Overall, I think the book was pretty good. It was worth reading and there were some things I learned from it that will help me. Compared to other early retirement books, it’s not the strongest. It’s pretty light reading, so I was ably to get through it quickly.
Here was my favorite paragraph from the book:
(To set context, he had just told a story about how, at a party or gathering, when there was a person new to the group, the host was introducing everyone. They were all “retired”, but as he introduced each person he’d say “This is Frank. He’s retired, but now he sells fishing lures that he makes… and this is Suzy. She’s retired, but now she’s the president of a non-profit that…..” The host seemed to be uncomfortable just saying “So-and-So is retired, without needing to also mention something ~productive that they were doing)
Why was the host embarrassed to introduce people as “retired”? I think it’s because “retired” has come to mean “non-productive”. The club member was too polite to call anybody names. But consider what Americans call productive. Make napalm, grow tobacco, distill whiskey, or sell handguns and you’re productive. Sign forms for the government, hype toothpaste, collect tolls on a bridge, or play pro ball and you’re productive. Retire and you pass to nonproductive status. Whether you write, sing, play golf, travel, or meditate makes no difference. You’re still retired. And that seems to define your role in life
When I read books that I think I will learn from, I take notes. For this book, because it is quite straightforward (and because he did a good job of keeping the book simple and these chapter highlights clear and concise) I just wrote down the headings from each chapter that Terhorst himself highlighted:
PART ONE – RETIREMENT AT AGE 35 IS FOR REAL
CH1 – IT TAKES LESS MONEY THAN YOU THINK
- Do your arithmetic
- Do some soul searching
- Do what you want
- Live on $50 a day
- Turn hard assets into cash
- Buy 1-year insured CDs
CH2 – YOU CAN KICK THE WORK HABIT
- Look for meaning in yourself, not your job
- Enjoy your career and then move on
CH3 – LIFE AFTER WORK – WHAT YOU CAN DO
- Make a to-do list
- Remember that work was just….. (talking on the phone)
- Go for responsible pleasure
- Modify the work ethic
- Life without guild
- Do what you wish, but you must do something
PART TWO – HOW TO GET STARTED
CH4 – MAKE YOUR ASSETS WORK FOR YOU AND SAVE ON TAXES
- Convert home equity to cash
- Convert other assets to cash
- Buy one-year insured CDs
CH5 – CONTROL YOUR LIVING COSTS
- Go south
- Live where the jobs aren’t
- Live like a resident, not like a tourist
- Try living abroad for 3-6 months
o Rent – don’t buy
o Don’t criticize, complain, or compare
o Learn the language
o Go with the flow
CH6 – WHEN DOES RETIREMENT MAKE SENSE FOR YOU?
- Take the two year test
- Talk to others
- Don’t expect enthusiasm from your friends
- Manage the change
- Fill your new days with your old activities
CH7 – RETIREMENT’S FIRST FEW YEARS
- Fill your new days with old activities
- Make a clean break (from work)
- Avoid making major purchases for two years
- Go back to work if you feel like it
- Do what you want
CH8 – LIVE ON $50 a DAY
- Cut your infrastructure
- Sell your vehicles
- Convert your home & other assets to cash
- Spend on yourself, not on your assets
- Spend more if you must
- More $ will add very little happiness
CH9 – RETIRING WITH KIDS
- Do your arithmetic
- Do some soul-searching
- Do what you want
CH10 – BUILDING YOUR NET WORTH
- Manage your career
- Control your spending
- Set up a savings routine
- Start a high risk / low risk investment program [He suggests using about 10% of your capital on very high risk investments – and gives examples similar to venture capitalism
CH11 – BARE BONES RETIREMENT
- Arithmetic / Soul-searching / what you want
- Live overseas or in the U.S. like a student
- Search out moneymaking sidelines
- Focus on spending priorities
Chapter 7 was the most interesting for me. Probably because I’m getting pretty close to retiring, so it was the most relevant for me.
The dated investing advice was a bit annoying, but because he suggests such a simple investment strategy (laddering CDs), it takes very little time for him to explain it.
1. What are the similarities/differences between Cashing in on the American Dream and other books such as ERE, YMOYL etc?
I believe it was written a comparable time ago as YMOYL. Terhorst was writing more towards the type-A high earning crowd – people who may have already had enough money to ERE (if they reduce expenses) without even knowing it. People who would just need to sell their big house and resign. It basically lays out what Terhorst did and said that is THE strategy. YMOYL is more about being intentional with your own spending – doing your own math and making your own decisions and figuring it out on your own. ERE is like YMOYL but with about 5x more information (good information)
2. What do you think the "American Dream" represents (to Terhorst, to people generally in the 1980s, today, and to those outside of America)?
I’m not sure. I don’t recall the book actually containing much about “the American Dream”. I’m assuming now that it was used because it’s a catchy title – and that it was decided after the book was written. I’m not sure whether he means:
1 - The American Dream as working and making a lot of money and having a lot of trappings (and “Cashing in” means to trade those – or literally – to cash them in to get income and be retired instead of working more and buying more.
2 – The American Dream as being so rich that you can not work.
I think it’s the first. But then “Cashing in the American Dream” would make more sense that the actual title that has “on” included. I guess the “on” would support #2.
3. How do Terhorst's numbers stack up today? Have you done any calculations for your situation? How do they compare?
Because they were written for high earners / high spenders, they end up making sense for us low spenders now. His net worth targets match almost exactly with mine (Bare sustainable FI around $300k, more ideal retirement at $400-$500k).
The $50 a day thing was a little annoying for me. I’m wondering if that daily figure is something that works better for people who are traveling? I’ve never asked myself “how much did I spend today?” and split up my monthly bills into a daily figure. It would’ve been more relatable for me to just say $1,500 a month.
5. Terhorst, and others, have attributed at least part of their success to the era in which they were born. How important do you think this is in your own case/today?
Well, for investing, CDs had really high rates back then (but was inflation really high right then?) and if I recall correctly, the stock market went crazy in the 80’s.
For actual spending, I don’t think it makes much difference. We had a huge thread on this subject (whether it is harder to get by / retire than it used to be) where we discussed spending a lot. I did some analysis myself and found that:
- Healthcare and college tuition went up a TON
- Common expenses like food and homes cost about the same
- Technological goods (including cars) are now much less expensive comparing the actual products directly.
- (plus there are new spending categories – internet, cell phone, etc. that didn’t exist back then. For a person suffering from generational lifestyle inflation without recognizing it, spending could seem much harder to control now)
I’m glad I finally read the book. While it was light reading and there wasn’t anything in there that will change my life, it was still worth reading. There are so few books on the subject of very early retirement that it’s worth reading all of them.