Saturday, 9 July 2011

How extreme can you be in saving money? retire very early?

How early is early retirement? 18,21,25?

Having recently pored through the thoughts of Early Retirement Extreme, there are questions that can be asked which may be even more radical than the aforementioned model. My basic assumption is that before you can consider early retirement, you would need/I propose you would need £40k. This sum would allow you to live for a couple of years paying rent etc. whilst you establish your new lifestyle.

The process for achieving early retirement, which can only be done if you are willing to address your spending habits and adopt a simpler life. A four stage approach as I see it is as follows:

I have looked at splitting your lifes' expenses down into 4 manageable chunks:

1) Living accommodation:

I haven't searched too hard but, I guess narrow boats and park homes are cheaper forms of accommodation than conventional housing. Your own home could be sold as capital to invest for a regular income.

Given that a park home is around £49k, narrow boats a similar purchase price, then we'll assume either is a possibility. I understand that park fees/mooring fees run at around £200 p.m.

Heating - I personally like the idea of obtaining your own fuel for a wood burning stove i.e. tree fallen, as long as you are not irresponsible, this should be free?

Washing - as the aim would be to break out of the cycle of purchasing consumer goods, I would hand-wash garments, minimising the amount of clothing used.

The furniture required would be less, and the only comforts that I would personally invest in is a computer.

This sets you up on minimum cost housing, with minimum cash tied up in assets.

2) I would ditch all forms of transport that require large capital outlay, except a bicycle, and utilise public transport for travelling further afield.This should release cash tied up in your vehicle(s) for investment
Shopping would be done locally, within walking distance.

3) Release all of your assets and turn them into cash, thus generating a capital amount that can be invested for income and growth. Dependant on your starting point, this rids you of the burden of ownership and should add to your cash pot in the early years

4)  Change the way that you approach life and what is valuable to you.As we are all (or at least seem to be) driven by an incessant need to buy the newest model or fashion/gadget, this habit needs to be broken in the early stages of your quest for freedom from slavery to the salary model. A more self-sufficient style is required to prevent out flow  of, what will be limited, cash flow.i.e.

Can I make it myself?
Can I fix it myself?
Can I learn a new skill to do the above?
Why do I need to purchase this item - will it enhance my life and achieve something or add value?
Can I get a better deal by shopping around?
Whom/what are my finances purpose, to support? me,my partner,my family? or the consumer goods providers and the banks?
Do I/can I account for all of my household income/expenditure?
Can I live on less?
How can I contribute to society and gain personal fulfilment?

I guess that this means that we have to turn our backs on the consumerist society and become more self-centred. It may be a wrench and seem abnormal for people to follow some of the practices (which are not original) that I preach, but from a personal perspective, I hope to consume less, create less waste and contribute more to society by following this approach to financial management.

I will work if I want to and balance my own needs with the financial needs of my dependants.

Follow the process above and you can make yourself an early retirement plan/escape from consumerism..

Thanks for reading

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