Todd at financialmentor.com summarised the challenge of what you have to do to become financially independent in 10 years. The thrust of his argument is you need to live on a lot less than you earn, and he described how that isn’t so easy
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.
It’s why most people fail, with the exception of odd, extremely focused individual like Jacob (ERE) who finds this all a breeze.
I’m with Todd there. I achieve a greater savings rate than 70%, but then I cheat by having a paid-off house and cycling to work a lot of the time, which takes down two big fixed costs for most people.
Not paying a mortgage isn’t hard, what is hard was paying all the instalments and overpayments over the last 20 years to get to that stage. Reducing other costs was hard. It is particularly hard for the first one or two months of going cold turkey on consumerism.
It was difficult because I had to overcome the norms of a lifetime. For most of my working life I was okay with work, and indeed even now what I do is fine and has regular moments of being interesting. It is the management environment that gets me down. So I had got used to spending a little bit less than I earned, so I was both a consumer of boys toys and of fine wines and eating and drinking out.
Losing the gadget addiction was a harsh switch but easier to hold on to, compared with losing the eating and drinking out. In the end I didn’t want to be working longer to sustain that lifestyle of having the toys, once I had come to that conclusion I could execute the decision, job done. I still have the gadgets I bought up to April 2009, there’s no point in flogging stuff like that on Ebay for the time/return point of view and most of them still work, and surprisingly enough I’m happy with their slowly ageing functionality. Stuff, therefore, was not the problem, and indeed sitting on Stuff accumulated over nearly thirty years of working life means Stuff wants have mostly been addressed anyway.
Hardly watching TV and web-surfing with the power of ad-block plus on my side means I am exposed to far fewer ads than most people, and I adopt a30-day embargo to sterilise any residual power of advertising. If I had a desire for some consumer item, stick it on a list and park it. After thirty days if it still seems like a good idea, go for it. 30 days gives enough time to reflect, and eliminates 95% of my purchases – by then I’ve usually found a way round it or it simply didn’t matter that much to me anyway.
It’s where my world intersects with other people that contrasts and difficulty lie. This is where Todd’s comment rings true for me. Before April 2009 I lived in a way that wasn’t particularly different from how my colleagues and friends lived. The biggest obvious difference is probably being child-free, though even that isn’t hugely unusual in the people I know.
Now, there is a big difference. Most of the people I know from work spend a lot more than I do, and they get nice stuff for it. One guy I know has an audio system that’s worth more than my house. Many have more than one foreign holiday a year; I haven’t used my passport for the last three years.
You have to be more internally referenced than usual to live so differently from the people around you, just like the monk holding to his own values despite the whorehouse around him reflecting contrasting ways of living. ERE observed that early retirement tends to draw personality types INTJ. I would say it is the independence of thought that is the most valuable aspect of that personality type for executing the frugality needed to achieve early retirement, where all around me things urge me to spend! spend! spend!
Trying to spend less means I sometime pass on social opportunities. So there is a cost to living differently, and I choose to pay that cost in the interest of being able to stop working a lot earlier than most people I know. Compared to the quality of life I lose by not buying Stuff, the quality of life I lose by cost-cutting in experiences and socialising is more of a downside to going for early retirement.
Although I am probably personality type INTJ, I’m not as strongly that way as say Jacob, and by going for early retirement rather than extreme early retirement the frugality challenge isn’t such a big ask. Being older than the typical extreme early retirement planner helps too, as SG observed in this comment.
Half the trouble with extreme early retirement for most people is that the first two decades of your working life contain the biggest costs – getting somewhere to live and buying the stuff to set up a household, and just when you are clear of that, most people then have children. That sets you back again because they costs some extra money but more importantly restrict the household’s capacity to earn money.
If I had time and energy on my side I would go the route of the entrepreneur, I wouldn’t choose saving as a means to financial independence. Although taking a long hard look at spending and cutting waste is worthwhile, at the moment I have reduced spending on things that would enhance my life.