If you're new here, this blog will give you the tools to become financially independent in 5 years on a median salary. The wiki page gives a good summary of the principles of the strategy. The key to success is to run your personal finances much like a business, thinking about assets and inventory and focusing on efficiency and value for money. Not just any business but a business that's flexible, agile, and adaptable. Conversely most consumers run their personal finances like an inflexible money-losing anti-business always in danger of losing their jobs.
Here's almost a thousand online journals from people, who are following the ERE strategy tailored to their particular situation (age, children, location, education, goals, ...). Increasing their savings from the usual 5-15% of their income to tens of thousands of dollars each year or typically 40-80% of their income, many accumulate six-figure net-worths within a few years.
Since everybody's situation is different (age, education, location, children, goals, ...) I suggest only spending a brief moment on this blog, which can be thought of as my personal journal, before looking for the crowd's wisdom for your particular situation in the forum journals.
I have a confession to make. I write a personal finance blog, but I rarely read other personal finance blogs. There is a reason for that. Here is the reason. I find that once anyone get actively involved in any community, they will start to (subconsciously) adopt the thinking modes of the community almost like by osmosis. This leads to similar thinking. In addition, it leads to thinking about the same things at the same time while reaching the same conclusions. In other words, herd behavior is born. If individuals in such a herd are very busy as people generally are when there is a quantifiable performance pressure — more, bigger, faster, there is too little time to step outside of the box when so much time is dedicated to following the rest of one’s peers.
There is a similar phenomena in scientific research. Feynman (a famous physicist) once remarked that the best way to find new insights into a problem was to ignore previous publications and just come to your own conclusions. Obviously this should be done after reaching some technical proficiency as well as some maturity, otherwise crackpot theories obtain. In a similar vein, Einstein did his greatest work revolutionizing the understanding of special relativity, Brownian motion, and the photoelectric effect while working in a patent office with little or no contact to the buzz of the ivory towers. I think it is fairly accepted that something similar to Einstein’s miracle year would never happen today (that’s why it was considered a miracle). With the publish or perish mentality of modern academia and its expectation of attending several conferences and presenting multiple papers every year (rather than a new idea every other year) it has been rendered nearly impossible to step back and take a creative look at the fundamentals. Instead everything looks much the same as last time.
It is difficult to say which system is better when they are so different. In a mass production system, agents distinguish themselves by quantity and matching expectations. Popularity in the current mass market philosophy clearly requires rocking the boat as little as possible while giving credits to the system by imitating it or quoting it. The key here is telling the end-consumers what they want to hear. This is done by telling them what they already know. For instance, consider modern pop music; it is an entirely forgettable experience, yet it is a popular choice of music. It is widely consumed because it is familiar and people know what to expect(*). This results in a herd that moves slowly yet moves consistently and steadily. It serves a purpose. For instance, blogging about index funds, tips on career advancement, and lists on many many ways to save money reinforces the status quo thinking. The effective purpose is to reassure people that they are doing alright. This is naturally a highly prized product that can bring in lots of advertising revenue.
(*) I have a theory that says that writings, research, statements, anything, are much more likely to be considered to be of high quality if the recipient agrees with the content or the philosophy behind it. Very very few people are above this natural tendency.
Original ideas can not be mass produced. I can not say that my posts are exclusively original but to the extent some of them are, it is certainly getting harder to come up with new insights. New insights can frequently be had through interdisciplinary means. These areas are abundant because they have not been harvested by specialists. This is not to say that all original ideas are useful. However, incremental ideas are not all useful either which is why I tend not to read them 😉
Originally posted 2008-03-26 07:20:04.
