Early Retirement Extreme

Jacob Lund Fisker writes over on his blog Early Retirement Extreme, about the possibilities of retiring early and being financially independent in just five short years. He did it himself and now he has written a book detailing his methods.

Jacob is a bit of a non-conformist and his methods may not appeal to everyone, but he uses a blend of wit, common sense, and logic to get his point across to his readers. I have been reading his blog regularly for about a year and a half now and find great value in his message.

Normal financial wisdom involves saving a smaller percentage of your income over a longer period of time and replacing seventy to eighty percent of your working income with investment earnings. This is the popular method and one that is preached frequently by all sorts of financial gurus. However, it is not a path to early retirement by any means, and does seem quite overwhelming to many people.

The basic premise that Jacob teaches is that you can live on twenty percent of your income and save the other eighty percent. This allows you to accomplish financial independence in a unique way. First, since you have learned to live on only twenty percent of your income, you are very adept at frugality, minimalism, and budgeting. In other words you don't really need alot of money, because you don't spend alot of money. Then, by saving eighty percent of your income and then investing that sum in carefully chosen income stocks, you can generate a substantial yearly income without the need for a regular, full-time job.

Therefore, in as little as five years, you can achieve financial independence and buy back your freedom. This gives you the time and opportunity to pursue the things in life that most align with your values. I'm just guessing here, but work probably isn't one of them.