3657: Can I Retire Young? by Jacob Lund Fisker of Early Retirement Extreme on Financial Independence

[00:00:00] This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify.

[00:00:31] This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required compatibility and availability varies 18 plus.

[00:00:54] This is Optimal Finance Daily. Can I retire young? By Jacob Lund Fisker of EarlyRetirementExtreme.com And I'm Justin Malek. This is the show where I read to you every day, with permission from the authors. So let's get right to it as we optimize your life.

[00:01:18] Can I retire young? By Jacob Lund Fisker of Early Retirement Extreme The following generic question is very common when it comes to early retirement. It goes something like this. You can adjust the numbers slightly. I am 30-something years old and have managed to save a few hundred thousands or more. Is it possible for me to retire already? The answer is yes.

[00:01:45] Although extreme early retirement is still quite rare, there are more people out there that retired in their late 20s and 30s than the few famous examples would suggest. Hence, early retirement is a realistic proposition for those who desire it. To retire early by becoming financially independent, you must solve the following problem. Your annual expenses must be less than 3% of your invested savings.

[00:02:14] This equation is much more important than absolute numbers. For instance, if you have $500,000 saved, but this is due to having flipped a house for a $200,000 profit and having earned a salary of $150,000 while spending $120,000 for the past 10 years,

[00:02:33] the equation does not hold because 3% of $500,000 is only $15,000, which is far from $120,000. With these numbers, you are rich, but you are not wealthy. Primarily because with an annual expense level of $120,000, chances are very good that you do not possess the knowledge and attitude to live well on $15,000 a year.

[00:03:03] Now, you can solve that equation either by reducing your expenses or by working longer to save more money. The most common problem in solving this equation is spending most of one's income, like in the previous example. This means that expenses are high relative to the income and that savings are low relative to their expenses, at least until you're at least 50 years old.

[00:03:29] In general, most people's expenses match their income regardless of how much they make. To retire early, you have to avoid this. This means living on much less than you earn. Living on much less is entirely possible. This is not done by a few cost-cutting measures or even a great many cost-cutting measures.

[00:03:52] Cost-cutting, especially when it is done to something close to your heart, like say your lawn or your patio furniture, will hurt. Instead of downgrading, choose to live differently. Do not accept a second-rate lawn or a second-rate car. Dump the lawn and car entirely and live on a cruising sailboat or in an RV. Or rent a single room. Or get a bigger place but live with others, perhaps your family.

[00:04:21] Travel the world by visiting your international friends instead of resort hotel staff, though I'm sure they're nice people too. Develop an inexpensive but sophisticated taste. Here you must be creative, and creativity stands in direct relation to your quality of life. Creative retirees do lots of stuff. Some hang out on their sailboat in the Caribbean. Some buy a house in Argentina. Some compete semi-professionally in their favorite sport.

[00:04:51] Some travel around and others tend to their garden or read all the classics. If you cannot be creative or feel you must live a normal life, characterized by driving, shopping, and paying bills, extremely early retirement, which can hardly be considered normal, can only be achieved by either winning the lottery or by downgrading your standard of living. Shopping with coupons, buying cheap things you don't really like,

[00:05:20] and putting an egg timer next to your shower. And that is no way to live. Extreme early retirement also means taking a different attitude to things. Some people, typically the busy ones, generally want everything to work. And if it stops working, they will pay for someone else to fix it for them. This is because they themselves either have no skills or lack the time to fix it themselves.

[00:05:47] Others take pride in being able to fix a broken pipe, a broken engine, put in a new floor and so on, and consider it a hobby. In turn, they do not pay other people to work for them, and so they do not have to work themselves. Early retirees are generally fairly competent people who can do a lot of things on their own. It is also often the case that if they can't, they know someone who can. They have a wide network of people from many different backgrounds,

[00:06:17] unlike specialized workers, who mostly know other specialized workers in the same field. Obviously, it also depends on your attitude towards work. Perhaps writing reports and finding ways for your company to market a new product made overseas to consumers is a fulfilling and appealing way to spend your life. Perhaps it is not. Perhaps you find it motivating to spend your life striving for that corner office, or maybe the office with a window, or a 5% annual raise.

[00:06:47] Or maybe you have other ways to feel accomplished. Maybe you use your work as a social outlet. It is certainly a lot easier to find young people at their job between 9 and 5, and outside of those hours, they are usually tired. But there is a significant number of people not working all week. Not as many, but they are there. And no offense, but they are generally more interesting people than the workaholics who only know their work, and the current top 5 shows on TV.

[00:07:16] The main question you should ask yourself is thus, not whether you have enough money, but rather, whether you can envision yourself living an unconventional life outside the boxes that most others live in. If this is the case, the money to do so can be earned fairly quickly. The challenge is mostly in the mind. And so, this is the real question you should be asking yourself. Can you be happy without doing what everybody else is doing?

[00:07:46] You just listened to the post titled, Can I Retire Young? By Jacob Lund Fisker of EarlyRetirementExtreme.com And I'll be right back with my commentary. You know, before I found Warby Parker, buying glasses always felt weirdly complicated. Overpriced frames, outdated styles, and somehow I needed a spreadsheet just to understand what I was paying for. But Warby Parker has changed that.

[00:08:15] And that's why my most recent two pairs have been from them. My new prescription pair showed up yesterday. I got the Watts style in sugar maple with blue light filtering and anti-fatigue lenses. And before I ordered, I used their virtual try-on. And it's pretty crazy how well it works. You just point your phone and see frames on your face in real time. And I love the quality. They feel premium. They look sharp. And prescription glasses start at just $95.

[00:08:44] They've also got contacts, eye exams, sunglasses, and over 300 stores if you want to pop in. Right now, buy one pair of glasses and get 20% off any additional pairs at warbyparker.com slash OFD. That's 20% off any additional pairs when you purchase one pair at warbyparker.com slash OFD.

[00:09:08] I've tracked my income and expenses since 2010, back when that meant a spreadsheet I built myself and updated every day. I loved it, but I still missed things. Categories changed and I'd go months before noticing my spending had doubled. Monarch does in seconds what took me hours. And it catches what I never would have. Last year, the weekly AI recap flagged that my dining out had crept up almost 40%.

[00:09:37] Charges I'd stop seeing. My financial picture has never been clearer. My favorite part is the AI assistant. I can just ask, can I afford this trip without touching my savings? And get a real answer, not a chart to interpret. It's like having a financial advisor in my pocket. Write your own money story with Monarch. Use code OPTIMAL at Monarch.com to get your first year of Monarch core half off at just $50.

[00:10:06] That's 50% off your first year at Monarch.com with code OPTIMAL. Thank you to Jacob. This is a pretty extreme take and I think he'd be the first to admit it. But there's a good point at the end. The real question isn't whether you have enough money. It's whether you can picture yourself living a life that looks different from everyone else's.

[00:10:29] I thought that was a great line because we usually treat early retirement as purely a math problem. There's a distinction between living differently versus just downgrading. Cutting back on something you love, like he said, just hurts. But choosing a whole different setup where you don't even want the expensive thing anymore is a completely different feeling. One is deprivation and the other is kind of just designing your life.

[00:10:59] I can relate to the not doing what everyone else does part in a small way. I keep my own social media use pretty minimal and it took years to get there. It definitely goes against the grain. It's a tiny version of what he's describing, but even that took some getting used to. Now if you're living paycheck to paycheck, a lot of this is a luxury to even consider. But the question is free to ask, could you be happy not doing what everybody else is doing?

[00:11:29] So thank you again to Jacob and thank you for being here every day and learning along with me. Have a great rest of your day and I'll see you tomorrow as usual where your optimal life awaits.