My name is Jacob. I became financially independent (meaning that all my expenses are sustainably paid for by investment income from my savings so I never need to work again unless I want to—what I make from blog ads/book sales is just a bonus; I’m not really one to say no to easy money) at 30, retired at 33 (meaning that I completely own my own time without needing to work for a living), and I am now 35 years old (meaning that … well just what it says).
When I was 25 I had figured out that the road to happiness didn’t lie paying back a mortgage on an enormous house, recurring car leases, $200 sporting event tickets, and a home that resembles a glove compartment—stuffed with irrelevant stuff. Instead life should be about living—a house is only a place to sleep and eat, a car is only an expensive solution to having a home too far away from where you live(*), and I want to live on my own, not vicariously through a local sports team or some celebrity on TV.
(*) That’s where you spend most of your day—maybe you live in a cubicle?
Basically I live differently from 99% of those around me. I don’t have a driver’s license, I don’t have any debt, I don’t live in a house, I cook everything from scratch, I cut my own hair, I practically never buy new or anything at all for that matter, I am not on any prescription medicines, and I am in great physical shape. I’m married since 2006. We live the same frugal/DIY lifestyle and we each pay half the household bills, her with work income as she is not financially independent yet—we kept savings separate (see the F.A.Q. for details), me with investment income. We don’t plan on having kids (but don’t let that stop you from considering financial independence, see F.A.Q. above), but we have a dog which is like having a permanent three-year old.
Financially, I have what you in finance101 terms could call a 40+ year(!) emergency fund. This is almost fully invested in individual stocks to avoid paying fees. If historic returns are representative, it should last me for the rest of my life. I also have a growing tax-deferred retirement account that I divert surplus income to for the tax deductions.
I did not build this “fund” by buying and selling real estate at the right time or putting all my money in some five-bagger stock. I simply saved more than three quarters of my income for five years. The math works out. If you save, 83% and spend 17%, you have need 25*0.17/0.83 ~ 5 years of savings, where 25 is the inverse of 4%, which is a safe withdrawal rate for at least 30 years. Add 8% interest from your assets, and you “only” need to save around 75%(*). However, 80-85% is better as it will give you more of a buffer and create more investment income than you spend. Because of that I’m on my way to become a USD millionaire at age 46 or 48 or so. Having a big head start helps a lot and I recommend quickly saving at least $100,000 in your twenties, even if you plan to work until you’re 65. The compound interest from that will make you much wealthier than if you don’t hit six-figures until you mid thirties or worse, forties.
(*) These theoretical calculations show you percentage-range to aim for. In reality, it is rare to have exactly the same income, expenses, and return on investment over a period of several years. What you’re really aiming for is the point where your annual expenses is only 3-4% of your invested net worth (in this calculation don’t include your home-equity; it’s NOT invested!). Once you reach this point, working for a living becomes optional.
It is not difficult to live on 17-25% of an average salary by substituting time and do-it-yourself skills for money. What is keeping people back is that they have neither time nor an assortment of skills, because they are busy concentrating on their professional skill to earn yet more money. At the end of the day many are too tired to do anything but watch TV and so they need to spend their hard-earned money to compensate by buying everything else. They are, in other words, very efficient at making money but hopelessly inefficient at spending money. I’m almost the opposite having turned the inefficiencies of the specialization-economy to my advantage.
Before I become financially independent, I used to be an academic physicist earning a modest ($40k) salary (see F.A.Q. for more salary details). However, given my priorities and way of life, I reached financial independence at 30, being fully able to live on my investment returns. I decided to retire permanently from my [first] career in physics when I was 33. I did not want to spend my entire life on just one thing.
I aspire to be(come) a polymath, like a modern version of Ben Franklin. I want to try as many different things as I can squeeze into my finite lifetime (see link). I don’t care much for status symbols that anyone can buy as long as they’re willing to spend a lifetime in the office going to meetings and shuffling papers. I don’t care much for “experiences” in the sense of going to see concerts, games, or old buildings in exotic countries. I care about what I can be. I want to be a husband, a scientist, a publisher, a circumnavigator (maybe), a banker, an inventor (maybe), a woodworker or boat builder (maybe), … accomplishments and adventures that can’t be bought with a plane ticket or a credit card.
Given that I retired without million/s of dollars sitting on my bank account, some have asked me why I didn’t continue working so I could earn enough money to become a millionaire? I have lived on $5-7,000/year for
almostover a decade now. While I now have a higher income than what I need, I see no reason to increase my spending. I figured I had already proven that it was possible to become a millionaire if I wanted to do that—if I had continued working, I would have been a dollar millionaire at age 39 or so—and while seeing seven figures on my balance sheet net would be nice, it’s not worth 6 years of my life. Besides, thanks to having saved too much (woe is me), I’ll still hit the magic number, only a decade later.
Some declare they can’t possibly live comfortably on my budget, and some even claim with pride that they spend more on a two week vacation or whatever than I do on everything in a year. I think this really says more about their own money handling skills than it does about my comfort level. Using spending as a measure of success or comfort is as inane as being proud of how fast the bilge pump is running in your leaky boat, how much you’re out of breath after running five kilometers, or how many gallons of gas you need to drive a hundred miles. If you get there equally fast, 15 gallons is not better than 3. It’s the other way around.
After retiring from physics, this blog became my primary “occupation”. I also had more time to dedicate to writing my first book. You could say I was entering the publishing business. In September 2010 I released my first book. In the first ten weeks, it sold more than 1,000 copies. Within the first year, it sold more than 3,000 copies. It’s great to know I’m not the only one interested in this kind of life! The book was self-published using Print-On-Demand with a little help from my friends. If you have a niche product, that is, you don’t see shoppers picking your book up from the shelf next to the checkout in the supermarket, I highly recommend POD. Let me know if you have any questions about it. I’d be happy to help other indie publishers along.
These days, the blog/book/forums are mostly on autopilot. I don’t spend a whole lot time thinking about early retirement or ERE anymore. I just do it.
I do have several current and future plans and serendipity will determine which of them plays out first. I’ll be sure to write an occasional update on the blog, since I know some of you are interested on what I spend my time on these days.
You can consider the following my bucket list.
(*WARNING*: Some of these can be classified as work!)
One plan is to go back to work as a quant trader (fun combining coding and numerics with the financial system). Another plan is to ride a bike across America (probably starting with something easier like the Pacific Coast/Hwy1). Then there’s the plan to get a small sailboat (got my eyes on a Westwight Potter 19) and gunkhole around Chesapeake Bay. And the drive to learn enough technical skills (wood working, metal working, construction) to be able to build most 19th century technology (up to, say, World War I, think, e.g. steam powered generator) as a way to preserve some of the mechanical skills of old times. I’d also like to build a tiny house, e.g. a log cabin or a tumbleweed—I think one of the things everyone should be able to do is to build your own home. Finally, there are repeated calls to write a second book, the contents of which are still germinating in my mind. I figure each of these will take several years of effort since it’s impossible to gain mastery of something without spending 10,000 hours on it and I’m not really willing to settle for less. Yes, extreme!
In terms of hobbies, I fix and ride bicycles, I practice Japanese sword arts (Shinkendo), and I am currently crewing on a couple of yachts out of the Berkeley Yacht Club. I mostly do bay/inshore racing but I have also done a few short ocean races. Let me know if your boat is in need of an intermediate level main or jib trimmer. I am also a radio amateur. If you are in the east bay area, you can try to hit me up on one of the 2 meter repeaters.
You can find out more about income, expenses, net worth, health, health insurance, children, marriage, work, etc. in the Frequently Asked Questions.
To contact me, write an email to:
< my first name >@earlyretirementextreme.com
Important things to note. I read all emails, but I do not have the energy to respond to everyone. In particular I NEVER give investment advice. PLEASE READ THIS FIRST!
if you’re looking for specific advice, I would suggest asking in the forums instead. You are likely to get a lot better response from the community than you will from me alone—my response will be something along the lines of “please ask in the forums” anyway. Actually, there’s a greater chance that you will receive a response from me in the forums than you will if you just send me an email.