Early Retirement Extreme

Early Retirement Extreme

Everyone dreams of retiring early, or at least while there’s still enough time to “enjoy” life without the daily grind of a 9 to 5 job sucking the last few gasps out of a person. With the right philosophy and some life style changes, Jacob Lund Fisker, author of Early Retirement Extreme, describes an alternative method of how to retire with only a few  years of working in the work force.

Early Retirement Extreme isn’t a “how-to” book on how to retire early nor is it a “get rich quick” plan that will explain how to become a millionaire over-night. What it is, though, is a “philosophical” guide on how to change your lifestyle so that you can save enough money to retire by minimizing your expenses and becoming more self-sufficient so that you can ultimately save money by not paying others to do what you can do.

Books that make me reflect on our American lifestyle that we’ve grown so accustomed to are some of my favorites, and this is a focal point in this book. Our society is currently stuck in a cycle that revolves around working and spending, then working some more. This kind of life is completely dependent on the economy: If the economy is in an upswing, then most people benefit; if the economy takes a turn for the worse, many people must scramble to keep themselves afloat.

Jacob’s lifestyle isn’t as affected by how the economy is doing. Instead, he describes a way to be less dependent on these monetary cycles and more self-sufficient.

A few points Early Retirement Extreme makes that were key to me understanding this philosophy were:

  • Live off 25% of your income. This is the key to Jacob’s success. By reducing your expenses to 25% of your income, that gives you the ability to save 75%  of the remaining income. Here is where compounded interest becomes important. Once retired, live off the interest of the investments.
  • Learn useful skills. If you’re able to fix your own plumbing, plant your own garden, or repair bikes or cars this can save you money or you can even charge for your services.
  • Become a Renaissance man/woman. Having many potential streams of income means you can switch gears whenever something doesn’t work or work intermittently at your leisure.

Many of Jacob’s equations and graphs were over my head, but he does explain them in layman’s terms making the formulas digestible. Where many will find this philosophy extreme, I found it refreshing.

The one drawback to this extreme retirement plan that wasn’t fully touched upon was health care. Jacob describes how to stay in the best optimum shape, but this doesn’t cover diseases or old age. No matter how fit a person is, this alone won’t make them immune to cancer or Alzheimer’s disease. Medical expenses can become extremely expensive in old age if such an illness makes one unable to care for themselves or expensive procedures are needed to get well. In the future, I’d like to see this topic expanded upon within the Early Retirement Extreme philosophy.

Do you think you’d be able to retire by 40?