Why Early Retirement Extreme is a bad name

via Early Retirement Extreme:

When I started the blog I debated what would make for a good blog name. One of the names considered was “Extreme Early Retirement” but I found that that name had already been “parked”. Early Retirement Extreme was free though and ERE also made for a better acronym than EER.

In retrospect, here slightly more than 3 years after starting the blog, the R-part of that name has turned out take have some annoying side-effects.

I found the crux of the matter to be that people have different and preconceived notions about what retirement means. Retirement has traditionally meant the part of life that followed a life-time of work. Retirement was for those workers who were broken down physically and sometimes mentally and unable to work further. The way industry had been set up meant that they could be replaced by a younger functional version much like a part in a machine.

As a more robust financial system replacement family dependence of having children, some people who managed to accumulate enough capital became able to retire a few years earlier than usual. A person could stop working even while being capable of continuing work. This was the first paradigm shift.

Traditionally households had a single income which meant that there were enough savings to support the household.

Recently, the idea of retirement has begun to change.

First, as households became poorer in real terms, single income households turned into dual income households. This now means that one person can retire while the other keeps working. This is the second paradigm shift. Here one person could retire several or even many years before the other.

Some people have also been able to push the age of retiring, that is, the age of no longer working for money far down. This is called extreme early retirement. This is somewhat different from using up one’s money until the pension rolls in. This is more akin to a lifetime of cash flows from investments that are not drawn down in value.

This is what I am talking on on this blog. This is the third paradigm shift. We have come pretty far away from the original definition of retirement: from someone who is too worn out to work to someone who has enough money so as not to need to work.

This is why early retirement extreme is a bad name.

Maybe financial independence extreme would be a better name?

Well, here the problem is that financial independence also has come to have many different meanings. For me it means having enough savings to pay for (finance so to speak) all my needs over a lifetime. Yet, for some it simply means not having any debt; for others it means having enough income to pretty much purchase whatever they want.

These definitions are even further removed from what I intend.

Another suggestion is “Independently Wealthy”. This is actually pretty accurate, except many people confuse “wealthy” (having money) with “rich” (spending money).

Consequently, I’m stuck with Early Retirement Extreme. Just make sure you don’t get stuck on your personal interpretation of what that’s supposed to mean, okay?

---

Copyright © 2007-2014 earlyretirementextreme.com

This feed is for personal, non-commercial use only.

The use of this feed on other websites breaches copyright. If you see this notice anywhere else than in your news reader, it makes the page you are viewing an infringement of the copyright. (Digital Fingerprint: 47d7050e5790442c7fa8cab55461e9ce)

For more info: Why Early Retirement Extreme is a bad name

Early Retirement Extreme

Why Early Retirement Extreme is a bad name

The post Why Early Retirement Extreme is a bad name appeared first on FX FOREX.

via WordPress http://ift.tt/1g9P4o9



Personal Finance, acronym, early retirement, retirement

What retirement means to me

via Early Retirement Extreme:

Following this post, I got this interesting question from “The Executioner” (slightly rephrased)

“You still have a full-time job, right? How can you call your blog “Early Retirement Extreme” if you’re still on someone’s payroll as a full-time employee?”

Yes, I have a a full-time job, a part time job, I write this blog, I’m working on a book, and I’m also on the board of a non-profit organization. I only live so long and there is so much to do, so I doubt that I will ever be able to sit still viz. “retire”. I am busy 14 hours a day (including weekends). I have always considered my work more of a “mission” than a job. It is essentially an expression of who I am. This is how it should be given how much time I spend doing it.

The thought of wasting my (finite) time is appalling to me. The drive for financial independence based on a simple life has very much been driven by my dislike of trading my time for superfluous possessions and being told to do things that do not interest me (such as playing career and award games and dealing with corporate bureaucracy).

I try to live a balanced life. Hence it is doubtful that I will ever be “traditionally retired” in the sense of dropping out of without contributing anything productive anymore because I need to compensate for not having done what I wanted so far. I can see how dropping out would work for someone who has worked for 30+ years at a tolerable job spending time and energy trying to climb the ladder/pyramid and never had the time to do anything but think about work, earn money, pay bills, eat, and sleep. Retiring after such an ordeal, I can fully understand why they would want to do the things they have not yet had the chance to do. Many people decide to travel, probably because they have never been anywhere and they want to see the world before it is too late. And so they set out to do lots of traveling perhaps overcompensating a bit and after a few years of that they have had enough and so they settle down. I have lived in three different countries and been to 14 so far. Let me tell you, traveling quickly gets old and I have reached a stage where I hate traveling. I know several other “jetsetters” that feel the same way. The next hobby seems to be playing golf. For someone who hasn’t done any sport since leaving high school, a desire for physical/competitive activity is also understandable. Golf can be enjoyed at almost any age and so at age 65 it is one of the few things left to do for the untrained individual.

Yet why delay activities until age 65 at which time you can only play golf when you can play hockey with the occasional body-check (hey, it was an accident, I swear ) when you are 30, 40, 50, or even 60 and older (if you kept in shape). In general I am curious as to the choice of postponing enjoyment so far into the future that the options for enjoyment become limited due to age, health, and lack of time to develop the sophistication to enjoy things even more. Not that I don’t understand it. People are too busy trying to make money to pay for all their stuff. I think that is a shame.

I was actually talking with DW the other day of what exactly defines retirement. Normally it means “removed from all activity”. Yet if I were to spend all my time working on improving my golf game, would that not be work? What if I was working full time but not getting paid. Is that retirement? I think the definition is rather blurred. What it comes down to is whether you do things by choice or because you need to.

I still work, but I don’t work because I have to. You could get technical and call it semi-retirement or financial independence, but then again “earlyfinancialindependenceextreme.com” or “earlysemiretirementextreme.com” sound somewhat silly . This is one of the main reasons that the blog is named as it is. I wanted to have something catchy.

Besides, this blog is not just about me. If anyone gets inspired and adopts some of the methods and decides to drop out and play golf or move around, I’m fine with that. I am giving you the means.

---

This post is part of the Carnival of Financial Resources~”We’ve Got Snow!” Edition. Check it out!

---

Copyright © 2007-2014 earlyretirementextreme.com

This feed is for personal, non-commercial use only.

The use of this feed on other websites breaches copyright. If you see this notice anywhere else than in your news reader, it makes the page you are viewing an infringement of the copyright. (Digital Fingerprint: 47d7050e5790442c7fa8cab55461e9ce)

For more info: What retirement means to me

Early Retirement Extreme

What retirement means to me

The post What retirement means to me appeared first on FX FOREX.

via WordPress http://ift.tt/PDWHhv



Personal Finance, definition, early retirement, golf, philosophy, retirement, semi-retirement, trading

What retirement means to me

http://earlyretirementextreme.com/wp-includes/images/smilies/icon_biggrin.gif


What retirement means to me




via Early Retirement Extreme:

Following this post, I got this interesting question from “The Executioner” (slightly rephrased)
“You still have a full-time job, right? How can you call your blog “Early Retirement Extreme” if you’re still on some...

Read More: What retirement means to me

#Definition, #Early-Retirement, #Golf, #Philosophy, #Retirement, #Semiretirement, #Trading

Progressquest your career

via Early Retirement Extreme:

I just got introduced to the brilliant game ProgressQuest which along with Bartle’s observations of the online gaming world is rich in applications for understanding the real world, which in many ways can also be compared to a big game.

Perhaps, a designed game?

ProgressQuest is a spoof on the MMORPG habit of “grinding” for experience points, that is, engaging in a non-entertaining behavior (killing non-player monsters) to achieve some other end, specifically an increase in levels, wealth, special weapons.

Just stop me, whenever you get the point of this analogy

ProgressQuest requires very little interaction from the player. If it does require interaction, the interaction is meaningless. For instance, you can choose an affiliation—it doesn’t matter though.

In the game, which plays itself (the spoof is on the autokill function which relieves the player from going through the self-similar repetitive motions of trivial combat), you head out to the “killing fields”. Here you slay monster after monster (serve customer after customer, write report after report, take phone call after phone call, …) each time collecting a small reward (something the monster drops (an affiliate bonus, a sales commission, a mark on your resume or publication record). Once you have enough rewards, you automatically head back to town to sell them for a level upgrade (career rise, home upgrade, …) or a special weapon (vacation, new car, … ). Then you go right back to the killing fields.

I’ve been playing it for half an hour now. I can’t help to admit it’s kinda fascinating in a comatose kind of way—like watching TV—to follow along. It’s “engaging” to watch what you’ll kill next or what kind of “level” you’ll advance to or what “special weapon” you’ll be able to purchase.

Much like real life…

Bartleby divided online gamers into four categories: achievers, explorers, killers, and socializers.

In short…

• Achievers play to gain points, rewards, levels, weapons, etc. (they act on the world).


• Socializers play to interact with other players.


• Explorers play to interact with the world, discovering new things.

• Killers play to act on players, that is, killing them.

ProgressQuest is a spoof on achievers. Achievers care mostly about advancing in the system. Most people are actually achievers, and so most online games, computer games—and dare I say the real world—is designed with achievers in mind. You can get them to do anything (specifically, hand over their time in the real world, and/or hard earned money in the gaming world) simply by making up titles, small rewards, special things, stuff that they can hold out demonstrating to the world of their achievements.

Try to click on the link and play it for while. Now, suppose you got $50,000 per year just to watch it or maybe it wasn’t fully automatic, but you had to click A to attack, and occasionally go back to town to convert loot and experience points into status symbols, that is, do something mentally unstimulating on autopilot. Would you take the job?

Have a red pill Swallow hard.

What is most fascinating to me is that this grand piece of social engineering works beautifully. I am an ‘Explorer’, which I suppose allowed me to figure out how the game works and adequately ‘hack’ it to get out the back door. I “retired”—looking for ways to spend my time that does not involve “achieving” and “being all I can be” by collecting levels, gold, and trinkets.

Using the Gervais analogy, the Killers are the Sociopaths, the Achievers are the Clueless, and the Socializers are … well, the analogy kinda breaks down—or at least I don’t see it anymore. In the gaming world, Killers frequently attract followers who look up to them. I do in some sense look up to Killers (maybe because they kill achievers… muhahaha ). In the real world, Killers work on Wall Street and in the top floor offices. I kinda see Socializers as Eloiburgers and the Achievers as Morlocks. The Explorers are the “hackers”. Killers can’t touch them, and the other groups don’t care about them. They exist outside the system, because they have gone beyond it.

Here the system we know is that of a college degree followed by 40 years for 9-5 jobs followed by a retirement home. This system is but a part of the world. Luckily, there’s still much of the world left to be explored. The tricky part, from an early retirement perspective, is how to explore it. Much of the world is built around achievement in the sense of amassing experience points. Been there, done that; life is too short. The challenge, now, is to find a different quest.

---

Copyright © 2007-2014 earlyretirementextreme.com

This feed is for personal, non-commercial use only.

The use of this feed on other websites breaches copyright. If you see this notice anywhere else than in your news reader, it makes the page you are viewing an infringement of the copyright. (Digital Fingerprint: 47d7050e5790442c7fa8cab55461e9ce)

For more info: Progressquest your career

Early Retirement Extreme

Progressquest your career

The post Progressquest your career appeared first on FX FOREX.

via WordPress http://ift.tt/1d4Y9ht



Personal Finance, achiever, early retirement, eloi, gervais, mmorpg, morlock, philosophy, strategy, work

Progressquest your career

http://earlyretirementextreme.com/wp-includes/images/smilies/icon_wink.gif


Progressquest your career




via Early Retirement Extreme:

I just got introduced to the brilliant game ProgressQuest which along with Bartle’s observations of the online gaming world is rich in applications for understanding the real world, which in many ways can also be compared to a...

Read More: Progressquest your career

#Achiever, #Early-Retirement, #Eloi, #Gervais, #Mmorpg, #Morlock, #Philosophy, #Strategy, #Work

Exercises in missing the point

via Early Retirement Extreme:

When I talk about not buying new things, living in small place, and not owning a car to retire early, these are the most common objections

• I want a big house because it is a comfortable place to escape to after spending all day working a job [I don't like].


• I like to budget so I can buy things for myself as a reward for dealing with my job and all the hard work I do.


• I got on vacations because I need to get away from it all [presumably job, house, and stuff] from time to time.

Funny, eh? I mean, how do you respond to that without sounding like Captain Obvious?

---

Copyright © 2007-2014 earlyretirementextreme.com

This feed is for personal, non-commercial use only.

The use of this feed on other websites breaches copyright. If this content is not in your news reader, it makes the page you are viewing an infringement of the copyright. (Digital Fingerprint: 47d7050e5790442c7fa8cab55461e9ce)

For more info: Exercises in missing the point

Early Retirement Extreme

Exercises in missing the point

The post Exercises in missing the point appeared first on FX FOREX.

via WordPress http://ift.tt/1fI13uI



Personal Finance, big, breaches, digital, early retirement, fingerprint, house, infringement, job, objections, owning, reader

A plan to financial independence at 35

via Early Retirement Extreme:

This is a guest post by Elizabeth from Working for Rachel. Elizabeth is starting her savings and plans to gain financial independence in 8 years at 35. If you like to read more please consider subscribing to her RSS feed.

---

I’m 27, and I want to retire at 35. I live in a big midwestern city with my boyfriend of three years and I work for a good-but-not-astronomical salary as a publications manager at a nonprofit. So far, I only have about $22,000 in savings and investments. We don’t own real estate. I don’t have any great investment or business ideas. In short, I might be crazy.Still, I think I can do it.My plan thus far is pretty simple: $2500 in savings every month and reducing expenses down to about $1000 a month. Right now, all I care about is that those rough numbers work. My planned savings plus a conservative estimate of interest equals an amount that can yield what I believe is a reasonable monthly income for the rest of my life.Five Ways I Save

I live in a city. The rent is higher, but there are lots of free things to do, an extensive public and university library system (essential for me), and good public transportation.

I don’t own a car. Have never had one and hope to never need one.

I don’t own a house or condo. I don’t believe in starter homes—they tie up your money in exchange for an iffy return on investment. If and when I buy, I want to be able to afford a good down payment on a place I can see myself living in for the rest of my life.

I don’t “go out” drinking, dancing, or to the movies. When I get together with friends, it’s usually at a literary reading or a free networking event.

I don’t spent much on gifts. I spent about a hundred dollars last Christmas, and that was high for me. My boyfriend and my family members aren’t very materialistic and I don’t see much value in giving them something they don’t really want (or vice versa). Next year, I’m planning on suggesting a gift-less Christmas.

I also have an ace (or maybe only a jack) up my sleeve—a trust fund. So far, the principal is only $24,000, but my grandmother will potentially continue contributing $12,000 a year to it until I’m 35. I don’t factor this into my retirement planning calculations as I don’t know how long she will continue to contribute and counting too much on an inheritance seems both stupid and a bit callous.

My current strategy:

I save $2500 every month, which is about 70% of my net salary. My savings are divided between a Roth IRA, which is invested mostly in stocks, and my high-yield savings account. I’ve decided not to contribute to my 401(k) until my company contributions kick in, because I expect to want access to this money well before traditional retirement age. (I did find out about the 72(t) rule a few days ago, and that may change this decision.)

I track my net worth every month and have marked on my calendar when I’m going to reach round numbers like $50,000 and $100,000.

$1000 a month is about how much I should have left over after my savings goals, but I’ve been spending more than that, using my “extra” freelance income as spending money instead of savings. Not good.

My retirement plans are based on spending of about $1000–$1300 a month, increasing after the first few years to keep pace with inflation. I need to make sure I can really live on that money or the whole plan’s going to fall apart. With fixed expenses of only about $820 a month, I should be able to get there.

My Future Goals

So for the next few months I’m going to challenge myself to spend progressively less in my discretionary spending categories (food, books, clothing, entertainment, and miscellaneous). I’ll start out by trying to beat my all-time lows in each category, with the new lows becoming my numbers to beat for the next month. By the end of May 2008, I hope to be spending $1000-$1100 a month.

I’m also going to start putting all freelance income directly into my savings account to make it easier to resist temptation.

To read more about my progress towards financial independence, join me at my brand-new blog, Working for Rachel. I’ll be making up frugal rules for myself, exploring new investment options, and sharing the mistakes I make along the way.

---

If anyone else would like to share their plans or experiences with early retirement or financial indepedence in a guest post let me know. Contact me at <myfirstname>@earlyretirementextreme.com.

---

Copyright © 2007-2014 earlyretirementextreme.com

This feed is for personal, non-commercial use only.

The use of this feed on other websites breaches copyright. If this content is not in your news reader, it makes the page you are viewing an infringement of the copyright. (Digital Fingerprint: 47d7050e5790442c7fa8cab55461e9ce)

For more info: A plan to financial independence at 35

Early Retirement Extreme

A plan to financial independence at 35

The post A plan to financial independence at 35 appeared first on FX FOREX.

via WordPress http://ift.tt/1gccAae



Personal Finance, big city living, early retirement, freelance, goals, manager, nonprofit, plan, starter home, trust fund

Guest post: Fulfillment

via Early Retirement Extreme:

This is a guest post from Peter Lawrence author of The Happy Minimalist. He was born and raised in Singapore and lives in Santa Clara, California. He has been able to retire well before the normal retirement age not because he won a lottery, inherited wealth, or joined a start-up. Peter attributes his early retirement to his minimalist lifestyle.

Sometimes, some people can keep eating and yet continue to feel hungry. Gorging oneself with empty calories is no substitute for the essential nutrients that the body needs. Eating a variety of different colors of fruits and vegetables together with nuts, grains and legumes can provide the necessary nutrients that the body needs such that one can actually cut down on the calories without experiencing hunger. Calorie restriction is a proven way to slow the aging process and maintain peak vitality. The goal should then be to consume nutrition dense food rather than calorie rich foods. Unfortunately, many people choose the latter. And when they continue to feel hungry, they continue to stuff themselves with the same junk, processed or packaged foods. But no amount of foods rich in energy but poor in nutrition will fulfill the body’s craving. Likewise, no amount of material stuff can fulfill our highest needs.

In 1943, Abraham Maslow put forth his theory of human motivation commonly known as Maslow’s hierarchy of needs. At the bottom of the pyramid are the physiological needs. At the apex is the need for self-actualization. In the developed world, despite having easily fulfilled our lower level needs, many don’t seem fulfilled. The reason is they are trying to satisfy their highest need with lower level stuff. The pursuit to keep up and beat the Joneses is deemed as the ultimate success. As such, they continue to play in the lower levels of the pyramid instead of recognizing that they have enough and transcending. As long as you are stuck in the mode that you have to have a bigger house, a faster car etc; you are never going to be fully satisfied .Just as your body’s needs cannot be satisfied with empty calories, your soul’s cravings cannot be satisfied by material stuff either. As Abraham Maslow said, “A musician must make music, an artist must paint, a poet must write if he is to be ultimately at peace with himself.”

---

Copyright © 2007-2014 earlyretirementextreme.com

This feed is for personal, non-commercial use only.

The use of this feed on other websites breaches copyright. If this content is not in your news reader, it makes the page you are viewing an infringement of the copyright. (Digital Fingerprint: 47d7050e5790442c7fa8cab55461e9ce)

For more info: Guest post: Fulfillment

Early Retirement Extreme

Guest post: Fulfillment

The post Guest post: Fulfillment appeared first on FX FOREX.

via WordPress http://ift.tt/1gMdJ4L



Personal Finance, early retirement, guest post, maslow, minimalism, peter lawrence, philosophy

Guest post: Why I’m pursuing ERE: greed vs. passion

via Early Retirement Extreme:

This is a guest post from Zev. Many of you may know him from the forums and some of you may recognize the name from the copyright page in the book. He contacted me out of the blue earlier this year offering to correct the book manuscript for me. Knowing that my English is not perfect, I took him up on the offer and we spent about three or four months passing the manuscript back and forth getting rid of 99.9+% of my errors—I’ve never seen so much red ink on any of my papers. During that period he chose to become financially independent himself. You can see the steps he’s already taken in his journal.

---

I had the privilege of being one of the first readers of the ERE book, and, having balked at actually pursuing ERE earlier this year after discovering and poring over the blog–”I live in New York City; I don’t want to be an urban hermit; I fail to see the miser’s contribution to society”–the book gave me a broader outlook, ultimately leading me to decide to become financially independent–nothing resembling “retirement” really enters into it–within five years; my ERE/FI date is 7/15/2015, and so far I’m running about a year ahead of schedule.

The primary reason for my decision, to put it in extreme terms, is to resolve the tension in my life between greed and passion.

Like many in the labor market, I have mostly based my decisions about what sort of work to do on what will provide the maximum return on my time. This has led me to be self-employed in the same transcription business for my entire adult life (I’m 32). I’ve become steadily more productive, savvy, and reputable in my business, and my income has risen accordingly. I am one of those “rational economic actors” that economists like to presume in their theorizing; I have “followed the money.” So far as I can see, this puts me right in the middle of the pack of the American workforce, albeit with a lot more control of the fruits of my labor: I sell my labor to the highest bidder, with the usual considerations of legality, ethical standards and safety–if there’s a black market for transcription, I haven’t heard of it.

Also like many people, working full-time has crowded out the activities I feel most passionate about, which, as is typical, are far less remunerative–reading, writing, playing music, making films. For someone with a middle-of-the-road constitution, at best–I sleep nine hours a night–”work-life” balance realistically translates to giving my best hours to my business and doing mostly passive activities and errands during the rest of my waking hours. This pits my social life, passionate interests and day-to-day upkeep (not to speak of downtime) against each other for the scraps of my schedule.

Truth be told, I’ve had a number of false starts in pursuing other careers–music/songwriting in my mid-20s, filmmaking a couple of years ago–and while the poor compensation didn’t scare me off, the opportunity cost of not maximizing my income, and the prospect of not ever having meaningful savings, did. Ironically, I never socked away so much as a dollar until setting my ERE/FI goal a few months ago. This lack of savings also puts me right in the middle of the American heap–”I must be rightfully compensated, so I can spend spend spend, because I deserve it.” This “because” has actually been more mysterious to me than that–”Why? To what end?” do I earn what I earn, do I maximize what I earn? I paid lip service to my neglected passions–”My income allows me to buy the gadgets with which to compose music and make films; my flexible work schedule gives me time to pursue them”–but as Jacob writes in the ERE book, the gadgets largely became tokens of my interests rather than tools to execute on them, and I would haul them from this closet to the next. My free time I have overestimated, both in quantity of hours and quality of focus.

So, while I guard against seeing ERE/FI as a panacea, I do see it as a potentially transformative opportunity to be freed from “maximizing profit” as my raison d’être, as well as a compelling answer to why I currently pursue it. I have the nagging feeling that this pursuit of maximization is more neurotic and deeply, culturally embedded than can be cured by a modest dividend-paying portfolio, but I feel an equal urgency to give myself the gift of the best 40-50 hours each week, freed from all anxiety about making a living INDEFINITELY, and see what creative output comes out of that.

For more info: Guest post: Why I’m pursuing ERE: greed vs. passion

Early Retirement Extreme

Guest post: Why I’m pursuing ERE: greed vs. passion

The post Guest post: Why I’m pursuing ERE: greed vs. passion appeared first on FX FOREX.

via WordPress http://www.evvi.net/5561/personal-finance/guest-post-why-im-pursuing-ere-greed-vs-passion.html



Personal Finance, early retirement, guest post, strategy, work, zev

Anti-consumerists can retire early from the rat race

via Early Retirement Extreme:

Maybe you have heard comments from the 1950s where some people predicted that the introduction of robotics would lead to work weeks of only a few hours with robots taking care of everything else. I’m sure the steam engine lead to similar predictions. In fact the opposite has happened. We seem to work more than ever. Instead of providing us with more leisure time and less work, technology has made it possible to work even harder at making leisure toys for the masses.

I used to be interested in anti-consumerism. I read adbusters, verdant.net, Naomi Klein and others. People are anti-consumers for a variety of reasons. One is environmental. Making all this stuff and throwing it away next year requires a tremendous amount of resources, raw materials, land, forests, animals – they all gotta go in the name of the latest and greatest. Another reason is political. Since people pretty much spend their money in the same way, people are inevitably divided into classes according to their earning power resulting in political tension. My original rebellious tack was mostly environmental, but presently I think of myself as a poor aristocrat.

It would seem that the values of early retirees are completely different from most people. Whenever I have a problem, my first thought is not to drive over to Walmart and buy a gadget that will solve my problem. Rather, I sit down and wonder how I got this far without spending money and then I find an alternative solution using creativity rather than credit cards. In many ways, my possessions – my stuff, is quite old, but also selected for high quality to last many years. Good stuff ages well. “Fashionable” stuff ages poorly and thus has to be thrown out and replaced with new stuff to the detriment of the environment, financial independence, and leisure time.

The asset/income ratio of early retirees is also completely different from most consumers. It’s not that assets necessarily are very large (you’d be surprised) – rather it’s the income that is relatively low. For instance, I have learned to live quite well on less than $10000 a year. In other words, I am wealthy by definition, but not rich, hence “poor aristocrat”. I don’t have/spend a lot of money, but what I do spend, I think I spend very well.

What are your spending values?

For more info: Anti-consumerists can retire early from the rat race

Early Retirement Extreme

Anti-consumerists can retire early from the rat race

The post Anti-consumerists can retire early from the rat race appeared first on FX FOREX.

via WordPress http://www.evvi.net/4752/personal-finance/anti-consumerists-can-retire-early-from-the-rat-race.html



Personal Finance, early retirement, philosophy

The opportunity cost of early retirement

via Early Retirement Extreme:

Adolescents have a sense of die-hard immortality that comes from having given no thought to their future. I realized that I wasn’t immortal when I was 21-22. This implied the full realization that my life span was finite although I hadn’t yet reached the sense of time that I have not that “old” people frequently demonstrate when they talk of children with the statement that “they grow up so fast!”.

Being an intellectual (MBTI type NT – rational) I measure growth in terms of how much I know or how competent I am. It was around that age that I found out that I was starting to forget things that I have learned as my brain was making room for new things and cutting away “excess useless knowledge”. I prefer to liken this to the growth of an ecosystem or a society where weeds (suburbs) are replaced by bushes (suburbs with shops) and finally trees. Weeds are like information. Bushes are like knowledge and trees are the wisdom that remains of what went before.

Having lived a good part of my life already, I can start mapping out choices or what-ifs. For instance, the opportunity to excusably engage in idiotic behavior while being drunk is long gone (I’m told that after the age of 25 one is not so easily forgiven). The opportunity to compete in sports on a regional level is also going soon. Were I to start now, I would not have been able to put in the time until I was maybe 45 at which point I would be too old for most sports.

Early retirement provides both opportunity and opportunity costs, but of course so does a career. For instance, quitting a career that for many people were chosen by the 18 year old selves allows a reinvention of who they are — if people indeed are defined by what they get paid for as seems to be the case in our modern world. On the other hand it also prevents them from becoming what they could have become. For instance, my 18 year old self wanted to become a professor in order to discover amazing new things and teach them to enthusiastic students. Needless to say, my 32 year old self has fewer illusions about the whole deal. Still there are some [illusions] left and it is such hope that would cause a lot of what-if doubts were I to retire now. However, since I have possibly irreversibly polluted my mind with thoughts about what else I could be doing, I entertain an equivalent number of what-if doubts were I not to retire now. This would not be a problem if I were held down by a children, mortgage, debt, and other liabilities. In some sense such restrictions would be welcomed because they would remove the uncertainty and the need to make decisions. Perhaps this is why so many people choose them.

For more info: The opportunity cost of early retirement

Early Retirement Extreme

The opportunity cost of early retirement

The post The opportunity cost of early retirement appeared first on FX FOREX.

via WordPress http://www.evvi.net/4110/personal-finance/the-opportunity-cost-of-early-retirement.html



Personal Finance, adolescent, adolescents, bushes, early retirement, ecosystem, growth, immortal, measure, opportunity cost, professor, trees, weeds

One more year before comfort

via Early Retirement Extreme:

In my search to determine what people actually mean when they say they want a “comfortable life” and in particular a “comfortable retirement” I have come across two conflicting definitions. No wonder, then, that such statements confuse me.

I usually think that comfort means being free from physiological (mental and physical) pressures or stresses. For instance, there may be less stress associated with sitting in a certain chair. What I did not understand why anyone would go to such great lengths and engage in work that was clearly stressing them out to sit in a chair that was mildly more comfortable but caused a disproportionate level of stress, that is to say, the marginal utility of upgrading the chair was lower than the marginal cost of adding one more year of work.

However, there is another definition of comfort which is founded on contentment and general life satisfaction. Uh oh, that’s a slippery slope right there because it is subjective to all sorts of external fads and fashions. By this definition we would only consider ourselves to be comfortable when we are satisfied. However, wants are supposedly infinite, at least, you know, the material wants, as I note that wants to get off our asses and exercise seem to be fairly limited, and this means that those wants can never be quite satisfied. They always grow on top of a moving baseline which in the worst case is defined by what everybody else seems to want (keeping up with the Joneses) and in the best case is defined by what you want.

This means that a person can never be quite comfortable in this frame of mind. Being comfortable based on such wants actually turns out to be a stressor and the usual argument (which I have been asked is): Well, you’d like to own a boat, so wouldn’t it have made sense to work one more year, then you could have bought a nice boat instead of cheap fixer upper(*). I could have done that, but maybe then, that boat wouldn’t have been enough. Maybe I’d also have wanted a nice truck, so that’s one more year on top of that. Since trucks wear out, I’d need to make sure that I had money to replace it when it wore out in 12 years, so add a third year. And so on.

(*) I haven’t bought one yet, but I’m looking.

“Just one more year and I would be able to retire in comfort”; except that’s what I’m telling myself every year and meanwhile my salary and responsibilities keep increasing and it becomes harder and harder to let go and then at age 48 I get a stroke which leaves me without control of the right side of my body, but not everything is lost, because I can always spend the boat and truck money on meds.

---

Some more comments: Maus makes some great comments below, so I figured I’d respond to them in the main post.

The first issue is the safety or income factor. First people seek a 4% withdrawal rate to cover their expenses because 4% has been shown to survive worst case scenarios over 30 years. Then they seek 3% just to be safe which is a 33% margin. Then the target changes to 2% just to be a bit safer even though this is actually a 100% improvement compared to the original case which means that in the historically worst case they’d end up with millions of dollars they can’t spend. Heck, even I will end up with a million bucks in my fifties and several millions by the time I die simply because I saved too much. The only danger would be to suddenly double one’s spending but I figure as I learn more and more and adapt an increasingly sustainable lifestyle my spending is more likely to go down than up.

There is only so much safety money can provide, so working to accumulate more money to provide more safety is irrational. If, say, the country gets hit by hyper inflation it does not matter too much whether you have $500,000 or $5,000,000. The marginal safety provided by money is decreasing. If I wanted ultra safe, then, I would create a stash with a 50 year supply of toilet paper, etc. and put a guard on it. That’s safe. Still, that does not eliminate the other safety issues like getting cancer (it also happens to vegans, just not as much), or getting killed in a freak accident (falling toilet seat from the sky).

A closely related safety issue is that people are more comfortable with what they think they have control over like their jobs and their cars and uncomfortable with what they don’t have control over like investments or airplanes even though the latter is statistically safer. For instance, I did not lose my portfolio in this downturn and in fact it came out stronger than it went in, but many people lost their jobs. In that sense I think there’s a necessary transition from thinking about once investments as actually being investments than being a savings account denominated in a stock market index. I think many make that mistake. In fact, the changing one’s frame of mind is not easy. Personally, though, I no longer ask “Have I saved enough for retirement?” but “Can I live off my investment portfolio income?” much in the same way that a salaried person asks “Can I live off my salary?”

The poverty of imagination is another great point. It amuses me that so many people say they’d still be working at their job even if they didn’t need to…you know, the passionate ones… do you really mean to say if you had these hundreds of other opportunities to do other stuff, you’d still pick your job of all things. I think many think there’s little alternative to their jobs other than sitting at home watching their DVD collection twice over, then going out to eat at every restaurant in town and then what? … Imagination is important but unfortunately, the imagination available for sale is pretty expensive: vacations, resorts, exotic activities, … There’s no need for that. Learn to play the guitar. Restore a classic car together with other people interested in the same thing. Meetup.com is a good place for this. Join a drinking club with a sailing problem, you know, a yacht club, or a coffee club with a biking problem. Personally, I have scheduled activities 4-5 days a week and that’s certainly enough for me. Sometimes it’s even too much.

For more info: One more year before comfort

Early Retirement Extreme

One more year before comfort

The post One more year before comfort appeared first on FX FOREX.

via WordPress http://www.evvi.net/1275/personal-finance/one-more-year-before-comfort.html



Personal Finance, comfort, early retirement, retirement, safety, work