If you want to become financially independent in 10 years, Todd over at the financialmentor.com makes a cogent case for how the math works. The extreme savings method is robust unlike other methods such as real estate or businesses which require a good deal of luckhas a high rate of failure due to causes beyond your immediate control. This means extreme savings will work in ~100% of the cases whereas real estate or business start ups will only work for a few, maybe 5-10%.
Still, not everybody succeeds with such a savings program and the post gives some reasons why. Having succeeded myself and seen others fail, I somewhat agree/disagree but I also have some understanding why an extreme savings approach can fail. Hint: It’s not the theory, it’s you :-)

“It takes the self-discipline(*) of a celibate monk living in a brothel to survive on 20-30% of what most people earn in our current culture.”, said Todd. I would say it takes an extreme level of independence, confidence, and leadership to go against the stream. This is perhaps why extreme early retirement attracts so many INTJs as this personality type exhibits those traits more than most other types. “Surviving” is easy; it’s the “spending less than you earn” which is hard because it makes you different. To wit, consider two families. One earns $90000 and the other earns $27000. The latter is surviving on 30% of the former just fine. No problem. However, it would take a self-discipline and an independent streak for the $90000 family to not spend in the same way as their friends and colleagues. On the other hand, if those friends and colleagues were spending less, it would be no problem at all. It’s the “not fitting in” that’s hard. This is why the ERE forums have come to serve almost as a support group for what are typically highly competent people who “should” be spending 5 times more than they do, at least according to everybody else. Many of the questions actually deal with the grief caused by other “well-meaning” people who don’t get it, not by the actual “surviving”.

(*) Self-discipline is not that important. I eat take-out food on occasion. I sometimes buy things *gasp* new.

In defense of extreme frugality: First, it certainly does depend on your values. Those values are not always to retire early. For me my initial motivation was environmental having realized how much waste our consumer culture generates. It took me a couple of years to realize that with the high savings rate I had, I would be FI in just a few more years. I used to enjoy buying gadgets, a lot. This, incidentally, was what I enjoyed most about my stuff. Doing “consumer research” comparing specs, buying the gadget, and playing around with it for a couple of months after which I lost interest. Then I was onto the next gadget. Had I kept this up, I would still be working 60 hours a week, but I would have owned the newest iPhone and been driving a Prius or a Volt. It took a few months for my values to change but eventually I got as much joy out of not spending money as I did bringing home shrink wrapped boxes of new toys.

It is said that your need [for money] is inversely related to your level of skill. Money buys convenience but more importantly, it compensates for lack of skill. My favorite example is the malfunctioning toilet. Suppose your toilet fails to flush. Now, you could say that an extreme saver wouldn’t have the money to fix it and would thus quickly find himself in deep shitdiscomfort. However, an extremely frugal person would likely learn (quickly) or have learned to fix the problem himself. The end result would then be the same: A working toilet. So both solutions are ultimately convenient. However, imagine that the toilet broke Saturday night (don’t ask!) and you couldn’t get a hold of plumber until Monday morning. Wouldn’t it be more convenient if you could fix it yourself?

It takes time and effort(*) to learn such skills. I’m reminded by another quote by Illich which I paraphrase to something like “a man is educated in proportion to his ability to understand and affect his immediate environment”. In this regard most of us are barely out of the toddler stage. If we have a problem, many of us just call an authority. We usually pay others to “understand and affect” our environment because we just never learned ourselves. We’re like idiot savants who only understand one thing, our job whatever it may be, but we understand that really well to the exclusion of everything else.

This can change. Fixing a toilet, knitting a sock, building a bicycle, installing a compressor to make a fridge, and similar projects aren’t rocket science. It can be learned by anyone who can read and follow instructions. It’s just in this society that nobody does it. On top of this there is a tremendous sense of satisfaction in being able to say “I made that” or “I fixed that” that, at least for me, far surpasses saying “I bought that”. For me the latter always comes with a sense of shame.

To illustrate, I will think that your new sports car is nice and fun to ride in, but what really impresses me is a heavily self-modded truck that gets twice as many MPG running on bio-diesel or an electric scooter built out of conduit pipe, old frame parts, and discarded golf cart batteries. Standard cars mean nothing to me. Conversely, I understand that the LA dating scene is entirely predicated on the price tag of one’s vehicle.

So I may only be spending $6-7,000/year but do consider the value I’m adding using those monies for parts and optimized living and location compared to someone who is spending $60,000 blindly. We may just be getting the same value out of it.

Sometimes it is argued that the absence of money excludes certain things. This is correct, but they also include things which are otherwise out of reach due to the absence of time spent on the job. When you’re FI, things change. Things are done differently. It would be too expensive for me to take the family to France for a month every year. However, it would be entirely feasible for me to move to France (yes, I got an EU passport) and stay there for years because I don’t need a job, the plane ticket would be amortized, and I wouldn’t be supporting a house in the states. If I had kids I wouldn’t be able to afford expensive private schools, but I would have 12 hours a day to help them with their homework. I don’t have the budget to shop at Whole Paycheck, but I do have the time to garden. The same goes for sports. I can dedicate much more time to an activity which usually beats having a personal trainer and all the latest gear. There’s a strong limit to what money can buy which is easily surpassed with time and effort.

Conversely, using the examples above, someone who works for a living can’t afford to go to France for 1+ years because they certainly can’t afford to pay for two houses (unless they were saving 50% already) and they might be underwater on the “biggest house they could afford” which would make for a hard sell. If they’re high earners they’re likely economically better off if they outsource the raising of their kids, because they need to work to pay for “fun-time”. And who has the energy for serious sports and gardening if one works 60 hours a week?

Much more important than confidence and independence is the ability to envision the possibility of doing things differently. If you can’t wrap your head around it, you can’t set the goal, and without seeing the goal, you can’t get there intentionally. Many can’t imagine doing things for themselves instead of paying others. I believe this is the source of all the “I can’t live on $10,000/year”. To illustrate, $1000 will buy you a good bicycle. However, $1000 will also buy you enough parts to make SIX bicycles which are equally good. Most can’t imagine doing that—don’t you need a degree in bicycling or some such?! (But many are willing to stretch their mind far enough to maybe get TWO used bicycles of the same quality.) In the same vein a hundred bucks in carefully handled seeds will feed a family for months, organically too. A hundred bucks spent in a restaurant will feed a family for a day.

I see this as the greatest barrier for most people are this is to a large extent why I’m putting my life on public display. Of course this is just meant as an inspiration. The point is not to copy what I do but to understand the principles and the philosophy. For instance, I’m not going to move to France, but some probably will. And you don’t have to live in an RV. That’s just what I do.