I used to be interested in ERE. But after a long hiatus from this blog and forum, I have grown skeptical of it's scientific validity.
Here's a good summary on the research on money and happiness: http://lesswrong.com/lw/bq0/be_happier/
Some of these research findings go against the major tenets of ERE:
- don't be stingy
- don't think too much about money
- don't think in terms of money
- spend on others
Many of the research findings are compliant with ERE:
- avoid conspicuous consumption
- do not live in wealthy enclaves
- being richer will not necessarily make you happier
- Autonomy: Make sure you have spare discretionary time — even at financial cost.
It's clear to me that some of the most fundamental aspects of ERE are totally unscientific. For one, happiness research has found that being stingy is bad for your health. If ERE isn't stingy, then I don't know what is. Secondly, people pursuing ERE are very focused on money, which has been shown to be detrimental to life satisfaction. See the link for more on these two points.
There are many aspects of ERE that are compliant with the research. I do endorse these values and will continue to practice them in my life.
After reading this research, I'm gravitating to a more moderate and balanced approach. Nothing like the standard American financial approach (often criticized 'round these parts), but nothing resembling ERE either.
I'm interested in what your own conclusions are of this research. I'm open to debate if you think I'm reading it incorrectly. I'm reminded of Neil deGrasse Tyson's quote here: ''The good thing about science is that it's true whether or not you believe in it.''
How Scientific is ERE?
That is a weird question you're asking. To me this question sounds like you could also be asking: "How scientific are black beans?".
What science do you mean? Judging from your answers, you're looking at "happiness science", it must be a part of social science or maybe of health/well-being science.
You didn't address economical science (macro- and microeconomics), or environmental science, or mathematical science (I think the mathematical science on ERE is developing nicely).
I think your question should have been something like "Does ERE make you happy - social science says it may not" and then you could add that you think it may not, given some science on money and happiness. Still, I think the fact that "the average person" does not get happier when spending time thinking about money does not mean that "the average person interested in ERE" gets unhappy thinking about money as well. The first real article I dig up from your link studied 51 individuals who were students from a university in the US, average age 20, and they were divided in four different groups, so about 13 persons per condition. Do you think they adequately represent the average American, let alone the average human, let alone the average ERE minded person?
What science do you mean? Judging from your answers, you're looking at "happiness science", it must be a part of social science or maybe of health/well-being science.
You didn't address economical science (macro- and microeconomics), or environmental science, or mathematical science (I think the mathematical science on ERE is developing nicely).
I think your question should have been something like "Does ERE make you happy - social science says it may not" and then you could add that you think it may not, given some science on money and happiness. Still, I think the fact that "the average person" does not get happier when spending time thinking about money does not mean that "the average person interested in ERE" gets unhappy thinking about money as well. The first real article I dig up from your link studied 51 individuals who were students from a university in the US, average age 20, and they were divided in four different groups, so about 13 persons per condition. Do you think they adequately represent the average American, let alone the average human, let alone the average ERE minded person?
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jacob
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Ugh!
I don't think the major tenets of ERE can be said to:
- be stingy
- think a lot about money
- only think in terms of money
- don't spend on others
Those sound more like the major tenets of being cheap and that would be _completely_ missing the point of ERE. It's about as wrong as thinking that ERE is all about sacrifice and austerity.
It also seems like this science (I didn't read the papers, just the conclusions in the link) operate on the standard consumer way of interacting with the world by spending money on stuff. As such, the findings are somewhat irrelevant to ERE because they're too narrow.
Money is only relevant to ERE insofar it pays for things that can't be obtained without money. For example, health insurance and real estate taxes must be paid with money---they can't be "paid" in good relations, help, personal skills, etc. This is why we only pursue on the order of a quarter to half a million and not 5-10 million. It's simply all that's needed to interact with the money parts of the world.
The skill parts, the social parts, the health parts, the intellectual parts,... just take time and I don't think it would be fair to say that any of us are stingy with our time, our knowledge, our willingness to help, to get together, to form social relations, to build things that benefit others rather than ourselves.
PS: In and of itself "moderate and balanced" are meaningless words that simply imply "I prefer what I myself do instead of doing something that to me is too much or too little". Sorry that's just a pet peeve of mine. In particular, "average" (as in the average of a population) is not a good determinant for what's moderate.
I don't think the major tenets of ERE can be said to:
- be stingy
- think a lot about money
- only think in terms of money
- don't spend on others
Those sound more like the major tenets of being cheap and that would be _completely_ missing the point of ERE. It's about as wrong as thinking that ERE is all about sacrifice and austerity.
It also seems like this science (I didn't read the papers, just the conclusions in the link) operate on the standard consumer way of interacting with the world by spending money on stuff. As such, the findings are somewhat irrelevant to ERE because they're too narrow.
Money is only relevant to ERE insofar it pays for things that can't be obtained without money. For example, health insurance and real estate taxes must be paid with money---they can't be "paid" in good relations, help, personal skills, etc. This is why we only pursue on the order of a quarter to half a million and not 5-10 million. It's simply all that's needed to interact with the money parts of the world.
The skill parts, the social parts, the health parts, the intellectual parts,... just take time and I don't think it would be fair to say that any of us are stingy with our time, our knowledge, our willingness to help, to get together, to form social relations, to build things that benefit others rather than ourselves.
PS: In and of itself "moderate and balanced" are meaningless words that simply imply "I prefer what I myself do instead of doing something that to me is too much or too little". Sorry that's just a pet peeve of mine. In particular, "average" (as in the average of a population) is not a good determinant for what's moderate.
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secretwealth
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Odd criticism. These four points are particularly odd:
"- don't be stingy
- don't think too much about money
- don't think in terms of money
- spend on others"
1. Possibly a fair point, but I don't think ERE are the only people who are stingy.
2. I would think having a 6-figure net worth would help people to think less about money than people who have 6-figure debts on houses, cars, and other depreciating assets with little-to-no job security.
3. Again, I think the more money one has, the more it is possible to think in non-monetary terms. Also, Jacob does encourage people to think in non-monetary terms as well and see how needs can be met outside the market.
4. Maybe this is a fair point.
I don't see what any of this has to do with science. It seems to have a lot more to do with some surveys that were taken--but that's not science.
"- don't be stingy
- don't think too much about money
- don't think in terms of money
- spend on others"
1. Possibly a fair point, but I don't think ERE are the only people who are stingy.
2. I would think having a 6-figure net worth would help people to think less about money than people who have 6-figure debts on houses, cars, and other depreciating assets with little-to-no job security.
3. Again, I think the more money one has, the more it is possible to think in non-monetary terms. Also, Jacob does encourage people to think in non-monetary terms as well and see how needs can be met outside the market.
4. Maybe this is a fair point.
I don't see what any of this has to do with science. It seems to have a lot more to do with some surveys that were taken--but that's not science.
Here's what I'm most concerned by:
"The present research suggests that stingy economic behavior can produce a feeling of shame, which in turn drives secretion of the stress hormone cortisol."
Dunn, E. W., Ashton-James, C. E., Hanson, M. D., & Aknin, L. B. (2010). On the Costs of Self-interested Economic Behavior: How Does Stinginess Get Under the Skin? Journal of Health Psychology, 15(4), 627–633. doi:10.1177/1359105309356366
If you're not concerned with the hormone cortisol, just read the book "Why Zebras Don't Get Ulcers" by the neuroscientist Robert Sapolsky.
"... the present findings suggest that thinking about time in terms of money is poised to affect our ability to smell the proverbial roses."
DeVoe, S. E., & House, J. (2012). Time, money, and happiness: How does putting a price on time affect our ability to smell the roses? Journal of Experimental Social Psychology, 48(2), 466–474. doi:10.1016/j.jesp.2011.11.012
There is no denying that ERE is characterized
a) stingy attitude
b) highly-focused on money.
I expect you all will try to wiggle out of this, but that is how I felt while I was attempting ERE. It's like saving money becomes one's #1 hobby.
This research suggests that these qualities are detrimental to well-being.
"The present research suggests that stingy economic behavior can produce a feeling of shame, which in turn drives secretion of the stress hormone cortisol."
Dunn, E. W., Ashton-James, C. E., Hanson, M. D., & Aknin, L. B. (2010). On the Costs of Self-interested Economic Behavior: How Does Stinginess Get Under the Skin? Journal of Health Psychology, 15(4), 627–633. doi:10.1177/1359105309356366
If you're not concerned with the hormone cortisol, just read the book "Why Zebras Don't Get Ulcers" by the neuroscientist Robert Sapolsky.
"... the present findings suggest that thinking about time in terms of money is poised to affect our ability to smell the proverbial roses."
DeVoe, S. E., & House, J. (2012). Time, money, and happiness: How does putting a price on time affect our ability to smell the roses? Journal of Experimental Social Psychology, 48(2), 466–474. doi:10.1016/j.jesp.2011.11.012
There is no denying that ERE is characterized
a) stingy attitude
b) highly-focused on money.
I expect you all will try to wiggle out of this, but that is how I felt while I was attempting ERE. It's like saving money becomes one's #1 hobby.
This research suggests that these qualities are detrimental to well-being.
I am pretty sure most on this blog only think about time as money when it comes to work or buying things. I spend most of my time smelling "the roses" and I never really think about the money I could be making if I took a second job. The goal is to get rid of the first:)
As for stingy, I bought my mother granite counter tops for her 60th birthday this year. That said, no one every became wealthy "financially" by giving it all away.
Edit: My ERE solution will normally consist of something nice which I could hand make and a thoughtful hand made card which I know she would also appreciate because of the much greater thought.
As for stingy, I bought my mother granite counter tops for her 60th birthday this year. That said, no one every became wealthy "financially" by giving it all away.
Edit: My ERE solution will normally consist of something nice which I could hand make and a thoughtful hand made card which I know she would also appreciate because of the much greater thought.
"This research suggests that these qualities are detrimental to well-being."
For the sake of argument let's say this is true. Wouldn't these few negatives be a small sacrifice for the major benefits of ERE? Thus causing a net benefit? I have been ERE for a year now and I can tell you it is WAY, WAY better than having a regular job.
For the sake of argument let's say this is true. Wouldn't these few negatives be a small sacrifice for the major benefits of ERE? Thus causing a net benefit? I have been ERE for a year now and I can tell you it is WAY, WAY better than having a regular job.
http://earlyretirementextreme.com/the-t ... ction.html
Here are studies that shows why this sort of thinking (which is ubiquitous in this forum and blog) is detrimental to well-being:
Aaker, J. L., Rudd, M., & Mogilner, C. (2010). If Money Doesn’t Make You Happy, Consider Time. Journal of Consumer Psychology, 2011.
DeVoe, S. E., & House, J. (2012). Time, money, and happiness: How does putting a price on time affect our ability to smell the roses? Journal of Experimental Social Psychology, 48(2), 466–474. doi:10.1016/j.jesp.2011.11.012
Mogilner, C. (2010). The Pursuit of Happiness: Time, Money, and Social Connection. Psychological Science, 21(9), 1348–1354. doi:10.1177/0956797610380696
Here are studies that shows why this sort of thinking (which is ubiquitous in this forum and blog) is detrimental to well-being:
Aaker, J. L., Rudd, M., & Mogilner, C. (2010). If Money Doesn’t Make You Happy, Consider Time. Journal of Consumer Psychology, 2011.
DeVoe, S. E., & House, J. (2012). Time, money, and happiness: How does putting a price on time affect our ability to smell the roses? Journal of Experimental Social Psychology, 48(2), 466–474. doi:10.1016/j.jesp.2011.11.012
Mogilner, C. (2010). The Pursuit of Happiness: Time, Money, and Social Connection. Psychological Science, 21(9), 1348–1354. doi:10.1177/0956797610380696
This is quite peculiar. I don't mean to jump to conclusions, but it seems like gibberade tried ERE, was unhappy, and then decided to return to the forum after a year's absence.
Well, that's all fine. ERE isn't for everyone. It probably isn't for the majority of people. @gibberade - who are you trying to convince, and of what? The people drawn to ERE are mostly hard scientists and engineers, and I don't think psychology papers will win anyone over.
So, thinking about money makes some subset of the population unhappy. Well, a significant part of the American population is in debt. Of course thinking about money will make them unhappy! Anyway, the people who are interested in ERE are almost uniformly INTJ - the key here I think is introverted. And I think introverts, who comprise a minority of the population, have different happiness triggers than extroverts. You could publish a paper saying "The key to happiness is spending time with large groups of people," and that would be accurate - for the 80% of the population who are extroverts.
Well, that's all fine. ERE isn't for everyone. It probably isn't for the majority of people. @gibberade - who are you trying to convince, and of what? The people drawn to ERE are mostly hard scientists and engineers, and I don't think psychology papers will win anyone over.
So, thinking about money makes some subset of the population unhappy. Well, a significant part of the American population is in debt. Of course thinking about money will make them unhappy! Anyway, the people who are interested in ERE are almost uniformly INTJ - the key here I think is introverted. And I think introverts, who comprise a minority of the population, have different happiness triggers than extroverts. You could publish a paper saying "The key to happiness is spending time with large groups of people," and that would be accurate - for the 80% of the population who are extroverts.
Anyway, should you choose to read about some of the papers, they mesh quite well with ERE. (I still think they're of dubious scientific value). Here's one quote from J. L. Aaker, whose paper is listed above:
“People often make career choices based on how much money they envision they can make now or in the future. Surprisingly little thought goes into how they will be using their time — whether they can control their time, who they will spend their time with, and what activities they will spend their time on,” said Aaker, General Atlantic Professor of Marketing at the Stanford Graduate School of Business.
Over the years, there has been relatively little research on the relationship between the resource of time and happiness. Perhaps not surprisingly, it is another resource — money — that has been investigated much more thoroughly as a potential key to happiness. Yet, very little research corroborates the idea that more money leads to more happiness.
Wow! This sounds exactly like ERE. Be able to manage your own time, choose what to do, focus on interesting projects. Don't focus on some ridiculous amount of money that will make you happy - but rather the modest, achievable amount that will grant you the freedom to manage your own time, etc, etc.
One other thing, maybe "spending on others" makes people happier. But I think that's a subset of a general phenomenon, which is that work with a purpose - including volunteering - seems to make people happier. And I think most people who choose to retire early spend much more time than average volunteering. So that seems another point in favor of ERE.
Seems to me that "ERE is scientific".
“People often make career choices based on how much money they envision they can make now or in the future. Surprisingly little thought goes into how they will be using their time — whether they can control their time, who they will spend their time with, and what activities they will spend their time on,” said Aaker, General Atlantic Professor of Marketing at the Stanford Graduate School of Business.
Over the years, there has been relatively little research on the relationship between the resource of time and happiness. Perhaps not surprisingly, it is another resource — money — that has been investigated much more thoroughly as a potential key to happiness. Yet, very little research corroborates the idea that more money leads to more happiness.
Wow! This sounds exactly like ERE. Be able to manage your own time, choose what to do, focus on interesting projects. Don't focus on some ridiculous amount of money that will make you happy - but rather the modest, achievable amount that will grant you the freedom to manage your own time, etc, etc.
One other thing, maybe "spending on others" makes people happier. But I think that's a subset of a general phenomenon, which is that work with a purpose - including volunteering - seems to make people happier. And I think most people who choose to retire early spend much more time than average volunteering. So that seems another point in favor of ERE.
Seems to me that "ERE is scientific".
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jacob
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@gibberade - I think you're pursuing a straw man argument. We, who are ERE, don't experience ERE the way you (undeniably) understand it.
1) With respect to Dunn et al, they essentially set up a prisoner's dilemma scenario, where "not giving" equals ratting/"not cooperating". All you can conclude from this is that deliberately giving less than what is considered the fair share causes stress. That's hardly surprising. You could run exactly the same experiment for exactly the same results if you replaced "helping someone with their homework given that they'll help me too" with the $10. So yeah, worrying about screwing other people over causes stress.
2) The DeVoe et al. study seems to support ERE. The point of ERE is to _decouple_ money from time. Being financially independent means that one no longer attaches monetary value to one's time because there's simply no need to get into mental games like "I could be out there making money instead of 'wasting my time' smelling the roses". Believe you me, I have heard plenty of exactly that argument e.g. "Jacob, you're wasting your time being ERE when you should be using your physics phd to maximize your income potential". But I don't need to because I already have enough money.
I don't like to draw hasty conclusions, but when you say you 'attempted ERE' it sounds like you didn't quite break through the barrier of changing from focusing on money and consumption/spending, seeing ERE as an exercise in "sacrifice"; and getting to the more renaissance/ecological/financially independent side.
1) With respect to Dunn et al, they essentially set up a prisoner's dilemma scenario, where "not giving" equals ratting/"not cooperating". All you can conclude from this is that deliberately giving less than what is considered the fair share causes stress. That's hardly surprising. You could run exactly the same experiment for exactly the same results if you replaced "helping someone with their homework given that they'll help me too" with the $10. So yeah, worrying about screwing other people over causes stress.
2) The DeVoe et al. study seems to support ERE. The point of ERE is to _decouple_ money from time. Being financially independent means that one no longer attaches monetary value to one's time because there's simply no need to get into mental games like "I could be out there making money instead of 'wasting my time' smelling the roses". Believe you me, I have heard plenty of exactly that argument e.g. "Jacob, you're wasting your time being ERE when you should be using your physics phd to maximize your income potential". But I don't need to because I already have enough money.
I don't like to draw hasty conclusions, but when you say you 'attempted ERE' it sounds like you didn't quite break through the barrier of changing from focusing on money and consumption/spending, seeing ERE as an exercise in "sacrifice"; and getting to the more renaissance/ecological/financially independent side.
Classic setting up a straw man and knocking it down. Your analysis is only as good as your premises, which are not very sound and are probably too narrowly defined.
For example -- I'm not stingy. I love to give money away to things or people that I think are worthy. I bought my parents a house and feel really good about it. But things like that are only possible if you have a little discipline to save in the first place.
Also there is a big problem with the original question, which is that "being scientific" is a necessary or worthy goal, or that there is one lifestyle that would maximize everyone's happiness. I would put to you that you could be entirely scientific and yet completely unhappy. And that the fact that ERE may not be for everyone does not mean that it might not benefit a large number of individuals. Equating aggregate results with individual results is an easy stretch, which makes it a common fallacy.
Again, these are straw-man arguments in another guise.
Finally, humans by their nature are not rational or "scientific" like a computer that can be programmed and always follows the same pattern of behavior. Read "Thinking Fast and Slow" or "Predictably Irrational" for good discussions of this.
For example -- I'm not stingy. I love to give money away to things or people that I think are worthy. I bought my parents a house and feel really good about it. But things like that are only possible if you have a little discipline to save in the first place.
Also there is a big problem with the original question, which is that "being scientific" is a necessary or worthy goal, or that there is one lifestyle that would maximize everyone's happiness. I would put to you that you could be entirely scientific and yet completely unhappy. And that the fact that ERE may not be for everyone does not mean that it might not benefit a large number of individuals. Equating aggregate results with individual results is an easy stretch, which makes it a common fallacy.
Again, these are straw-man arguments in another guise.
Finally, humans by their nature are not rational or "scientific" like a computer that can be programmed and always follows the same pattern of behavior. Read "Thinking Fast and Slow" or "Predictably Irrational" for good discussions of this.
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secretwealth
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"I expect you all will try to wiggle out of this, but that is how I felt while I was attempting ERE. It's like saving money becomes one's #1 hobby."
Even if this were true, it seems like you're missing the forest for the trees. I agree that the accumulation phase of ERE can be stressful and difficult, especially at first if one sees modest returns on the effort. However, ERE involves about 4-5 years of accumulation and 40-50 years of enjoying financial independence, so I think "suffering" for 4-5 years is definitely offset by the total freedom for 40-50 years.
However, a lot of this is mindset. As Shakespeare said, "There is nothing either good or bad, but thinking makes it so." For me, I find the accumulation phase empowering. For instance, I was trying to explain dividends to my mother the other day, and used the example of spending $200 on a video game console or spending it on PHK (I know, I know--big Gross premium but I still like it). Spend it on the latter, and that $200 turns into $1.75 in monthly income for the foreseeable future. Maybe more. If I forego the video games, I effectively get a free slice of pizza every month. Or I can add to it, and suddenly I have a free phone bill, free food for a month, a free apartment--you get the idea. If I manage my investments wisely, I can make sure that I get this free stuff for the rest of my life.
That is heady, empowering stuff. Passive income is a beautiful, wonderful thing when you have it, and I don't see why pursuing it would make anyone miserable--and I don't care what the "science" says.
Even if this were true, it seems like you're missing the forest for the trees. I agree that the accumulation phase of ERE can be stressful and difficult, especially at first if one sees modest returns on the effort. However, ERE involves about 4-5 years of accumulation and 40-50 years of enjoying financial independence, so I think "suffering" for 4-5 years is definitely offset by the total freedom for 40-50 years.
However, a lot of this is mindset. As Shakespeare said, "There is nothing either good or bad, but thinking makes it so." For me, I find the accumulation phase empowering. For instance, I was trying to explain dividends to my mother the other day, and used the example of spending $200 on a video game console or spending it on PHK (I know, I know--big Gross premium but I still like it). Spend it on the latter, and that $200 turns into $1.75 in monthly income for the foreseeable future. Maybe more. If I forego the video games, I effectively get a free slice of pizza every month. Or I can add to it, and suddenly I have a free phone bill, free food for a month, a free apartment--you get the idea. If I manage my investments wisely, I can make sure that I get this free stuff for the rest of my life.
That is heady, empowering stuff. Passive income is a beautiful, wonderful thing when you have it, and I don't see why pursuing it would make anyone miserable--and I don't care what the "science" says.
This is a valid question and we shouldn't just dismiss it out of hand. Any extreme idea should always be evaluated on an ongoing basis, as the extreme idea creates the possibility of going off the rails. This is not a critique of the basic ERE ideas, but of how and why someone implements these ideas.
A good example is making soap or not washing my hair to save money, when one more day of work would basically buy me soap for life. I personally find these ideas to be against ERE. However, many on here espouse those ideas. Which, is fine, but these ideas aren't necessarily perfect matches for ERE.
Basically, what I'm saying is that outside of the frame work of ERE some of the ideas are extreme just for extreme's sake. I'm on a mobile device, so I lack the ability to go into depth.
A good example is making soap or not washing my hair to save money, when one more day of work would basically buy me soap for life. I personally find these ideas to be against ERE. However, many on here espouse those ideas. Which, is fine, but these ideas aren't necessarily perfect matches for ERE.
Basically, what I'm saying is that outside of the frame work of ERE some of the ideas are extreme just for extreme's sake. I'm on a mobile device, so I lack the ability to go into depth.
I would say ERE is a turn off to many people for all the same reasons most people are not scientist's/engineer's/etc.
It can often seem difficult, frustrating, and nearly unobtainable at times. Could this lead to unhappiness? I don't know, I never bothered to research it, but the pay out (end result) is great all the same.
I enjoy everything ERE or ER MORE now that I am almost there. The first few years can be a let down. Especially if the market tanks! After some decication, behold the power of compound interst and societies tendence to norms:)
It can often seem difficult, frustrating, and nearly unobtainable at times. Could this lead to unhappiness? I don't know, I never bothered to research it, but the pay out (end result) is great all the same.
I enjoy everything ERE or ER MORE now that I am almost there. The first few years can be a let down. Especially if the market tanks! After some decication, behold the power of compound interst and societies tendence to norms:)
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secretwealth
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@Chad: About the soap thing--that isn't limited to ERE and I've seen similar "hacks" posted on more frugality-oriented sites than I could count. Also, I have to say that I thought the focus on frugality was the weakest part of the ERE book (sorry Jacob).
However, it's important to remember that ERE is, like any ideology, a set of ideas, and some of those ideas will appeal to some people more than others.
However, it's important to remember that ERE is, like any ideology, a set of ideas, and some of those ideas will appeal to some people more than others.