Early Retirement Extreme Strategies

Early Retirement Extreme is a philosophy with the goal of being financially independent. That means reaching an amount of money such that the interest on your investments cover all your expenses, letting you survive "forever" without needing to work (like your own "Universal Basic Income"). Because of the math of compound interest, saving a large percentage of your income lets you reach this point much, much quicker than saving a normal percentage. So the idea is to reduce your expenses. You can of course also use these strategies for other goals, such as to work less (as I've done), or to get through a pandemic, or even just to survive.

Especially, it's important to realize how much of a difference there is between buying something regularly that's consumed, buying something once that's consumed, and buying something that generates wealth. Eliminating regular expenses for things that are used up has the biggest impact. E.g. a lot of people treat a $40 per month cable bill as not a big deal, but treat a $5000 heat pump as a big deal. However, the cable costs you /way/ more - the heat pump actually earns you money. Even comparing a $40 cable bill to a $1000 TV (a one time cost that is consumed), after 10 years the cable will have cost you $4800 plus interest, and the TV only $1000 plus interest.

The first thing to do is ask yourself what activities you do or want to do in your life. E.g. for me I work at a computer, read books, play video games, go hiking, go biking, play sports, visit friends and family, play board games, eat, sleep, etc. Then ask how you can accomplish the goal of spending your life doing those things (rather than thinking about what stuff you need to buy). If you already have stuff that you know won't help you do the things you want, get rid of it. Doing so might seem like a waste of money, or, if you sell it, it might seem like you're not getting much money for it, but the important point is that the value of getting rid of this stuff is much greater than the price you get for it, in terms of the space it saves and the reduced stress from reduced clutter. Remember, by compound interest, even emptying a room in your house, which might allow you live somewhere, say, $200 per month cheaper, is an enormous amount of money (over $100000 over your lifetime).

Some specific strategies which have helped me reach an ERE level of spending are:


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