Early Retirement Extreme

Financial independence, frugality, self-sufficiency, ecology, capitalism, and voluntary simplicity

Big sacrifices now make all the small differences later

Published in June 20th, 2008

Posted by Jacob in compound interest, financial independence, investments

If you’re new here, you may want to subscribe to my RSS feed. Thanks for visiting!Yeah, hey what wait, isn’t it the other way around? As regular readers will know I have a manical obsession with turning things on their head and making fun of them (just ask our dog), but there is some [...]

The major risks of buy and hold index investing

Published in April 11th, 2008

Posted by Jacob in compound interest, investments

13 Comments

I see stock markets falling in three, possibly more, stages. The first stage is the golden age of capitalism, where owners run and have a stake in their own company. In the second stage operations and stakeholdership is taken over by professionals, that is, CEOs, who own less than 1% of the company, and (institutional) fund [...]

Get wealthy trick: Don’t spend any money until it is re-earned.

Published in February 23rd, 2008

Posted by Jacob in compound interest, money

7 Comments

Some people use credit to spend their money before they have earned it. Other people spend money as they earn it. However, if one wants to get wealthy, one needs to re-earn the money.
First order re-earnings work like this. Pick an interest rate, let’s say 4%. Once $100 is earned, it is deposited in a [...]

How I became financially independent in 5 years - Part IV - the investments

Published in February 10th, 2008

Posted by Jacob in compound interest, culture, economy, financial independence, financial security, investments, net worth, personal finance, saving

13 Comments

I posit that most people can attain financial independence in less than 10 years and in less than 5 if they are truly determined. I also submit that many people are not willing to make the necessary changes.
Read part I here
Read part II here
Read part III here
By cutting all expenses to the bare [...]

Optimizing blogging with S-curves

Published in January 29th, 2008

Posted by Jacob in blogging, compound interest

3 Comments

Blogging has no threshold to get started. There is no need for a degree to apply, nor is advancement determined by “unionized” seniority. This means that there is little initial investment needed to get started in terms of time and money. In fact, it is possible to start a new blog right here right now [...]

Cash flow diagrams for the poor, the middle class, and the investor class

Published in January 26th, 2008

Posted by Jacob in assets, compound interest, debt, expenses, financial independence, financial security, investments, money, personal finance

16 Comments

Being poor or unable to get credit 100% of the expenses must be covered with wage income. Schematically the cash flow looks like this

Thus you put your time into your work which gives you a wage income that is used to pay for stuff that goes back to you.People with a credit score can go [...]

Better goal setting with S-curves

Published in January 25th, 2008

Posted by Jacob in compound interest, job, motivation, rat race

2 Comments

One popular psychological strategy is to set small goals or start slowly. This strategy usually fails from the lack of meaningful progress despite having achieved several small goals(*). There is a good reason for this. The S-curve or logistic function is a useful model for understanding why this strategy rarely brings the intended results.

DW was [...]

I don’t need an emergency fund, I have a credit card

Published in January 14th, 2008

Posted by Jacob in budgeting, compound interest, financial security

8 Comments

I don’t have a disaster fund or an emergency fund. For emergencies, I use a credit card. Why do I do that? The reason is that emergency funds must sit in a checking account to be liquid. While sitting there they earn less than a savings account (in general) typically only a few percent.
If I [...]

What I would teach children about savings

Published in January 8th, 2008

Posted by Jacob in budgeting, compound interest, money, net worth, saving, standard of living

4 Comments

I do not have any children, so this discussion will be largely academic. However, if I had children, I believe that instilling the proper financial values so that children know what to expect from money is much more valuable than a 529 plan or any kind of donation, gift, or allowance. My parents saved about [...]

Do I need a million dollars to retire?

Published in January 7th, 2008

Posted by Jacob in compound interest, consumerism, cost of living, expenses, financial security, frugal, household, rat race, standard of living

7 Comments

People keep telling me that I need at least $1,000,000 to retire comfortably. This concerns me somewhat since I don’t have one million and because it would take about 10 more years to save for one. Now, one million would throw off a cost of living adjusted $40,000 a year in capital income if it [...]

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