notice that 20 years of living expenses would have to be withdrawn at 5% to generate 1 year of living expenses. Most financial pros recommend a sustainable withdrawal rate of only 4% or less.

Several personal caveats to that, though. Chances are good that either my wife and I will do some type of paying work in retirement to regenerate the additional 1% and put it back in some type of retirement account. This would take about 4 hrs a week at my current part time job to generate this income (Sound familiar, Jacob?). Hey, Roth contributions can only come from earned income, and woe upon the Mrs. and I if we miss one tax year’s contributions even if we’re “retired.” Our son will (hopefully) not require that 1k/mo forever. By planning for him to be an equal share we have built some “fat” into the equation, so when he leaves the nest, we’ll be able to drop the withdrawal rate down to 3.3% or so. We currently live in a very high cost area. If necessary, we could reduce our living expenses by about 20% by moving one hour away after retirement with virtually no change to our standard of living.

So, despite a fairly rough twelve years in the stock market, (our largest retirement account has a 12 year annualized return of only 3.8%) we are indeed on course to retire in 2016 with right around 20 years of work under our belts and 20 years of living expenses saved up. We’re not quite yet at Jacob’s stage, but we’re over halfway there and things look good! Saving works, take heart!

We do have a glitch in the otherwise seemingly perfect matrix in that the Mrs. has a pre-existing health condition which necessitates high cost health insurance, but we also have an ace in the hole with my previously mentioned pension. If readers are interested and Jacob has space available I can write more on the merits of pensions or the perils of group health insurance at a later date. I’m well above the 600 word mark and have probably worn out my welcome as a guest poster.

Thanks for reading.

So far I have joined the following money-making schemes

• Adsense, which serves text links. Adsense tries to find relevant ads based on certain keywords. It may not be entirely intelligent. For instance, if I say “credit cards are bad”, it might show ads for credit cards. If I suggest using baking soda instead of toothpaste, it might show ads for teeth whitening. I get paid per click, but it’s not that simple. Obviously advertisers only want to pay for “genuine business” and google has algorithms that put the clutch on any behavior that suggests otherwise, which effectively means I don’t get paid.
  
• AdsDAQ, which serves annoyingly animated ads or whatever they feel like. Here I set my own rate and any advertiser that is willing to pay the (rather high) rate gets to put whatever they want there. Here I get paid per “impression” regardless of whether anyone clicks. This income is more predictable than Adsense. If there are no buyers, the ad shown defaults to adsense.
  
• Amazon affiliate links. If you click on a link on this site that goes to amazon and you buy something on amazon, regardless of whether it was the thing that the link originally led to, I get a 4%+ referral fee. This holds as long as you buy something there within, I believe, 24 hours, I get paid. Unless you click on another affiliate link on some other site in the meantime in which case they get paid. I note that very few actually buy the books I suggest (why buy, when you can get them from the library?). Instead people buy all sorts of other things, the most interesting being a huge box of several hundred condoms. Godspeed to you, dude!
  

FYI: I do not block individual ads. I may look into doing that in the future.

If $3/day is going to be the norm, I am not going to reach my $100/month goal which is my criteria for keeping the ads on. I talked with “MoneyEnergy“, and we agreed that the best way to “monetize” ERE is probably to sell ebooks given the ratio between recurring visitors and one-time search engine visitors. In fact, if you compare the stats(*) of ERE to an immensely popular blog like The Simple Dollar, you will see that the average TSD visitor spends 40 seconds on the site. The average ERE visitor spends 279 seconds.
It seems much less likely that anyone hanging around for several minutes is going to end up clicking on an ad, but conversely more likely that they may be interested in buying a book to read more, or at least get it from the library

(*) It is interesting how few bloggers are actually willing to reveal these stats to the public. Kudos to TSD for keeping them open, and yeah, kudos to me too .

Incidentally, if you hate advertising and everything it stands for, use an RSS reader to read blog posts instead. It is much more convenient as you do not have to go to all the blogs to see if anything new has been posted. The reader does it for you.

The most important thing about retiring extremely early is to decide what to spend your time on. (As you will be quite young, this will most likely not involve playing bingo and taking your medicine at regular intervals.) If you do not know, don’t worry. Some prefer the structure of a regular career with 9-5 hours and its associated expectations and can not think of anything better than watching TV and cleaning the house. If that is the case, maybe it is best to stay on the career track with its structured activities. If you’re not sure, a good way to know is to look back to when you were a kid during summer holidays. If you always found stuff to do, you are a candidate for extreme early retirement. If you were mostly bored, missed your school friends, and couldn’t wait for the holidays to end so you could go back, maybe you should not retire early.

Whereas career oriented people spend their money on houses, cars, restaurant food, TVs, subscriptions, etc. Extreme early retirees take all that money and spend it on an investment portfolio that provide a passive income, while they spend their time running, diving, reading, meditating, traveling, talking, meeting with (new) friends, or whatever they are interested in. First, you must therefore accumulate a few hundred thousand dollars to create this portfolio. Don’t worry! A few hundred thousands is not a lot. Look at your income tax return and add up how much you are earning and will earn over the next handful of years. Alternatively, look at how much you have earned over the past 5 years. How much of that money do you still have in your possession? (You could have most of it!) If you earn $35000 per year it takes less than 3 years to pass the first $100,000 minus your expenses. Obviously, it is important to reduce the expenses unless you can somehow boost your income from 35k to 70k.

Some people may have large houses because it plays a part in their socioeconomic status or perhaps they have been told that real estate goes up. However, many people live large homes simply because they have a lot of stuff. However, most only manage to use a small number of things on a regular basis regardless of how many things they have. All the superfluous things causes clutter and as a response, bigger houses are bought. It is better to get rid of them and move into something smaller and less expensive. To downsize put your stuff in moving boxes by category and note the contents on box with a sharpee and today’s date. Rent a storage unit or a friend’s garage and store your boxes there. If you need something from a box, go and get it, reseal it, and write a new date on it. After 6-12 month it will clear from the contents of the boxes what you really need and use. Get rid of the rest using yard sales, and sites like craigslist, ebay, and amazon.

Find a small, that is, one bedroom or less per person, place to live that is close to work and the supermarket. Consider a room mate or even moving in with family. Consider it a practice of your social skills for the time when you need to live with your future spouse. If you already have a spouse so much the better. You can share the 1 bedroom. These days it is easy to use online services to find a place to live. Search for a price range, generally around 10% of your income. Then enter the address or your work and your future address into an online mapping system and see if you can walk the distance. Don’t forget that you may be able to use public transportation to extend your range.

Sell your car. Many car owners spend as much on their car in monthly costs: gas, depreciation, and insurance, as extreme early retirees spend per month in total. Cars are mostly for people who live in inconvenient locations. But you took care of that in the step above. To get around, use your feet or your bicycle. In a pinch you can use public transportation or get a ride from a friend.

Learn to cook from basic ingredients. Not only will this save you much money in the short run which you will need for your investment portfolio. It will also save you a lot more money in avoided health issues further down the road. Unless food is your thing, in which case you probably went to chef school, eat to live instead of living to eat.

Cancel your subscriptions. No less than 1 decade ago, people did fine without their cell phones and these days cable TV only repeat a few proven formulas in different forms and shapes. Think of any other non-essential subscriptions you have an cancel those too. For each $50 in monthly charges you keep, you need to save an additional $15,000 to become financially independent. Weigh the costs, some subscriptions may significantly increase your quality of life, but it is probably safe to assume that most don’t.

Find hobbies and things to do that do not cost money. Go sailing. Start writing. Play the guitar. Become a member of the open source community. Fix bicycles for the community center. Start thinking about what you will be doing in retirement and get good at this. If you get really good, you may even be able to accept few payments, but never let the income rule your decisions.

Take care of your things. We have gotten used to abusing our stuff and throwing it away to get new stuff. However, you can make things last. Learn to maintain and repair the things you have.

Take the sizable amount of money that you now manage not to spend and put it in an investment account. Many people recommend index funds, but learn about investing and you may want to pick something else. Watch that account grow. Once it is bigger than 300 times your monthly expense, you have arrived! Since your expenses will go down as your savings go up, this will happen sooner than you think. Perhaps surprisingly so.

I have an early retirement plan, like many people, but mine is slightly different. The normal system of working out the numbers to figure out how much I need to accumulate in order to live X amount of years at Y dollars per year is definitely a part of my early retirement strategy; however, it is only half of it. The other half is more income focused. While prudently saving, I’m also focused on developing income streams.

The overall objective is to amass a sum of money that serves more as my “emergency retirement funds” while living off income from a basket of income streams that I’ve developed prior to “retiring”. These income streams may require some level of effort and work to maintain them, but they are income streams that require no more than a few hours a week of work and work that can be done from home. There are risks to an early retirement (which i will address later) and I believe it is a better strategy to not touch the money saved up, instead letting it grow while living off other income sources.

If one is to step back and examine what it means to retire, it is all about income replacement. Most people replace their income by withdrawing money from savings or investments. I’m merely focusing on cash flowing assets versus my traditional savings and dollar denominated assets (stocks, bonds, etc.). It is still important to pursue the build up of cash and stocks because it is another level of diversification and like I mentioned above, it will serve as “emergency funds”.

Turning to specifics and actual numbers, I’m currently 27 years old. It is not unreasonable for me to establish retirement funds (cash and stocks) of about $300,000 – $400,000 by the time I am 35 years old (I currently have approximately $50,000 saved). It is important to not include equity in your primary residence since you will always require a place to live, although you may rent down the road. Moving on, it is also not an unreasonable goal to having established income streams producing anywhere from $3,000 – $8,000 per month in income by the time I am 35. Let me explain the strategy and path to get to this point.

I plan to work pretty hard over the next 8-10 years. My primary job provides my primary income plus enough to save about $10,000 to $30,000 per year (maybe even more) depending on performance numbers. There is potential for even greater upside and there is potential for limited growth, depending on the economy, and a few other factors. By living frugally and smart, I can build up my so called “nest egg” to a nice level. By being a patient investor, focusing on depressed stock prices (which equate to higher yields), I can lock in very attractive returns for these funds which will hopefully grow the nest egg even faster over the years.

While working on my primary career, I’m also dedicated to developing income streams as I’ve mentioned several times already. My first income stream that is already established is my online blog, 20smoney.com. I started that website to provide financial information and advice for people in their 20s that is not typically found in the personal finance blogosphere. Currently, the blog brings in anywhere from $250-$450 per month. Instead of saving that money or spending that income, I’m currently reinvesting the proceeds back into the blog. As I mentioned before, my goal is not an income stream that produces a few hundred dollars a month, but an income stream that produces a few thousand dollars a month at minimum. Therefore, while I’m living off my main job and funding my nest egg through my main job, it makes sense for me to maximize the efforts to grow the income stream by investing in it (similar to reinvesting dividends into a stock).

As one income stream (my first blog) becomes more stable and I shift some of the work to other people, I will shift my own focus towards building a second income stream from the ground up. Again, it will most likely be in the form of a blog or a website because of how easy it is to setup and because it costs almost nothing to get going. Plus, with my first successful blog launch under my belt, the second one will be much smoother. I believe that each blog launch really takes 2-3 years to get up and running and to be able to actually produce some decent income. As I said above when I mentioned my income goals, it is not unreasonable to expect online income in the range of $3,000 – $8,000 per month in 8 years when I’m tentatively planning to retire.

I have thought a great deal about the security of online income and have found it to be just as secure if not more than the income from a “regular job”. Unless there is a huge shift in the way the web works, the traffic and income is actually very secure for a website. The ebbs and flows of the economy hardly affects it, as opposed to very much affecting regular employment. If you think about it, online advertising (a big source of online income) is only in the infant stages. The online economy is growing much faster than the non-online economy, so come to think of it, it’s a better place to be than say… manufacturing in America.

The main risk that I see for early retirement, especially when observing current economic and monetary policy, is inflation. Anyone contemplating early retirement should study inflation and ensure that they are protected or hedged for such a development. Online income, like many businesses, are actually pretty good places to be in an inflationary environment (since businesses typically just pass on higher costs). Having funds in inflation protected assets like commodities and even stocks is also important.

By achieving consistent online income from one or more sources that will provide plenty of money to live off and also building up a nice nest egg to earn investment returns and to be funds to “fall back on” in the case of an emergency, it is very possible to achieve “early retirement” in my mid 30s. I view “early retirement” as simply achieving ultimate freedom. No boss. No 9-5 job. My only work that I partake in is work that I enjoy and can do at anytime and at any place (just bring a laptop). Early retirement brings the flexibility in life that allows me to pursue the projects and activities that I wouldn’t be able to pursue working a 9-5 job. The financial independence, the flexibility, the freedom… it’s a fantastic goal to pursue.

My housing story is as follows. During grad school I lived in dorm with shared kitchen and bathroom facilities. This is not a big deal when you sleep from 3am to 10am. I usually had everything for myself. The cost of this was ~$270/month (I’m trying to remember past exchange rates) for a small but really well designed room with a table, a bed, a sink, and lots of storage. This was 10 minutes of walking from my job.

I then moved to the US and got the entire top floor of a duplex. This was my first experience of “supersized American”. It was possible to do sprints in the living room without running into a wall. It was furnished with garden furniture. I met DW shortly thereafter and we started living in each others homes. The cost was $400/month and this was 20 minutes of walking from my job.

Since this was a waste, we rented a 1000sqft house half a year later. We lived there for the next 2.5 years. This cost $660/month divided by 2. It was an old house which had been standing empty for a couple of years before we moved in, so pretty much everything in that house broke while we lived there but the landlord was quick to fix it. It was 25 minutes of walking from my job.

Anyone noticing a commonality? (Price and distance).

Then I got a job in CA. We now had a 1500sqft (maybe larger) with 2 bdrms and 1 bthrm and an attached garage. In CA style, we parked the car outside and played hockey in the garage. This also had a landscaped garden which cost a fortune (several hundred dollars per month in water) to keep alive in the dry climate. It was $1400/month plus significant utilities. It was also 100 minutes of walking from my job. I got a bike.

The trend was broken.

I did not really feel I was getting my money’s worth and the landscaped garden was really hitting me in a sore spot (tons of work, finite CA water supplies,…). Vacuuming took an hour, etc. Man, almost every room took an hour to clean by itself. There was simply too much maintenance and too little adventure. And I was paying a premium for that?!? After this experience/experiment, I decided that I would never want a McMansion or a house in suburbia within the constrictions of a home owner association.

I started thinking about living aboard a boat. It sounded exciting, but DW wasn’t buying it. I was a little bit worried too. What if the head (toilet) was operated wrongly in the middle of the night—then we would wake up with screaming bilge pumps and step into knee high water? No, clearly I did not know enough about boats.

Tiny houses (tumbleweed) sounded exciting. Small housing and the possibility of home ownership while maintaining the flexibility to move around in our professional careers (moving every 2-3 years gets old as soon as you hit 30 at which point, I guess, you’re old too ). DW wasn’t buying it.

Instead we bought an RV after some initial preparations and this is where we are now and where we have been for the past year. It is or was 50 minutes of walking (15 minutes by bike) from my job and it cost ~$280/month/person (rent+utils).

Lately, we have been thinking about buying land in New England (Maine or New Hampshire). As shelter is calculated the same way as a latte(*) in terms of calculate the cost of recurring expenses, we could replace our current situation with real estate costing up to $150000 or so. If we buy something (in cash of course) less than this amount we would come out ahead.

(*) I drink coffee, but I would never buy coffee “out” unless in dire circumstances. The last time I bought coffee was in Denver airport at 6am in the morning after a 6 hour night flight.

In conclusion: If you want to retire extremely early, you do not have to live in an RV like we do, currently, but you should make paying only $200-400/month/person for shelter+utilities your highest priority. As you can see above there are many ways to do that (and also one way to not do it).

We can argue the exact monetary point of FI, but the power of EEFI (guess an acronym!) is the compounding interest or the cash flow it generates that anyone pursuing delayed FI will not see for a long time.

First, if I got a real job (who knows, I might radically change my philosophy in 15 years—I did so 10 years ago, so I have a history), then I would not need to contribute anything to retirement savings because I already saved more for retirement than many people ever will [in their lifetime]. This would leave me more money to spend which results in what consumers know as a “higher standard of living”(*). In addition, I saved early, so practically all my money has longer time to compound that many people’s savings (I know people my age who have not started saving yet.)—where the first contributions get 30+ years of compound, whereas the last get 0 years. This means I have 30 years of compounding, whereas the life-time worker only has 15 years.

(*) I currently know how to get the same standard of living as a middle class person for far less cost. That is, I live in an RV, but I could replace this with a house in many parts of the country with less expenses as a result.

The price is 5 years of hard savings. The first years are the most important for the reasons above. A problem with the first years is that for most people starting—it definitely held for me—I/we/they are mostly clueless about how to live without a lifeline to Walmart, Ikea, and the mall. Initially it would therefore look like 5 years of suffering(*). However, within a year, there will be some learning and frugal skills, networking/connections, and lifestyle changes will rapidly compensate for the consumer ignorance.

(*) A good reminder is to put things in perspective. You will still be living better than 90% of the rest of everybody else on the planet though.

The most important thing to realize is that the period is finite. A lot has been made out of the issue that I used to eat lentil soup. (It’s a great dish similar to dhal.). I don’t anymore. Most importantly, I do not derive current happiness or sadness from what I ate or did not watch on a TV I did not have 5 years ago. What I do do, however, is to derive happiness from the savings I did 5 years ago. “Sacrifice” in the present, which is now the past, to enjoy in the future, which is now the present.

All I have done is to take this to an extreme. If you have never tried it, there is enjoyment in going to bed financially secure and without worrying about jobs and bills, and perhaps there’s more enjoyment in that compared to ordering pizza every day and watching TV series on flat screen TVs. I’m just saying.

Very likely, anyone interested will already have adopted some of the culture already. After all, this should be the main reason for living somewhere in my opinion. Respect should be taken for granted, but for anyone with tendencies to inconsiderate/oblivious behavior(*), pay extra attention abroad. The language is crucial! Even though most of the world speaks English, you will never make the same connections to the locals as you would in their native language. in particular, some jokes can’t be translated!

(*) If you don’t know if that pertains to you, it probably does

Well, that’s my two cents. Here is a nice thread discussion offshore retirement in greater detail than I can.

Since starvation of food or at least the newest iPod is a frightening proposition at best, most elect to find jobs. You could conceivable grow your own food by yourself, which is no mean feat, but nobody can make their own ipods, and so wage-employment is the preferred strategy to such an extent that no other venue is seriously considered.

Due to base risk of starvation, risk is preferably transferred to the employer as if they are somehow more safe than striking out on your own, as if. I think recent history has shown that employment is no guarantee of safety.

The problem with entrepreneurism is that income is seldom immediate. A business needs assets and inventory to leverage the work and the former two do not appear overnight.

This means it takes some time before one is ready to sustain one’s debt to life, which was mentioned above. One way to do so is to save up a war chest designed to pay one’s fare until the business is capable of doing so. Such a war chest can be substantial or it can be small. If it is substantial it may never be established, so this leaves a small war chest.

The key to having a small war chest is to have a low overhead. This means low cost of living. Low cost of living is directly equivalent to time. It is therefore key to establishing a successful business. You may think of business success as playing the lottery with the number of lottery tickets being determined by work effort and the work effort being determined by time and obviously effort(*).

(*) Lottery tickets just indicate the uncertainty. If you have certainties like networking, say your dad used to be the president, or you’re a 10 on the 10-scale, you will have certain advantages in certain directions, eh?

The ultimate war chest is obviously financial independence. With financial independence, it makes little sense to share your profits with your employer unless working for someone else somehow allows you to work more efficiently than you would be able to on your own.

See the 30 day challenge in the right sidebar for how to very likely significantly reduce your expenses, even if you’re already pretty frugal.