Updated on 02.25.11

Review: Early Retirement Extreme

Trent Hamm

Every Sunday, The Simple Dollar reviews a personal finance or other book of interest. Also available is a complete list of the hundreds of book reviews that have appeared on The Simple Dollar over the years.

ereIt was the subtitle of Jacob Lund Fisker’s Early Retirement Extreme that convinced me to pick it up. “A philosophical and practical guide to financial independence.” Intriguing enough for my eyeballs, particularly since the subject matter of the book seemed to be in line with my own experiences on what it takes to be financially independent, as revealed from the text on the back cover (which explains the book so well, I’ll just quote it here):

This book provides a robust strategy that makes it possible to stop working for money in less than a decade. It provides a shift in economic perspective from consuming to producting. Your value to society is not how much you earn or buy, but what you create and produce. Consumers are often forced to buy expensive solutions, but producers have the flexibility to create their own solutions at a quarter of the cost. The resulting savings are invested to cover the remaining expenses, resulting in financial independence.

The strategy can also be used to pay off debt, travel the world, volunteer, go back to school, or simply work without worrying about the next paycheck. It offers a compelling alternative to the default choice of getting a college degree, buying a house, filling the closets with stuff, and then spending the next 40 years paying it off.

In other words, if you focus every action – or as many actions as possible – in your life on producing rather than consuming, you’re going to set yourself up for lasting financial success.

It’s a very interesting perspective to have on personal finance as a whole, one that goes hand in hand with voluntary simplicity and frugality. Let’s dig in to see what else Fisker has to say.

A different frame of mind
Most people look at problems in their lives today and come up with a solution that usually involves buying a product. You want to barbecue? Go buy a grill and a propane cylinder instead of building a fire pit and bartering for wood. You want to move heavy items? Go buy a cart rather than focusing on improving your personal health and strength.

Fisker’s general philosophy is that, at every possible opportunity, you should focus on solving the problems life throws at you yourself, with minimal purchases to solve those problems. In doing this, you build a set of skills and attributes that enable you to solve even more problems in your life. If you build a fire pit and start using it, you learn about open-fire cooking techniques. If you get stronger to move a heavy item, you’re more capable of doing things like changing a car tire.

Hand in hand with that is reinvesting the money you’re saving by doing things yourself. If you’ve not bought a grill and you’ve not purchased a cart, then you can take that money and save it. You’re not paying the plumber or the electrician, either. You’re not buying prepackaged foods or take-out. You’re not buying gadgets or consumable entertainment. That money all goes towards making yourself independent from work.

It’s a path that’s not for everyone, of course.

The lock-in
Most of us spend the first big part of our lives – childhood and early adulthood – acquiring a set of skills that do not lead to that kind of self-reliant life. We’re trained from a very early age to be consumers. We buy things to solve our problems. We learn skills that make us more effective consumers. We go to college – and usually go way in debt for the privilege – just so we can learn a skill set for a very narrow career path. We buy a house, a car, and countless other things that weight us down with debt and upkeep payments.

And we’re stuck. We don’t have the skill set to approach life any differently. We’re locked in, and to break that lock is extremely difficult and requires adopting some lifestyle elements that are going to be substantially different than the elements of the lives of people around us.

Economic degrees of freedom
The best state for anyone to be in during any economic environment is to be what Fisker refers to as a “Renaissance man,” an individual who is skilled in many different areas and is capable of maintaining many different avenues of income. Few people fall into this category in terms of their personal skill set – they’re either committed to one skill set or committed to one particular method of earning income (like their job).

A “Renaissance man,” in other words, has many degrees of economic freedom. They can switch jobs or career paths easily and have the skills to succeed in many different areas. In order to be such a Renaissance man, though, a person has to make a consistent commitment to actions that either produce value or directly improve the individual’s ability to produce value.

The Renaissance ideal
The Renaissance ideal is a life spent building skills or producing value, with as little consumption as possible. Such a lifestyle has benefits in many different directions, from the financial to the ecological, and Fisker covers those.

Fisker also examines what it takes to become highly skilled at specific tasks, using a “10,000 hour” metric for strong mastery of an area. Naturally, few people become that specialized, so Fisker encourages people to evaluate how they’re building skills. In other words, you shouldn’t just repeat the same thing over and over and expect it to build skills. Drills are incredibly useful, but if you just do the same drill over and over, it’s difficult to grow.

Strategy, tactics, and guiding principles
There are no such things as needs and wants beyond things like sleep and very basic nutritional intake. That’s a pretty strong statement to make, but Fisker does a great job of spelling this idea out.

Let’s say you’re looking at your needs and your wants with regard to housing. You actually have a lot of options in that regard: sleeping under the stars, sleeping under a piece of canvas, couch surfing with friends, renting a tiny room, and so on. We often limit our options without even thinking about it.

What you have there isn’t needs or wants. What you have is a list of options to choose from. When you immediately start eliminating options, you tie yourself tighter and tighter to a certain type of lifestyle that, by its very nature, excludes many types of financial and personal freedoms that you may otherwise desire.

A Renaissance lifestyle
Fisker spends most of this chapter outlining specific elements of living what he describes as a “Renaissance lifestyle,” one that’s built around the accumulation of skills rather than the accumulation of goods. This chapter is quite long and extremely detailed.

Much of it, however, is spent breaking down specific ideas that people have built in their heads about what’s “required” for modern life and what’s “normal.” If you step back from the elements of your day to day life and look at the true breadth of choices before you, you can actually make some very radical shifts in your life if you so choose.

For me, there are a ton of great ideas in this section. Some of them are quite workable, while others aren’t as workable.

Foundations of economics and finance
The book closes with a brief look at economics, almost as an appendix to the principles in the book. There’s not much new ground here if you’re familiar with Economics 101.

Is Early Retirement Extreme Worth Reading?
This is a book that tackles a completely different approach to personal finance and modern living than almost every other personal finance book. If you’re merely looking for help on investment choices or want someone to hold your hand while you create your first budget, this book won’t be of any use to you.

However, if you’re interested in some intriguing thinking about modern personal finance, self-reliance, and entrepreneurship, Early Retirement Extreme is a fascinating book. It’s absolutely loaded with thought-provoking ideas. If you’re not left with some food for thought after reading just a few pages of this book, then you’re not actively thinking about your financial state as a whole.

For me, this was one of the most compelling personal finance reads I’ve enjoyed in a very long time. While I don’t wholly subscribe to Fisker’s ideas, there were so many thought-provoking points in this book that I’ll have food for thought for years. In fact, I wouldn’t be surprised if many posts on The Simple Dollar in the near future eventually trace back to this book as a genesis point, where my mind has taken some little thread from this book and run with it for a while.

Check out additional reviews and notes of Early Retirement Extreme on Amazon.com.

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  1. Nicole says:

    I feel like this would be a good philosophy as long as people using it aren’t tempted to think, “If I can do [x], there is no reason for anyone else not to.” For instance, my frame was just not built to lift heavy objects no matter how much I work out (you’d think differences like this would be obvious to everybody, but I know better), and if I need a cart to not throw out my back then doggonit I am getting a cart. In the same vein, long-term solution building is good, but there are still things that need done now, not three weeks from now.

  2. Wes says:

    Trent, of all the reviews I’ve read of yours, this is the most intriguing.

    I’m very curious to learn more about the author’s concept of the “renaissance man.” I like to try my hand at all kinds of different skills (though, to be honest, most of these “skills” are actually hobbies that probably end up making me more of a consumer than a producer). However, I’ve always had sort of an Adam Smith view of efficiency that made me appreciate the idea of specialization. The synergies of having multiple skillsets, though, are undeniable, so there must be an ideal balance somewhere between the Jack-of-all-trades and the one-field expert.

    Also, I would like to know more about the author’s opinion on retirement as the concept of early retirement, at least in some ways, goes against some of the principles of the book. I think that society in general sees retirement as the exact opposite of the virtues this book discusses: a time to stop producing and to increase consumption. It’s hard to say without reading the book, but I would figure that the author might value a kind of working-retirement. After all, is the goal of ratcheting up production simply to hasten the moment in life where you don’t have to produce anymore? I would say yes and no. It’s good not to be dependent on your job, but that does not mean quitting work when you can is the best choice, either (at least not for me). For an excellent and inspiring discussion on the virtues of not retiring, check out the chapter on that subject in Daniel Lapin’s “Thou Shall Prosper.”

    Thanks for the post, Trent. I think I’ll be reading this one soon.

  3. Elizabeth says:

    I’m glad you wrote about this book, Trent! I’ll have to check it out :)

    I’ve heard a similar argument used against the U.S. economy: that it consumes a lot but does not produce enough. Interesting to see how this principle applies at a micro level.

    @Nicole — agreed! I’ve saved a lot of money over the years by learning to do things myself, but I also know my physical limitations — I own a cart!

  4. Robert Muir says:

    Good points Wes. I think you would find this book to be an excellent read.

    The question you have to ask yourself is, “if I didn’t have to work, what would I do?”.

    For some, it would be to devote time to specific hobbies. For others, charity work might come into play. And still others might surprise themselves with what they can accomplish once the need for work is removed.

    Keep in mind that many of the most productive people in history didn’t have to work for a living. The only reason Darwin was able to accomplish what he did was because he could live off an inheritance.

    If we can modify our consumption and increase our capital productivity, we can easily be financially independent.

  5. Landon says:

    I have been reading Fisker’s blog for awhile. He is an excellent writer and makes alot of though-provoking points. Honestly, I view his material as “advanced” personal finance; once you get the basics down concerning budgeting, investing with index funds, getting out of debt, etc etc. then you can graduate to Fisker’s material and complete change your lifestyle.

    I’m reading the book right now and it’s great. My only complaint would be that it is a little dry and this might put off some readers; it sometimes reads like a textbook.

  6. DOT says:

    I have not read the book yet, however I do read Jacob’s blog everyday and absolutely love it.

    After reading your review I think I will start on my copy. I have had it for about a month but have found myself unusually busy to sit down and read it.

  7. DOT says:

    I have not read the book yet, however I do read Jacob’s blog everyday and absolutely love it.I do agree with you that he has many thought provoking ideas that seem to stick in your mind forever. I can relate to his “engineering and numbers” theories.

    After reading your review I think I will start on my copy. I have had it for about a month but have found myself unusually busy to sit down and read it.

  8. getagrip says:

    I’m reminded of a quote:

    “A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects.”
    – Robert Heinlein, Time Enough for Love

  9. CB says:

    Jacob comes from a more frugal European country and is able to bring the outsider’s eyes to American business and habits.

    Better to make a conscious choice than to just be carried along by the stream. Most people won’t be at the extreme, but I’ve gathered tips for living with mire awareness. His blog posts are now reissues, but worth checking out. He is an original thinker in terms of the dominant American mindset. He’d never end up like Willy Lomand in Death of a Salesman.

  10. jim says:

    I haven’t read the book. I have read the blog by the same name. The blog is pretty interesting reading with lots of thought provoking stuff. HOWEVER, when you get down to the actual details of what Jacob does we’re talking about living in a trailer, eating beans and rice and wearing multiple layers of clothing rather than paying for heat. That may be great for some people but not for me.

  11. @jim – The point is not to copy me but to optimize one’s life by choosing what one values and not paying for things one doesn’t really value just because that’s what everybody else does. For example, I live in the bay area (one of the most expensive areas of the US) where it rains a few weeks a year and snow is the stuff of legend. The climate is what many pay to go on vacation to experience for a week. There’s lots of outdoor activities like biking and sailing. We live in an RV. It’s quick and easy to maintain—I don’t care for lawns and spending upwards of an hour just to vacuum the floor. I want home-maintenance to be as easy as possible.
    That said, the rent is comparable to what it would cost to buy a $150,000 home which would get you something decent in many other parts of the country, many of which would not have the RV opportunity. I eat beans and rice because I prefer Mexican and Indian food which just happens to have a lot of those and red meat usually gives me a heartburn. Also, since I do sports 4-5 times a week, I need to eat for that. And yes, I prefer to spend my money on clothes rather than propane—but considering where we live that means putting on a sweater, not dressing as the Michelin man. But those are my choices. With my budget, savings, and the DIY skills instead the Walmart trip, I could easily fake a middle class house+lifestyle in Vermont or Tennessee. That may be great for some, but not for me. But you could do that instead.

  12. Tara C says:

    I can’t wait to read this book. For me, the title seems to be a bit of a misnomer – it’s really about financial independence rather than what most people think of when they hear the word retirement.

  13. Nancy says:

    I haven’t read the book, but I always wonder how people who are financially independent deal with health insurance. #9 CB explains, in this case, how–this author lives in Europe. My husband & I spend over 30% of our income on health insurance because we don’t have it through our jobs. As one gets older, I would think it would be virtually impossible to not have insurance through a decent job, as the premiums become very expensive.

    Anyone else have any ideas on how to deal with this?

  14. Dave says:

    I’ll start by saying that I enjoyed the review and the comments but I have not read the book. I feel strongly that living within our means and having more than one marketable skill is truly laudable. However, I tend to draw the line at what has become the fashionable concept of self sufficiency rather than competitive advantage. I am and HVAC technician and generate around $68 per hour and I am fully capable of repairing everything in my home and most things regarding my cars. Nevertheless I just paid someone to remodel my bathroom. Guess what, the contractor did a much faster, better, and cheaper job than I ever could and I just fixed air conditioners all that time for more than his cost. I just had an injector replaced on my car and although they charge about what I make I went for a hike instead of working on my car all weekend. Self sufficiency can become slavery, just think, the average herdsman in east Africa is self sufficient but, even though it might work for them, I don’t want to live that way. I will be retiring in around 2 years and at that time I will fix my car, roof, plumbing, and everything else that I possibly can but then I will no longer have any competitive advantage.

  15. Debbie M says:

    @Nancy, Jacob no longer lives in Europe. One answer is high-deductible insurance plus as much prevention as possible (stay fit, eat right, wear a helmet). He’s still pretty young, though, but then he keeps earning money (through fun things), so he may be able to afford a few major health problems later.

  16. Dave says:

    A small correction to my comments–I meant to say comparative advantage

  17. Lily says:

    I’ve read Jacob’s book and enjoy reading his blog everyday. Some of the most interesting articles on his blog are his thoughts on just what is wealth and on how he retired in 5 years while still in his early 30s.

  18. Nikki says:

    I definitely am interested in this book. I’ve been planning for something similar, but not in as short a time. Basically, my original plan was to work full-time for the next 10 years (until age 50), save 9% of my income in a 401K (6% from me, 3% from my employer) during that time, plus some personal savings, then “retire” to teach English as a second language in various places around the world. My inspiration was the book _Tales of a Female Nomad_ by Rita Golden Gelman.

    If this book can help me get there faster, or at least with a stronger money base, fantastic!

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