Blogs & Comment

Book review: Early Retirement Extreme

Thebook, Early Retirement Extreme — A philosophical and practical guide to financial independence (2010), is more of a manifesto than a step-by-step guide. Its a call to replaceleveraged consumption with a low-cost lifestyle that re-directsthe majority of work incometoward rapidly accumulating capital.
A life lived with capital is preferable to a life lived with debt and a pile of stuff. When sufficient in size for ones living requirements, capital allows choice on when to enter and exit the workforce, pursuit of ventures in line with ones passions, self insurance against risks, and a more solid financial foundation for single or family life.
The books author, Jacob Lund Fisker, retired at the age of 33 approximately two years ago, and currently writes the Early Retirement Extreme blog. He also has a PhD in theoretical physics, which perhaps explains why his book at times reads more like a textbook. Yet, the writing is crisp and clear.
The first two chapters contain a polemic against consumerism. One deft riposte goes: We have come to the point where spending money is one of the few recognizable signs of success. For instance, spending half an hour in a traffic jam getting from A to B in an expensive car is considered more successful than spending half an hour in a traffic jam getting from A to B in a cheap car.
Step outside of Platos Cave and adopt a different frame of mind. Perhaps the best way to throw off the chains of a pervasive consumerist tendency is to study alternative sources of information. Ignore most personal finance books out there. They only explain how to play the game by the rules, declares the author. They merely try to implement small changes, like 25 Frugal Steps to Save Money.
Chapters 3 and 4 discuss the concept of economic degrees of freedom and classify occupations into four categories: the salary man, working man, businessman and Renaissance man. The latter is the extreme early retiree and is ideal because it provides a buffer against economic vicissitudes and supports a more rounded development of the individual across seven fields: the physiological, economical, intellectual, emotional, social, technical and ecological.
Chapters 5 and 6 deal mainly with strategies and tactics for reducing waste and inefficiency in order to be able to live on one quarter of what the average consumer spends. They range from the general to the particular, an example of the latter being buying socks all in one colour to avoid the chore of matching up pairs after laundry time and the waste of throwing out unmatched singletons.
Chapter 7, the last in the book, examines the financial side. It models the cash flows of different living arrangements and discusses savings rates, emergency funds and investment of savings to get money working for you rather than the other way around. At the end is this investment recommendation: living off your money will make preservation of principal, keeping up with inflation, minimizing taxes, and providing a stipend more important than outperforming the market.
Reaction to the book will most likely vary with a readers situation and ingrained preferences. Many will attach a higher value to the utilities derived from consumption. Others may have salaried jobs that already align with their passions. But those who value utmost the freedom to do what they want with their time should find confirmation and inspiration.
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