I’ve always disliked waking up to an alarm, and, double-disliked working for someone else. One day I was feeling depressed, weighed down by my $72,000 of student loans. I promised myself I would run my personal finances like a business or a hedge fund, so I could get out of debt and stop feeling crushed by student debt. In a stroke of luck, I stumbled into Early Retirement Extreme and learned about an alternative to working forever. If you reached financial independence, you could “retire”, and spend your time how you wanted.
I spent that night reading the blog. The next day, I couldn’t wait for work to end. I raced home, and read again until past midnight, until I devoured the entire blog.
The premise was simple, live richly on around $7,000 per year. Most Americans’ biggest expenses are housing, transportation, and food, in that order. If you can choose a housing arrangement close to work and with family, friends, or roommates, and ride a bike or walk to work, and cook some food, you’ll be healthier, happier, and change hours of every day enjoying extra fresh air and exercise. As a side effect, you also save a shitload of money. If you invest this productively, eventually, the income from investments will exceed spending, and work becomes optional.
When I read the blog, I was renting a $750 single bedroom apartment, and owned two cars. Remembering my promise to myself, I decided to move at the end of my lease. I also bought a bicycle.
In the beginning, I biked only 1-2 times per week. I didn’t like biking in the rain, and enjoyed taking naps in my backseat during lunch. I began to bike more and more, getting groceries by bicycle plus backpack.
I put an ad on craigslist to sell one of the cars.
A few weeks later, I moved to a $500 rather large apartment, still close to work, and with full kitchen, living room, washer and dryer. I rode my bike to work consistently, sometimes riding my Electric Skateboard as well.
I was extremely happy during this time. Being out on a bicycle makes you feel alive.
I read some Buddhist philosophy. I remember reading that we live but once, and like a fire, a good life burns completely, leaving nothing but ashes. I set myself on fire, and was saving $1250 on $2500 take-home pay.
I’ve since taken BJ Fogg’s Tiny Habits and Maneesh Sethi’s Hack the Habit courses, which taught me how habits can be added, subtracted, or replaced. I’ve also read a lot of sources that lead me to conclude
“Biking is the keystone habit for financial independence.”
The only way people change is by changing their behaviors. One of the most powerful ways to change a person is to change their identity. Much of military boot camp is about tearing down someone’s identity, and then replacing it with a complete set of new habits: what to wear, how to wear it, how to clean your body, how to speak, how to make your bed, even how to tie your shoes.
But, critically, you don’t have to tear down someone’s identity to activate massive change! There are two other very effective ways to kick off identity-level change.
One way plays upon peoples’ desire to appear consistent. When experimenters solicited a neighborhood for donations to a cause, they would get little money. When they first gave lawn signs to homeowners declaring support for a good cause, and then later solicited donations, people gave a lot more. The reason is they were manipulated into believing “I’m the kind of person who supports this cause” because they had a sign up in their yard, and saw it every day, and didn’t want to seem inconsistent with their prior actions. In another experiment, people had an obnoxious sign for a good cause, which almost nobody would allow in their yard. But, if they gave them free lapel pins for the same cause the week prior, almost everyone agreed to put up the hideous sign. Same principle.
Another way is through keystone behaviors. For example, if you make somebody start flossing their teeth, it ripples out into improved longevity, better credit scores, and all measures of health. The flossing probably doesn’t lower your arterial plaque, but it does make you conscientious, considerate about the future, and changes the way you see yourself. You see yourself as someone who is responsible for their own health, and cares about the future. Then that identity shift ripples out.
I read that when Coach K gets a Duke basketball team together for their first practice, he starts by describing how to put on your socks and tie your shoes to avoid blisters. This might be a keystone habit for championship basketball teams.
Similarly, when I read about people who have become financially independent, almost all of the success stories include a chapter where the person walked and/or rode their bicycle to school/work. It makes you healthy, makes you wealthy, and, because you don’t want to appear incongruent, reinforces your identity: you are exactly the kind of person who makes decisions propelling you toward greater health and wealth every day.
So, after getting into the groove and beginning to see consistent progress, I reached a point where my job wasn’t good anymore. I had originally created my own job as a marketing coordinator, but when the Governor retired, I was replaced by her main marketing person and shunted into QA. I wasn’t really applying myself, so the founder and I wrote a separation agreement with some severance pay and I was laid off.
Then, my grandpa died. My aunt asked me to come help organize his estate, and with no job, I readily agreed. I learned a lot concentrating cash, stocks and insurance, and canceling credit cards and closing down all the little quasi-scams old people agree to accidentally.
I interviewed and got hired at a new job, this time earning $63,000 per year.
I moved to a new city, and this time, I felt like a pro. I found a room in a house for $430 per month, internet and utilities included. It was just 8 minutes’ bike ride from work. I purchased the same bike again, brand new, for $150. I cooked 5 lunches each Sunday night. I was motivated and on the right path, pushing closer to freedom each month.
I lent $20k to a property manager friend who buys and rents houses in the hood. $200/mo interest.
I sold 6 appliances for $500 profit at lunch one day.
I sold bitcoin to anyone who wanted it at a 10% premium.
I built micro-businesses (websites) earning $5k/ year.
My savings rate reached 87%. I was consistently saving over $3000 on take-home pay of $3700.
It was the best job I’ve had, and while I loved it, I loved the idea of freedom more. I kept a spreadsheet on my work computer called “Path to Financial Freedom” and I would look at it whenever I needed motivation. Each month, my passive income grew, approaching my projected expenses. Sometime around November, I realized I was floating. Every dollar I earned at work was no longer necessary. I told my manager I wanted to retire, and he was shocked. I proposed retiring at the end of December, figuring it would simplify taxes and everything, but my manager asked me to stay two more months to transition my work to new people. I agreed.
On Jan 31, 2014 I retired, at age 27.
Maybe retirement isn’t your goal. But I think everyone can benefit from practicing these principles.
1. Before I did this, I didn’t believe it was possible. Now, I believe anyone with a job in a “rich” country can retire in under 5 years. If you have crushing debt, a minimum wage job, or kids, it will take longer than if you don’t. But it’s still possible! Many times, the obstacle is the way. Debt often gives people enough motivation to change.
2. It’s important to see how little it really costs to live happily.
3. A gut-level appreciation for quantitative vs qualitative differences. This can be earned through other avenues, but the journey to financial independence illustrates it clearly.
Quantitatively, most people earned 5 and 20 times as many dollars as I did in 2014.
Yet qualitatively, we can buy the same clothes, phones, laptops, stuff on Amazon, and travel to the same places. We eat safe food and have similar internet access speeds. We have access to similar healthcare. We have as much electricity and clean water as we want.
Qualitatively, I might be able to enjoy my food more, spend my time doing what I want, and feel healthier.
Retirement so far
I didn’t feel like I could publish this post, but it’s been one year, and I’m financially stable and thriving. I haven’t woken up to an alarm except to travel or help other people. If friends are getting married, or someone dies, I just go.
I was able to travel to two other countries (three trips), and car camp in all the western US National Parks with my girlfriend because she had a gap year. I’ve read books, spent time with friends and family, and played sports. I work to improve daily on writing, trading, thinking, chess, finances, marketing, physical strength, and health.
Retirement is the best job I’ve ever had.
Early Retirement Extreme
Mr. Money Mustache
My thinking was forever changed by this 5-part blog post.
The Millionaire Fastlane
The Personal MBA– Useful mental frameworks for business.