However, it is perhaps better explained in other terms. Nobody reads or writes personal finance (pf) blog very long before it is realized that personal finance and personal health or fitness have a lot in common. Many pf bloggers start a health or fitness blog after obtaining some success with their pf blog, because the principles are very similar. Just like people comes in all sizes and shapes, people also comes with all kinds of budgets, assets, and incomes.

I am, therefore, going to try to explain my “extremism” in terms of health and fitness. Let’s survey the landscape.

First, you have the pf blog equivalent of fat camps, where you pay $200 for the instructor to tell you how to cut down on the cola and twinkies and get off the couch walk around a little. There are also instructors, who for $200 will tell you how awesome you are, which is similar in the self-image domain. For the obese, this can lead to quick weight losses of tens of pounds. For the others, it can lead to renewed motivation and self-confidence. These blogs/camps are probably the most helpful and important of all in terms of preventing a serious issue from developing or reversing an already serious issue (but why does it always have to cost $200?). Yet for the average person, fat camps and motivational speeches are useless.

Next, you have pf blog equivalent of 6 meals a day, cardio, and bench press. This is advice that works for the average person, because it normal, uncomplicated, and only requires consistency to work. Here the motivation to consistent action can be supplied either by a personal trainer (personal obligation) or a subscription to a magazine or a blog. Doing the chest press for 3 sets of 10 reps followed by a few miles of cardio on the stationary wearing spandex in a gym filled with shiny machinery followed by a nutritious power drink at the bar is the equivalent of a dollar cost averaging into an index fund followed by a dinner out at the steak house and a fruit salad in front of the 40″ LCD TV. You’re not going to win any athletic competitions but you’ll do okay in the long run. Most importantly, you will be doing the same as everybody else and that can be very reassuring.

Finally, you have a few pf blogs (I’d like to think I belong to this category, but maybe I’m just a wannabe) which is the equivalent of a garage gym filled thick bars, chains, stones, sleds, and kettlebells. People work hard, they grunt, sweat, and bleed. They are lean and mean and they eat champions for breakfast. THEY DO NOT WEAR SPANDEX(*). These gyms are hard to find and sometimes admission is by invitation only, possibly literally, but mostly they are very welcoming if you can find them and you show enough “heart”.

(*) If you search the internet, you can find me wearing some wimpy spandex cycling shorts

I am going to call these groups 1, 2 and 3 and refer to them below. Most will identify with one the above.

I will now deal with the misunderstandings between 2s and 3s as both have a tendency to believe they know the one truth (1s are usually quick to admit they are wrong.)

The greatest difference is the disagreement on what “comfort” means. 2 eats for taste and without some sort of self-constraint, 2 would eventually become 1. 3 eats for function and function and taste are sometimes two entirely different things. 2 can not understand why 3 eats raw eggs because frankly they taste like snot and besides, who else is eating raw eggs, not very reassuring. 3 recognizes that fruit salad tastes better, but taste is of little importance compared to what the food does to 3’s overall fitness. After all, you can no longer taste what you ate yesterday, but you will have the results of what you ate in strength or lack thereof. 2s derive utility from the pleasure of eating well. 3s derives utility from the pleasure of moving well. 2s need to see their doctor to start an exercise program. 3s can run 20 miles tomorrow, actually right now. Similarly, 2s prefer the easy path to quick results. 3s prefer the hard path to superior results. 2s will be doing biceps curls while 3s will be doing dead-lifts. 2s probably think that dead-lifts are bad for your back (they are if your back is weak from doing a majority of your lifting sitting or lying down ).

In pf terms, 2s take pleasure in simple tangible things like xboxes, bathrooms, and other doodads. 3s take pleasure in the freedom and kinds of opportunities their financial wealth provides.

Most 2s think that people grow weaker with age and that weakness is a natural state. Most 3s know that people grow weaker with lack of use. I was a born 3 or perhaps very early influenced to become a 3 and it took a long time to realize that the reason that 2s and 1s would rather take the bus than walk a measly 4 miles was that walking would hurt them. It was difficult to imagine. It would be highly uncomfortable on their feet, they would probably develop a mild case of shin splints, they would end up sweating and soaking their shirts and be too tired to do anything after they arrived. That was the cost of not exercising and eating like 3.

In pf terms, what is considered a difficult sacrifice by 2s is considered trivial by 3s. What 2s can not do easily with the resources available to them, 3s can. In the example above, 3s can run the distance in the same time 2s would need to wait to take the bus, I know, I did that. What 2s deem a low standard of living as measured in xboxes, bathroms, garden gnomes, 3s deem a high standard of living in terms of shares, bonds, commodities and cash. What is perceived erroneously as a low quality of life by 2s is simply due to a different focus. What 2s see are the raw eggs, the sweat, the blood, the grunting. What they don’t see is the effortless motion, because the 2s are taking the bus, which is probably fine by them. However, just as it is hard for a natural athlete to live in a body that can barely run 5 miles without hurting, it is hard for a free man to live a life of electronic toys and extra bedrooms if he is has to give up his time to gain these.

Analogies only work to a point, but I hope this has at least made it clear that the priorities of someone with a high savings rate and primarily capital income is different from the priorities of someone with a low savings rate and primarily wage income, say. Consider the RV, for instance. If you consider space and separate rooms a priority, or if you need to demonstrate your socioeconomic status through the size of your home rather than the size of your portfolio, it is obviously a poor choice. If you like that you could move to another state and still live in the same place. If you like that you can super-clean your home in less than an hour or that it comes with built in disaster preparations like own water, gas, and electric supplies, it is obviously a great choice. Or consider “appearances”: Which would you rather have, a smartly-dressed flabby body or a lean body covered by an old t-shirt. Which would your spouse rather have? (Answers may differ but I know what I would prefer). The form was paid for, the function was worked for. Anyway …

I used to live as a financial 2 (and also as a health 2) and my quality of life was low (ask my wife). I am much happier, so says my wife, as a 3, and so that is what I do. 3 is only extreme from the perspective of a 2. From my point of view: If you spend 40 or more hours a week working and you desire to show up at 9a every day for the next 40 years in exchange for some electronic toys and a big place to store them, you must be some kind of crazy workaholic with no imagination. Sorry!

However, since I already have a “writing”-business, I had the option of writing on ERE and getting paid. How clever is that! (Anyone please let me know if that is too clever.).

Hence, I switched on google ads. This is about the level of hassle I’m willing to deal with unless some individual advertiser wants to buy the space (As I have already noted, the greater our interests are aligned, the cheaper I am) and that advertiser does not want links to payday loans, credit consolidation, high interest cards, loans, etc., where the price would be “more than you can afford” In the history of this blog, no advertisers have ever approached me with anything else.

However, since ads are more annoying than they are helpful (on average), I am going to take them down again if I’m not making $100/month or more.

During the first day, I made $8.72.

I am open to suggestions to move the ad block around or change or resize it given that it maintains the income potential. or those who do not want to look at them, most browser have an option (typically found in the preferences) to switch them off.

In 2006, we made $100,000 a year and spent $30,000 or about $2,500 a month. Our goal: to buy house in the French countryside in three years, cash.

I wondered if I could survive three years. The pressure of my career compounded by the increasing philosophical dissonance I felt at work made me sick—literally. When you spend 60-70 hours a week working and your spare time at the doctor’s trying to deal with stress-related illnesses, your are on borrowed time.

We’d already figured out that the extra money and consumer benefits couldn’t make us happy—or even distract us from our misery. We’d long since cut way back on eating out, shopping, and keeping lots of crap around. Every day, I had a harder time justifying our lifestyle.

In January 2007 I just snapped. I told my husband I was going to look for a much less stressful job—I found one very shortly and took a significant pay cut. My husband values my health and happiness more than his dream of a big house, so he supported my decision.

“Why not move to France now?” That was his response to my third-life crisis.

For years we’d been putting off returning to DH’s home country because of the money my career brought in—and, frankly, because of my need to identify myself as a ‘professional’ and a ‘hard-worker.’ Well, to hell with all that, is what I finally decided. We gave our notice, sold our stuff and moved back overseas.

Our financial plan now that we’re over the ‘big house dream’: retire ASAP.

Use our current savings (thankfully in Euros!) to buy a small home within the next few years. I vote for buying ‘cash.’ DH votes for taking out a loan that would lead to expenses no more than 650 euros a month (our current rent), so we can afford a place with some land. Given the current state of the global economy and environment, having your own land for growing food sounds wiser all the time, but we’ll see.

Take advantage of my time without work to rethink the way we spend money. This is a project I’ll be working on full-time for the next few months. Our initial goal was to make it on only my husband’s salary. We did this easily in October even with a 300 euro “fun” category. Our next step is to start saving on DH’s salary alone. Within 6 months, I hope to have us saving 500 euros a month and closer to 800-1,000 euros a month in a year’s time.

In the next year I hope to find an income source of about 800 euros a month. Why so low? So that I can afford to do something that won’t make me wish I were dead—perhaps even starting my own business. If I can make more without becoming a miserable human being again, then I’m not against that either.

How long will it take?
Assuming we keep expenses low, and that I find an income source in the near-future, AND assuming we continue to be able to make a 4% return on our investment* we’ll need roughly 300,000 to retire with1200 euros/month. That’s slightly less than what we can get by with now because we won’t need a car anymore once we’re no longer working.

IF DH agreed to buy an apartment ‘cash’ housing should cost us no more than 200 euros a month (we’ll need some money for taxes and maintenance). We ought to be able to retire in 10-12 years.

If we decided not to buy at all, I suppose we could get there even faster, but DH doesn’t like that plan for now. I say, let the man have his dreams. He compromises with me a lot.

*We’re not the savviest investors, just lucky so far. We need to learn some new tricks.

(*) With the V-bounce, I am 10% richer now than I was in 2007, despite saving furiously in 2007 and 2008.

I use 3% inflation and 8% capital appreciation (about 5% real interest). I think 8% is reasonable as I run a portfolio that is based on partially hedged(*) individual stocks (about 15-20 of them) most of which pays dividends—it is slightly less volatile than an index fund by construction.

(*) I use short ATM options to decrease the beta. It is something you can learn to do comfortably/confidently in about a year of self-study. If you don’t fear corporate bankruptcies or if you like to support the budget deficit or you simply feel traditional, you can do this with bonds too. Synthetically, a long put at the same strike would turn a covered call into a risk-free bond.

According to my model projections, I will be able to buy out DW in 2013.5, at which point I will be good for $360k, which is $180k to back each at a $600/month lifestyle, if she wants to. The reason why this is possible is because I went a “little too far” in my savings goals preferring a “runaway” in my finances. This means that my passive income provides more money than I can practically use and so the rest is reinvested. Ideally, I would like to wait for $400k which would happen in 2014.6 or so, just to preserve the runaway(*). I like positive runaways.

Of course, you could argue that with my part time job (if I still have it at that time), there’s a runaway anyway since I’m not drawing down the portfolio currently, or then. Also, I’m not counting her savings which would move both dates forward. Or a W-shaped “recovery” which would move both dates further out in time.

(*) According to the same projections, I’ll be a USD millionaire in 2024 (age 49), that is, if DW does not retire. At that time, a million bucks will hopefully still buy a lot of beer. I think, maybe, I should start counting my net worth in beers.

Obviously this depends on whether she wants to be a “kept woman” which I think she would not like to be; I certainly would not want to be dependent on my spouse for support(*). If not it would probably take a few more years, but at least the option would be there. Even more obviously, it depends on whether she wants to keep working on regulating the polluters.

(*) It would hurt my fragile male provider ego . It’s bad enough that I’m no longer the supreme earner even though I’m holding my own. Yes, I know, it’s the 21st century, so I should just get over it.

Here are are some earlier guest posts:

• The Early Retirement Path
  
• Interview with Modern Gal

• A plan to financial independence at 35
• Guest post: DW on how it is to live with me & the follow up
  

I am looking for 600 words or more. Specific plans and timelines get extra credit!

(*) Passion increases job demand which lowers the salary. Ask any passionate employee.

(**) Not many do, it would seem.

However, for some the primary focus in life is not to earn money. It is not even to make mortgage payments for 30 years. Or fly to Hawaii every other year. For some, their life purpose is doing something that, perhaps, does not make money at all. In that case, they work not to make money but merely just enough to support themselves while spending as much time doing something else than making money. Quite outrageous. Weirdoes.

But they do exist.

Those people have part time jobs which are actually quite hard to come by given that employers prefer people who want to spend all their time making money—I would too. But these jobs do exist and I bet anyone spending as much time looking for part-time jobs as they do looking for real jobs would be able to find one just as easily.

This is an early retirement blog, but it would perhaps be more accurate to say that it is a “part-time capitalist” blog. I have a part time job as a capitalist. I got it by working to earn money and instead of spending it on booze and interest payments, I saved it to use as capital. Being a capitalist does not require a degree (unless you want to work for someone else and share the profits of your work) and learning how to be a capitalist is no more difficult than learning any other field of study. It is an easy job that does not require much work. Whether you make $1000/year or $10000/year depends more on your amount of capital than on your skill.

Obviously, not everybody want to be a capitalist just like not everybody wants to be blogger like me. I am also a part-time editor, which is a specialized job that pays well enough to allow me to work only a few hours a week if I wasn’t a part time capitalist as mentioned above. As this requires no capital and no educational degree, one could jump right into it, if earning a lot of money was not a primary life-goal.

If earning money is the primary objective, it can easily be the hammer with the whole world being the nail. If I only think of money as the solution for every problem, clearly I need a lot of it, especially since some problems are not easily solved with money (health care and education comes to mind). If money comprises my entire arsenal, I also need a lot of it if I can not work. I must save it diligently using the favorite method of my culture, whether that be real estate, bonds, or stocks, so I can keep up my income when I am no longer working. And when I am no longer working, what am I to do but spend it on the normal ways of recreating: travel, watching TV, and buying stuff.

Yet, as I said, there are some for whom money is just part of their solution-arsenal. I would rather buy toilet paper than having to make it myself, etc. but for many things, I do not need to spend large amounts of money. Hence, a little money is required, but not a lot and so making money the primary or even secondary objective (as measured by waking hours) objective of my entire life seems crazy.

A few become part time capitalists, but it seems more common to find intermittent jobs and be good at that or work as a specialized consultants. This is all possible because the focus has been turned from spending money on everything because there is no time to merely spending money on a few things.

For those who feel money-trapped, the first step is to realize that money is not the only solution, and the second step is, then, to spend less of it. This is not technically difficult. Personal finance is easy and anyone can learn it in a couple of months. The hard part is changing one’s perceptions that there is more to life than making money.

(*) Perhaps my blog is too small.

It seems that there is a common sentiment or perhaps a confusion between bloggers and journalists. Some readers expect bloggers to be valuefree and restrict their writings to facts, that is, act like modern journalists. Now, there is a natural or at least observed progression for bloggers to become more journalistic in their writings as they attract a larger audience and even to advance to editors and “magazine”-owners as they start hiring guest authors or even staff writers either for money or for access to their readership.

However, I think it is sad when a blog turns into a magazine or when a blogger becomes too afraid to state opinions which may results in a 10% loss in advertising revenue, fears which I think are overblown anyway. There is indeed a conflict of interest for any blogger that relies on ad-income rather than say being directly paid for opinions. Unfortunately, the latter approach is fairly uncommon as readers expect material to be free. Hiding the cost in the fraction that clicks on ads or worse paying for it by restraining bloggers to their perception of the emotional fragility of a part of their readers—part of which supposedly click on ads—is more acceptable even though the latter could be thought of as a sell-out.

I read blogs because I am interested in opinions and ideas. I do not want to read clinically clean, politically correct articles devoid of opinion and full of disclaimers.

The efficient market hypothesis can, therefore, easily be shown to be wrong. Yet it is still a good approximation which makes portfolio theory sufficiently mathematically tractable to write papers about it and win Nobel prizes, say.

Insofar efficient market theory is a close approximation of reality, the best trading strategy is not to trade at all (see paragraph 1). However, the more popular this becomes, the more difficult it becomes to estimate asset prices. Buy&Hold on a large scale, therefore, makes asset prices more volatile.

The more popular buy&hold becomes, the closer index returns will be to GDP growth, that is, around 3% in real growth. Any growth beyond this is rightfully attributed to investing becoming more popular, hence it is only possible to get the historic 10% returns, if you are actually part of the history where fewer people were equity investors.

When everybody becomes equity investors as part of their retirement strategy, buying and selling will not depend on whether business conditions are good (the prioritizing based on the individual merits of a business having already been destroyed by blindly investing in indexing) but on whether people are retiring(*). Hence, if large numbers of people are retiring, expect the markets to drop. If large numbers of people are entering the work force, expect the markets to rise. It would seem that retiring baby boomers can keep markets depressed for quite some time.

(*) This attitude is dangerous towards business conditions. Hopefully, professionals will keep trying to reward good companies insofar that they have the money to do so with more money being invested solely based on the stock price or current capitalization.

Here is the income so far

• August: $5.55 (only about 10 days)
  
• September: $12.10
  
• October: $16.88
  

About $7-8 was from a single day, so reasonable earnings are about $10/month for my current “portfolio”. This is equivalent to buying a high-yield position for about $1200 which is not bad for the effort. Alternatively, if the $10 can be considered secure in the long term, the money stream is worth about $3000 in present dollars.

However, realize that the size of the wardrobe is strictly limited by how often laundry needs to be done. In the past couple of weeks I have verified the obvious. When I was packaging my luggage for my trip back to my folks, I asked them how often they did laundry. All the time, they replied (smaller washing machine and three adults in the household). Since I would be number 4, I just divided the magic number 12 with 4 and so I brought 3 pairs of underwear, 3 t-shirts, 2 pairs of pants, and 1.5 sweaters (a thin and a thick one) including the ones I am wearing.

The desire to use a washing machine efficiently generates a need to own more clothes. If you handwash or otherwise is able to wash really small loads, it is possible to make do with just one set.
Simply wash your clothes every day before you go to bed and let it dry overnight. This is possible for quick drying fabrics which sadly are rarely natural fibers.