ERE - the book

[The Old Man]

“A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.” – Max Planck

A paradigm shift is a change in basic assumptions. Early Retirement Extreme is such a paradigm shift. It will cause you to reexamine your relationship to money, work, career, retirement, and personal finance in general. In short it asks the question, “Why is the conventional approach the default?” and it proposes alternatives. It is a good book since it will cause you to start thinking differently.

There are a multitude of books on alternative lifestyles – minimalism, bohemianism, simple living, survivalism, etc. There are also a multitude of books on personal finance – savings, budgeting, investing, retirement planning, etc. However, this is the first book that I have come across that integrates conventional financial planning with alternative lifestyles. The integrative force seems to be what the author calls the Renaissance ideal. A side effect of practicing the Renaissance ideal is that if one so chooses one may retire from the rat race extremely early.

Negatives:
(1) Who is the intended audience? The book has calculus equations and logarithms. It should be remembered that many (most?) Americans have difficulty with fractions. Perhaps the situation is better in other countries.
(2) The book is presented as a philosophical guide. For the practitioner it would have been useful to identify some reference books for implementing the details. There is a section for further reading, but it seems to be more geared to the sources for the philosophical development of ERE rather than its implementation.
(3) Many people consider that living off of passive income sources requires a capital base as to be unachievable, so they never think about alternatives to the default. They also believe that living on an income substantially below the average creates unacceptable tradeoffs to quality of life. The book addresses the second point fairly extensively; however, the first point does not receive a lot of attention.

In my opinion lifestyle comes first and financial independence will come as an effortless side effect. If one pursues financial independence first, then the required changes to lifestyle will be seen as a sacrifice. ERE will only work if it is seen as not a sacrifice. To its credit the book does talk a lot about the benefits of the lifestyle; however, the book title and discussion is focused on retiring extremely early which puts the focus back on sacrifice as the means to independence.

As a side note I liked the graphic of the running person on the back cover – a la, escape from the rat race.

In summary, the book is a philosophy about a certain way of life that as a side effect will yield financial independence relatively early in life.

[jennypenny]

In my opinion lifestyle comes first and financial independence will come as an effortless side effect. If one pursues financial independence first, then the required changes to lifestyle will be seen as a sacrifice. ERE will only work if it is seen as not a sacrifice. To its credit the book does talk a lot about the benefits of the lifestyle; however, the book title and discussion is focused on retiring extremely early which puts the focus back on sacrifice as the means to independence. [...]

In summary, the book is a philosophy about a certain way of life that as a side effect will yield financial independence relatively early in life.

I'm not sure you can generalize that way. For some--the homesteaders and rural nomads on the forum--the lifestyle was the draw. It was easier to envision a minimalist and/or self-supporting lifestyle that didn't require a lot of capital. They may have brought skills to the table that made reducing expenses the easier part of the ERE equation.

Others--the 'professionals' and urban nomads--sometimes struggle with the idea of living a self-sufficient lifestyle. Their talent is in making and managing money. For them, achieving the required capital base is easier. They make adjustments to reduce their expenses as well, but their spare time is usually spent increasing income, managing investments, and generating income opportunities for post-ERE.

Some people--suburbanites and the over-40 crowd--tend to find a balance between both. At that age, they've acquired skills that help with both sides of the equation. Many have partners, which helps them diversify (one focuses on income while the other focuses on lifestyle changes). A concern for the future and other philosophical reasons might be a driving force behind their attraction to ERE. For them, ERE might have coalesced several principles they had learned or adopted into a unified theory of everything.

I realize that I'm over-generalizing in my categorizations. My point is just that a person's skills, experience, and personal goals determine their perspective on ERE and what they consider difficult or a "sacrifice." Some might find accumulating a large capital base reasonable, but the idea of making laundry soap ridiculous. Others already do for themselves, but see the capital base as most difficult because of salary constraints. The nomads here seem the most adaptable to ERE, earning enough money as they go, focusing only on skills that are most useful to them at the moment, and trading and bartering their time and skills for things other than money.

I think ERE had to be philosophical in nature to appeal to all of those groups. The minute Jacob introduced a 'formula' for ERE he would have lost people because the methods are different for all of those groups even though the guiding principles are the same.

[saving-10-years]

+1 JennyPenny, that is my understanding too. Also being INTJ helps ...

[jacob]

I think ERE had to be philosophical in nature to appeal to all of those groups. The minute Jacob introduced a 'formula' for ERE he would have lost people because the methods are different for all of those groups even though the guiding principles are the same.

Of course, now I lose those who think "philosophy is hard" and just want a plan.

[Ego]

I have always thought that Amazon should allow you to sell several versions of the same book depending on the customer's previous purchases, their ratings of other books and the cookies in their browser. "This version of the book was recommended for you because you loved......"

Fifty Shades of ERE.

[oldbeyond]

I recently re-read the book, which proved an interesting experience. The first time around I was mostly interested in savings- and withdrawals rates, but now that felt obvious(because I've spent too much time on FIRE blogs/forums since then). The philosophy, the new(to me) mental modes of dealing with reality(decoupling/goal setting/modularity/appropriate response) is were you'll find the true gems. Ultimately, the most practical way of solving problems is learning how to think, but if you want something "practical" in the normal sense of the word, MMM is great. If I have a criticism of the book(rather just an observation), it'd be that it is short on "motivation". For those of us with a bit lower conscientiousness than jacob, the distance between insight and action can be quite substantial, and while the book can teach you how to interact with the outside world quite well, it is insufficient if you want to learn to deal with yourself. Then again, I'm not sure that it should, as there are other great resources for this, not to mention that it might not be relevant to a lot of people(including jacob).

[jacob]

It's pretty hard to write a book that fits all individuals at all times at all stages of their development while meeting all their goals and desires

When I wrote it in 2010, the target group was my blog readers back then. This was a small and dare I say very specialized group of people who were already on the same page. I remember saying that I would be happy if I managed to sell 30 books. (DW still makes sure I never live down that statement.) As the readership grows and the book reaches new demographics there's bound to be some friction. In fact I've noticed that a temporary peak in sales---due to being mentioned on a site closer to mainstream---is often followed by a string of bad reviews a few weeks later.

[workathome]

The book was awesome because it was wholly unique. One can use the framework and create infinite variations on "tips for saving."

Unfortunately, that *is* what people want - tips. Everything I've learned about marketing says crap like "7 tips to INSTANTLY blast you into retirement!" would be far more salable. So I suppose those of us inclined could take the framework and try and sell a zillion varieties of tip books.

Stories are easier for most to digest. If Jacob simply wrote an autobiography (compiling posts from ERE) mixed with tips, it would probably have a lot more mainstream appeal. I guess Tim Ferris is the perfect example.

[henrik]

to sell several versions of the same book depending on the customer's previous purchases, their ratings of other books and the cookies in their browser.

And maybe we could do the same with party programs, political speeches, news. Hmm...

[The Old Man]

After reviewing my initial post it looks like I made a statement that could be misconstrued. I don’t think that the book as philosophy is a negative. I think the negative is there is a lack of references for implementation.

Lifestyle versus Financial Independence: I was addressing both the critics of ERE as well as my personal experience. Mainly, many people live a mainstream lifestyle without thinking much about it. Some may be economical/ frugal, but they do so not out of choice but because they have no money. For a practitioner of Minimalism or other ‘ism they have already made a conscious decision about its benefits and thus are more open to ERE ideas that advance their personal goals. A life that is not thought will not consider the ERE lifestyle a viable alternative – the changes will be too much of a sacrifice. A Minimalist on the other hand will consider a ERE lifestyle closely related and achievable. All that remains for a Minimalist is to consider how much of a capital base is needed to sustain their minimal lifestyle – a question that until they chanced upon ERE they did not think much about.

For the definition of retirement that prevails on this board I am considered to be retired. If I so choose, I could quit my job today and I would be OK. I achieved this state not by design, but because I made a decision some years ago to simplify my life. Financial independence was a side effect. It surprises me that in nominal dollars (nominal dollars!) my lifestyle today costs less than it did twenty years ago. Lifestyle precedes financial independence. Minimalism gives me benefits today. I don’t need to be on a five-ten year program to realize its benefits; thus, financial independence was inevitable.

[saving-10-years]

For the definition of retirement that prevails on this board I am considered to be retired. If I so choose, I could quit my job today and I would be OK.

May be wrong here, but I am working on the assumption that there can be quite a gap between being able to quit the job (the FI bit) and the retiring (RE) part. If you are suggesting that they are the same. Are you?

I was at the FI part long before I realised that I was (sleepwalking to FI). For many baby boomers its been no particular achievement to acquire the money pot to retire. The trick is realising that you can retire by living differently than they do now and wanting to.

I discovered ERE too late to have a real impact on my getting to FI but I expect to have a different sort of retirement (more 'extreme') because I discovered ERE. I'm not retired yet (one month to go!) but I'd like to be more selective and personally productive (in an ERE sense) in retirement than I was/am while having to give so much of my mental energy to work. The time and choice elements of my life will be far different in retirement. I expect to *think* differently as well as feel differently once I cross that Rubicon. I'll be reporting back on my personal explorations of the 'other side' once I get there and thank those forum members who have already done so. Its made very interesting and enlightening readin.

Speaking of which I plan a deep rather than speed reading of Jacob's and all manner of other books in retirement. (Trying to keep on thread).

[Chad]

Others--the 'professionals' and urban nomads--sometimes struggle with the idea of living a self-sufficient lifestyle. Their talent is in making and managing money. For them, achieving the required capital base is easier. They make adjustments to reduce their expenses as well, but their spare time is usually spent increasing income, managing investments, and generating income opportunities for post-ERE.

Some might find accumulating a large capital base reasonable, but the idea of making laundry soap ridiculous.

Exactly. Making laundry soap sounds just as bad to me as going to my normal job.

[The Old Man]

May be wrong here, but I am working on the assumption that there can be quite a gap between being able to quit the job (the FI bit) and the retiring (RE) part. If you are suggesting that they are the same. Are you?

Well I suppose that is a good question. In the ERE community what does 'retirement' mean? Financial Independence (FI) is easy as it just means that a person would be OK without a j-o-b. Since Mr ERE himself, Jacob, has a job then I believe that FI and retirement are one and the same in the ERE community. Have I misunderstood? I am hardly an expert on the ERE philosophy.

[saving-10-years]

Financial Independence (FI) is easy as it just means that a person would be OK without a j-o-b. Since Mr ERE himself, Jacob, has a job then I believe that FI and retirement are one and the same in the ERE community. Have I misunderstood? I am hardly an expert on the ERE philosophy.

Well I'm not an expert on the ERE community but there is a distinction for me. This is that retirement is the big *do something different with your life* thing because you are releasing time. This is what Jacob did/is doing and what he writes about in the book. Retirement may see you end up working at a 'job' (periodically or permanently) but if its the same job as you did before with no gap in service is it retirement? Really?

An example from my world. I am about to 'retire out of' a job that some people would like to 'retire into'. Because its that sort of job (intellectually rewarding and not physically onerous) many have problems dragging themselves away even when they reach pension age. Others who are way beyond FI (consciously or not) have no intention to retire. They will carry on working. Some may 'go part-time' after FI (or for other reasons). Is that retirement? I would not consider it to be so and neither would they (they might describe themselves as sem-retired depending on their age). Some people 'retire' in the sense of not drawing a regular salary from a single employer and then work as consultants in the same field, sometimes for the same employer. Is that retirement? Well for me its just a re-arrangement of the hours/terms of the existing job.

Reading around here there there are many stories of people who are going for 'retirement' for a reason: travel, learning, projects, spiritual growth, family, living differently. This shapes when they decide to retire (enough money to do X or Y requires different exit plans). But there is always (from my reading) some sense of quitting the job to do something different. If your idea of retirement is that its only about FI/having enough FU money then in some high-earning sectors almost everyone is retired. Although not acting so. Do you really consider yourself retired?

For me its a big leap from FI into retirement. So not the same for me and probably the more difficult part. The leap into the unknown. So not passing a milestone (FI) but leaping a chasm (in my retirement plans I expect there to be no route back).

EDIT:Latest on MMM blog http://www.mrmoneymustache.com/2014/02/ ... etirement/ has this comment:

And gently remind him that retirement means doing WHATEVER HE WANTS with his time without the worry of needing income. If that includes continuing to work at a job he loves, that’s totally in the cards!

- I personally found that case quite strange but it seems to support General Snoopy's ideas.

[jacob]

@saving-10-years

+1

[jacob]

Another example is a professional football player who makes millions, stops playing football. Remains FI. Then decides to open a sports shop, teach little league, or appear on TV once in a while as a commentator; just to stay active---not to make money or build a career or an empire.

I would say this person is a retired football player.

This is what I mean when I use the word retired. You start by putting in a hard effort and make lots of money. Then you decide, enough with the hard effort. I'm just gonna live off my money. I might still work, but I'm not going to work for "work-related"-sakes like making money or pursuing career goals.

In that sense, I'm a retired physicist. I do fulltime paid work as a quant because it's interesting to me. I collaborate on some academic cancer research as a hobby and I don't get paid for that. I don't write blogposts anymore because it's no longer interesting to me. (Maybe I'm a retired blogger too?).

However, I was FI at age 30 and I didn't quit physics until age 33. I would definitely not have considered myself retired in any sense between 30 and 33. I would not have considered Steve Jobs, Bill Gates, or Warren Buffett retired. They have the money (external freedom) but they don't have the internal freedom to leave.

According to the Internet Retirement Police, in order to qualify for the word retirement, one has to fit into some very specific boxes, like having a pension or annuity, or a million dollars, not lifting a finger being normal consumerism (you can buy laundry soap, but you can't make it yourself... however, you can drive your own car without needing to hire a chauffeur); and if you work, it has to be either volunteer work (here even a fulltime career as a volunteer is okay as long as it's not paid work) or it must be some form of consulting (you can get paid as long as it's not 9-5).

It's complicated, so I just prefer to avoid using the word.

To me, meeting the ERE definition of retired means having left the "rat race" (stopped pursuing money, career goals, advancement, corner offices) by virtue of your own (not your spouse or the government) means (which is typically independent wealth but could also be any other supremely easily obtainable form of income that requires very little active effort).

[The Old Man]

@ saving-10-years and jacob: Thanks for the description. Sounds reasonable. In ERE terms looks like I am FI, but not yet retired.