Budgeting

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At first glance, an ERE lifestyle seems to demand an excessive amount of budgeting and planning. The opposite is actually true. If a person significantly reduces their largest expenses (usually housing, transportation, and food), and maintains a high rate of savings (>50%), the remaining funds can be managed much more loosely than in traditional financial plans. An ERE approach to budgeting is the opposite of the so-called "latte factor" budget where every detail of a budget is analyzed. Tracking expenses can help with monitoring spending trends and future planning, but simply recording your expenses at the beginning or end of every month should suffice.

Once the largest budget items are addressed, there is much more freedom to spend the remaining money on the items that are most meaningful to you without worry or guilt if purchases are evaluated using the criteria listed above. By maintaining a high savings rate and very few recurring expenses, ERE budgeting can be a very simple process.


Related Resources

Purchasing Goods and Services
Early Retirement Extreme 21-Day Makeover Day 9: Budgeting
Early Retirement Extreme Blog How I live on $7,000 per year