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 not are willing to make the necessary changes.

Read part I here

Note: This was one of the first blog posts I wrote when I started this site back in 2007. It is also one of the most popular. I describes what I did in the period from 2001–2006. Maybe some day I’ll write a summary of the period 2007–2011, but for now you’ll have to dig into the blog to see what has changed and what has remained the same. When I set out on this journey in 2001, I didn’t have anyone to follow or look to for ideas. Blogs didn’t really exist and I didn’t have access to a good library, so I had to figure out most things myself. In retrospect and with more guidance I would have done it differently and with less personal hassle. So don’t think that I still do all the things described here. In particular, don’t think you have to follow the exact details of what I did to reach a similar goal. In fact, you can follow the journals to see how it’s done better than I did. With that in mind, here’s my story …

One thing I noticed early on was that small expenditures could quickly add up. $100 there, $50 there, $5 every day for a month,… In the months were I bought very little my savings seemed to go up very fast. If I spent more my savings would go up less. It isn’t rocket science that sweating the small stuff IS important. Therefore I canceled my radio subscription and eventually my gym membership. Of course it goes without saying that I did not have a TV. I did have a cheap internet connection though. I stopped shopping for clothes outside of thrift stores. I also changed my diet into what was basically two different types of meals for dinner for which I could cook up a 6 day supply in 30 minutes: Lentil soup and tuna salad(*). For breakfast I had oatmeal with water, seeds and raisins, and for lunch I ate a couple of bananas. Maybe once a week, I would buy more interesting things (spices are my friends). Of course when I went home to visit, eating different food was quite a joy, but it is not that difficult to eat the same kind of healthy food day after day. It only takes a little getting used to. A large part of the world eats nothing but rice and while it is hard in the beginning one quickly gets used to thinking of food as fuel for the body rather than snacking entertainment.

(*) You don’t need to eat this boring. This strategy was mainly due to me being in grad school and not wanting to spend very much time cooking. Many grad students rely on ramen and pizza because of the time pressure. In comparison, my diet was better than average.

One year I believe I only bought three new books. My savings rate of my after tax wage income was pushing 80% that year. However, that was so boring that I vowed not to skimp on things that somehow improves me i.e. makes me smarter or in better shape. I think that is a good rule to go by even though it pushed the rate down to 70%. I think one can get too extreme. Today I allow myself more “frivolous” expenditures thanks to my substantial passive income. We even have cable now. Still my savings rate on my after tax wage income is around 40% which my passive income bumps up to almost 80%. The main reason for that is that since I think a lot about my purchases, I simply don’t need to spend a lot of money to be comfortable.

Financial independence is only one form of independence. I was interested in other forms of independence as well. After all, what do you do if people wont take your money or your money becomes worthless or you lose it all? Therefore I experimented with simplified cooking, raw eating, solar ovens, and growing my own vegetables (not a success). I also tried to make things last longer. I mended socks, repaired electronics, etc. Most of the times I found that I could do without something or jerry rig a simpler solution without heading down to the store. It may seem like trivial example but rather than buying an energy saving gadget, I simply got used to switching things off manually when I didn’t use them. Simple to understand but the difference in attitude is huge and results follow when this attitude is taken to other levels as well. For instance, how would I deal with 90F heat? I could buy a AC unit, buy a fan, or I could simply learn how to sweat. Sweating may sound uncomfortable, but after a while the body adapts and the heat is no longer an issue. It is only when you live in an air conditioned society that you never get a chance to adapt always being subjected to the bad effects of going between hot and cool and consequently adopt the preconception that it is impossible to live without AC. Well, people managed to live without AC less than a hundred years ago. The same goes for heating. Even though the heating was included in the rent where I lived, I experimented one winter with whether I could do without heating in a temperate climate. This meant long underwear and sleeping in a thick bathrobe under a sheet, a fleece blanket and a sleeping bag, but I managed just fine. Today I am comfortable in a t-shirt down to 65F relying on a larger than average metabolism from a vigorous exercise plan. This in turn means that I can eat well and maintain a single digit body fat percentage. It all fits together.

I began simplifying my lifestyle trying to rely more on skills and adaption to the environment rather than on tools (think money). I have researched this with a fairly open mind. I have looked into car-living or boat-living, places where every cubic inch of space counts to get ideas for how to maximize my use of space and thus minimize my need for space. I know a thing or two about homesteading from researching in how to be creative in making solutions from scratch. I know how to make soap from scratch (though it’s easier to buy) and what common household items to substitute for shampoo or toothpaste. I even know how to make baking soda! I can cook with almost no heat and very few utensils. There is of course a lot of “actionable” details to this story, but in trying to convey the idea to other people the biggest obstacle has generally been the frame of mind rather than things to do. We have become so used to heading down to the store and thinking that we need everything we can buy there! It is a lot easier to learn techniques than it is to change one’s entire belief system of how the world hangs together. The end result of all this was to make everything I truly needed to live well fit into a couple of large suitcases and reduce my expenditures to what is considered somewhat below the poverty level while maintaining a comfortable lifestyle. In terms of quality I live somewhat above the ordinary consumer class standard of living since I own more luxury items but in terms of quantity my life style is quite a bit below.

When I finally got my PhD, I had no student debt. Furthermore I had saved enough of my grant/paychecks to actually make up half of my current net worth! After finishing my PhD, I became an academic researcher and was now making about as much as a state trooper or a long haul trucker. As I have hinted in earlier posts, I did not become financially independent by having a six figure income. Far from it. Rather it was through creative ways of increasing my savings by being increasingly more independent of the general economy. Quite an adventure.

I think it has been argued before whether a college education is really worth it. My answer is that it depends. A college education is certainly not a magic bullet to financial success. Monetarily, a college education and a tradeable skill are probably equally valuable, since going without a college education means earning money sooner and not accruing any student debts. What is important is money handling skills, not income. On the other hand, although I could have had a much higher income by NOT getting a PhD (entering grad school is almost financial suicide) and choosing engineering or accounting rather than science (that’s a specific as I am going to get), I did not think of expected income or even employability when I picked my major. However, unlike the higher income educations, my particular major has allowed to visit more than 10 countries for conferences and workshops without paying a dime out of my own pocket, publish many articles and part of a book as well advise on million dollar projects and thus have some influence in the scientific world. Having a “blue collar” job would probably not have been as intellectually satisfying to me, but that’s just me. For those who have their heads and hands screwed on right, spending up to 10 years in the educational system just to learn how to research arcane details that are interesting to maybe only 5 or 10 people in the world probably sounds crazy as well whereas building a beautiful house is a great accomplishment.

to be continued… Read part III here.