… or more accurately, extreme early financial independence vs delayed financial independence.

We can argue the exact monetary point of FI, but the power of EEFI (guess an acronym!) is the compounding interest or the cash flow it generates that anyone pursuing delayed FI will not see for a long time.

First, if I got a real job (who knows, I might radically change my philosophy in 15 years—I did so 10 years ago, so I have a history), then I would not need to contribute anything to retirement savings because I already saved more for retirement than many people ever will [in their lifetime]. This would leave me more money to spend which results in what consumers know as a “higher standard of living”(*). In addition, I saved early, so practically all my money has longer time to compound that many people’s savings (I know people my age who have not started saving yet.)—where the first contributions get 30+ years of compound, whereas the last get 0 years. This means I have 30 years of compounding, whereas the life-time worker only has 15 years.

(*) I currently know how to get the same standard of living as a middle class person for far less cost. That is, I live in an RV, but I could replace this with a house in many parts of the country with less expenses as a result.

The price is 5 years of hard savings. The first years are the most important for the reasons above. A problem with the first years is that for most people starting—it definitely held for me—I/we/they are mostly clueless about how to live without a lifeline to Walmart, Ikea, and the mall. Initially it would therefore look like 5 years of suffering(*). However, within a year, there will be some learning and frugal skills, networking/connections, and lifestyle changes will rapidly compensate for the consumer ignorance.

(*) A good reminder is to put things in perspective. You will still be living better than 90% of the rest of everybody else on the planet though.

The most important thing to realize is that the period is finite. A lot has been made out of the issue that I used to eat lentil soup. (It’s a great dish similar to dhal.). I don’t anymore. Most importantly, I do not derive current happiness or sadness from what I ate or did not watch on a TV I did not have 5 years ago. What I do do, however, is to derive happiness from the savings I did 5 years ago. “Sacrifice” in the present, which is now the past, to enjoy in the future, which is now the present.

All I have done is to take this to an extreme. If you have never tried it, there is enjoyment in going to bed financially secure and without worrying about jobs and bills, and perhaps there’s more enjoyment in that compared to ordering pizza every day and watching TV series on flat screen TVs. I’m just saying.

Originally posted 2009-11-12 08:36:31.