Here's something I'd like to add from the
Early Retirement Extreme blog. My annotations are in red.
Quote:Jacob Lund Fisker Wrote:
What makes ERE work is how things are put together. If we take the 21 Day Makeover (as seen in the lower left sidebar), we start by reducing the amount of stuff we have. The less you own, the less you have to move, store, or maintain. Everything you buy other than food should be extremely durable. So don't go buying stupid shit that you can't afford, or depreciates in value over time.
This is done in order to relocate to a place where 1) We don’t need to pay as much to store things we don’t use anyway; but more importantly 2) We don’t need the same level of transportation. $2000 will buy you a shitty car that might last a couple years, but it will afford an excellent bike that will last decades.
This in turn means we can ditch at least one vehicle and maybe two. It also means we get more free time since less time is spent on commuting. The average commute is 20 minutes by car. That's 175 hours spent in a year just to get to work. This can be used to cook and since we’re closer to the supermarket, we can go with fresher food. This would allow us to ditch the fridge.
Also, knowing what we eat will save on health care costs and medications down the line. This allows for a higher deductible. Since you're saving all this cash, you'll be able to drop 10k for a serious health problem. This goes well with not having the car since we can get around under muscle power thus reducing blood pressure and the chance of a heart attack down the line—destressing too. Bikes improve your health and save you money, the exact opposite of a car.
Having fewer things, there are fewer things that can break and if we dump the TV, we can spend our time learning to maintain and fix them. It pays to be a self taught handy man. We have not reduced our expenditure on consumer durables to almost zero.
As an interesting side-effect we’re suddenly saving tons of money. You should be saving at least 70% of your paychecks, which will allow you to retire in 5 years at this DIY styled standard of living.
This is the complete forest. It works because everything fits together and supports each other. That is what makes it a design rather than a collection.
. . .
The forest is what makes ERE ERE. I’m not saying that everybody should do exactly what I’m doing. If you're pulling in 100k a year, you can obviously afford a higher standard of living if you decide to become financially independent. Jacob lives on ~7k a year. I am, however, saying that the big picture is enormously more important than, say, the specific temperature of one’s shower or how many cents that costs.
You don't have to follow this guy to a T - he's not a player - but if you were to incorporate a couple of the bigger suggestions (like cooking your own meals or biking) then yeah, you should have plenty of paycheck to get by.
An interesting side note, let's say you make $15 an hour and you commute 20 minutes to work. If you want to calculate your "real wage", you simply take what you'd get paid and divide it by all the hours paid and unpaid that revolve around work. You also add any costs that you wouldn't have otherwise, like having to buy work clothes or going out to lunch.
~2000 hours paid work @ $15/hr for a regular 5 day week at 8 hours a day.
~175 hours unpaid commuting time (costs about 5k a year for car maintenance, gas, tires etc)
~260 hours to get ready for work (shower, shave, eat breakfast etc).
$10 lunch every day (-$2600)
($30,000 - (5000 + 2600))/(2000+175+260) = $9.19 / hr
Congratulations, you barely make above minimum wage. Even if you don't account for the hours to get ready for work, you're still only making $10 an hour.
Math saves lives. You could literally be money ahead living in a shitbox apartment, bartending a couple nights a week, working part time at Mcdonalds, and selling beads on Etsy. Hahahaha.
