Fwd: FW: Early Retirement Extreme

Kids. 

You may like this article on how somebody manages to retire early. Fascinating example. I didn't get into the habit of savings till I was 30. Way too late. But you guys are doing well by saving now. So I'm very happy.

I went to the Jewish school today to talk about maths and banking careers. It was very good. Year 9 students. They were brilliant. I've never seen or met a group of more intelligent students. Some of them were more intelligent than post graduates. Very impressed. I talked about both of you and how I've encouraged you to invest and save at least 1/3of your income always. And how you're comfortable with money.

There was also huge amounts of security. Quite extraordinary. Bigger security than Heathrow. Holy moly. I was amazed but the sad thing is that Jews have realised that they have to rely on their own for their security, they cannot rely on the state. Frequently it's the state which actually gets involved in this. History tells us this.

But happy days. Have a lovely day. The weather is great isn't it? After the huge rains?

Love

Baba

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Subject:	Early Retirement Extreme

Early Retirement Extreme

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When To Retire? – Try Age 35 Posted: 08 Jun 2016 07:37 PM PDT This guest post is from Todd Tresidder who retired at age 35… 13 years ago. He wrote a book teaching you when to retire and publishes the web site FinancialMentor.Com providing various retirement planning tools including articles and calculators. I retired at age 35 (I'm now 48) and learned a few lessons along the way. Hopefully you will benefit from my experience because I did many things right and a few things wrong that I would like to share with you. The first thing I did right was actually an accident because I had no clue what I was doing or why. I stumbled upon the first step to retiring early — commitment to the goal — without knowing what commitment was or the reasons why it was the make or break step early retirement. It happened while I was a student at U.C.L.A. walking in Santa Monica Park along the Pacific ocean. Most of my college friends had already graduated and were spending their days in office cubicles with stressful jobs in pursuit of a BMW: I was finishing off my last few classes and enjoying a beautiful day in the park. Frankly, I preferred the latter. I can still remember looking at the many street people lounging away on that sunny day and realizing I would sooner be a bum on the street spending my days in the park or library reading books than be a hamster on the wheel of the corporate machine in pursuit of needless lifestyle. This was a bizarre thought for a college kid majoring in Economics, but that's what went through my head. I wanted experience out of life, not money, and I knew the 9-to-5 grind was not my path. This important realization never left me: it became the basis for my commitment from that day forward. I wanted something different. The second piece of my commitment to early retirement came with the common sense realization that if I had to lead an economic life then it might as well be designed to achieve financial freedom. Nothing less made sense to me. After all, why would anyone design their life for financial mediocrity (or less)? Just to be clear, I'm not talking about "wanting' more money or success like most people. Instead, I'm talking about studying the subject of wealth accumulation and making constructive plans so that every aspect of my financial life was directed toward early retirement and financial freedom. I was plotting war against a meaningless life. I wanted the flexibility of freedom. If I had to deal with money then all my money dealings would be designed with financial freedom in mind. Again, nothing less made sense. These two realizations, while simple on the surface, were critical to cementing my commitment to the path of financial freedom and early retirement. They were a statement of my values, established my priorities, and motivated my actions. They left me no way out with no viable alternative path. I would pursue financial security until I succeeded because there was no better alternative. Whenever I had a setback on the journey to financial freedom I always remembered these two key realizations and how they left me no real choice but to get back on the horse and try, try again. I was committed, and the commitment gave me the persistence necessary to succeed. That was critical. Anyways, I share this with you at length because my experience in coaching people is most aren't lucky enough to have a clear commitment from the outset. They have to develop their commitment. It can't be something superficial like "tell the boss to take this job and shove it". That won't work. It must be a motivation rooted in your deepest values that drives action. It is the critical first step to early retirement that nobody succeeds without first completing. What I Did Right On The Path To Early Retirement The first thing I did right will be familiar to many readers – I kept my expenses down so that I could save my earnings. When I was single some might have called me frugal although next to Jacob I would probably be deemed a spendthrift. My formula was simple – keep my expenses at college lifestyle level and bank the difference. As my income grew I banked progressively more. I never raised my lifestyle and never suffered or experienced sacrifice. I was living in Lake Tahoe running a hedge fund working from before dawn until mid-day making good money. During the afternoons I hung out with the ski bums who were having fun and just getting by thus I never had pressure to spend lavishly or keep up with the Jones's. We would ski half-days in the afternoon during winter and play volleyball or mountain bike during the summer. Life was good, I saved 50%-70% of what I earned, and never felt any sacrifice whatsoever. I was on track to achieving my goals and having a great time as a single guy living the outdoor recreation lifestyle. The second thing I did right was learn everything I could about investing and risk management right from the very beginning. My belief was the lifetime compounded value of investment skill was worth far more than any salary could ever amount to. Run the numbers yourself and you will see the truth in that statement. A few percentage points change in ROI compounded over your lifetime can make or break your financial security. The math is simple: there is a very narrow spread between inflation and passive investment returns. You live on that spread so if you can figure out how to add a few percentage points to your ROI then you can double or triple the spread. The affect is geometric – not arithmetic. It is important stuff to understand if you want to play the early retirement game. In fact, my clarity on this issue motivated me to reject a high paying career to accept an initially low paying position with a start up hedge fund. The reason I did this was because the low paying position had a large upside if we succeeded (which we did) and my job duties centered around researching and developing active investment strategies with risk management systems. The knowledge I gained from that work has been invaluable, and I remain grateful to this day for that experience. It is the foundation on which my financial freedom was built. Finally, the last thing I did right was I built a business as an owner (actually, a partner). If you research how wealth is built the most common source is business with most of the remainder coming from real estate. The third asset class – paper assets – is typically a parking place for wealth built in business and real estate rather than being a source of wealth in itself. I was just following a well proven path. The reason wealth building works this way is simple: business and real estate offer leverage and tax advantages whereas paper assets do not. The leverage and tax advantages are essential to amassing capital rapidly for early retirement. With that said, I was a bit of a freak because more of my wealth has come from the growth of my investments (paper assets) than from the business I helped build. This is based on my unusual investment skill built on more than a decade of intensive research and is not something most readers can expect to duplicate. Instead, you should go with the proven formula and focus on business and real estate to grow your wealth and use paper assets as a parking place for wealth built elsewhere. In summary, the things I did right were frugality to create savings, investment knowledge to create compound growth, and business building to create leverage. Fortunately, that was enough to reach early retirement despite making a variety of other mistakes that I will share below… What I Did Wrong On The Path To Early Retirement There are a few things I would do differently if I could do it all over again. The first thing I would do different is buy an apartment building while I was young. I would get as big a property as I could convince the lenders to finance. I would live in the building, manage it, and do whatever maintenance was necessary to enjoy free rent and positive cash flow. Had I walked that talk in my 20's instead of paying rent or buying my first house then I would own a rental property today that is fully paid for and cash flowing like a big dog. Think about it – most people in their 20's are living in apartment style housing anyway so this strategy doesn't force any reduction in lifestyle. Additionally, if you manage the property and do the maintenance yourself then you gain inside knowledge on how the business works that will serve you for a lifetime. On top of that, by the time you reach my age the property will be paid for providing perpetual income that adjusts for inflation, has virtually no risk of failure, and can never be depleted. That combination of features is a rare and beautiful thing for early retirees – something you would never regret. Another mistake I made early on was retiring as a single man then promptly getting married and having kids thus multiplying my expenses several times their previous level. Don't get me wrong: I don't regret getting married and having kids. In fact, I'm thankful beyond words. However, I completely failed to figure in the impact on my expenses. I know it sounds laughably dumb in hindsight, but I just didn't think through the various phases of my life and how my expenses would change. I just ignored the whole issue until reality forced me to look it in the eye. That was a mistake I don't recommend you repeat. Finally, the last mistake I want to share was switching cold-turkey from a strong business income that provided a fat contribution to savings straight into living off those savings. The culture shock of such a dramatic financial change was not a good thing. It required too many emotional adjustments in my brain over too short a time period. I highly suggest phased retirement as a wiser alternative. In summary, there are many dimensions to the early retirement game. It isn't just about frugality or leverage or stocks or internet marketing or any other recipe you may read. You can create your own custom mix based on your unique skills, values and interests. What worked for Jacob or I may not be the right formula for you. Instead, find your own path while obeying the proven principles that get results. Don't worry about making mistakes as I'm ample proof you can make lots of mistakes and still reach the goal. The key is to get committed, develop a plan, and put that plan into action. If you persist then the goal will become a question of "when" – not "if". Hope that helps. Copyright © 2007-2015 earlyretirementextreme.com This feed is for personal, non-commercial use only. The use of this feed on other websites breaches copyright. If you see this notice anywhere else than in your news reader, it makes the page you are viewing an infringement of the copyright. (Digital Fingerprint: 47d7050e5790442c7fa8cab55461e9ce) Originally posted 2009-11-24 10:56:54.

Exercises in missing the point Posted: 08 Jun 2016 07:33 AM PDT When I talk about not buying new things, living in small place, and not owning a car to retire early, these are the most common objections I want a big house because it is a comfortable place to escape to after spending all day working a job [I don't like]. I like to budget so I can buy things for myself as a reward for dealing with my job and all the hard work I do. I got on vacations because I need to get away from it all [presumably job, house, and stuff] from time to time. Funny, eh? I mean, how do you respond to that without sounding like Captain Obvious? Copyright © 2007-2015 earlyretirementextreme.com This feed is for personal, non-commercial use only. The use of this feed on other websites breaches copyright. If you see this notice anywhere else than in your news reader, it makes the page you are viewing an infringement of the copyright. (Digital Fingerprint: 47d7050e5790442c7fa8cab55461e9ce) Originally posted 2009-08-01 14:58:35.

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Ants and Crickets

So here’s the basic story.

  Once upon a time... one hot summer, a cricket sang cheerfully on the branch
of a tree, while down below, a long line of ants struggled damely under the
weight of their load of grains; and between one song and the next, the cricket spoke to the ants. "Why are you working so hard? Come into the shade, away from the sun, and sing a song with me." But the tireless ants went on with the work... "We can't do that," they said, "We must store away food for the winter.
When the weather`s cold and the ground white with snow, there's nothing to eat, and we'll survive the winter only if the pantry is full."
   "There's plenty of summer to come," replied the cricket, "and lots of time to fill the pantry before winter. I'd rather sing! How can anione work in this heat and sun?"
   And so all summer, the cricket sang while the ants laboured. But the days
turned into weeks and the weeks into months. Autumn came, the leaves began to
fall and the cricket left the bare tree. The grass too was turning thun and
yellow. One morning, the cricket woke shivering with cold. An early frost
tinged the fields with white and turned the last of the green leaves brown:
winter had come at last. The cricket wandered, feeding on the few dry stalks 
left on the hard frozen ground. Then the snow fell and she could find nothing
at all to eat. Trembling and famished, she thought sadly of the warmth and her
summer songs. One evening, she saw a speck of light in the distance, and
trampling through the thick snow, made her way towards it.
   "Open the door! Please open the door! I'm starving. Give me some food!" An
ant leant out of the window.
   "Who's there? Who is it?"
   "It's me - the cricket. I'm cold and hungry, with no roof over my head."
   "The cricket? Ah, yes! I remember you. And what were you doing all summer
while we were getting ready for winter?"
   "Me? I was singing and filling the whole earth and sky with my song!"
   "Singing, eh?" said the ant. "Well, try dancing now!"

Well, so now you know the basic story, its obviously a metaphor and life lesson so that people should work hard and save. I used to be a cricket but with kids and the wife, its a bit ant(sy) now. Sometimes one uses the grasshopper instead of the cricket. Check out the link, its fascinating, I never understood so many angles to this story. I loved this indian take…

An Old Story – The ant and the grasshopper story

The Ant works hard in the withering heat all summer building its house and laying up supplies for the winter.

The Grasshopper thinks the Ant is a fool and laughs & dances & plays the summer away.

Come winter, the Ant is warm and well fed. The Grasshopper has no food or shelter so he dies out in the cold.

——————–

Indian Version:

The Ant works hard in the withering heat all summer building its house and laying up supplies for the winter.
The Grasshopper thinks the Ant’s a fool and laughs & dances & plays the summer away.

Come winter, the shivering Grasshopper calls a press conference and demands to know why the Ant should be allowed to be warm and well fed while others are cold and starving.

NDTV, BBC, CNN show up to provide pictures of the shivering Grasshopper next to a video of the Ant in his comfortable home with a table filled with food.

The World is stunned by the sharp contrast. How can this be that this poor Grasshopper is allowed to suffer so?

Arundhati Roy stages a demonstration in front of the Ant’s house.

Medha Patkar goes on a fast along with other Grasshoppers demanding that Grasshoppers be relocated to warmer climates during winter.

Mayawati states this as `injustice’ done on Minorities.

Amnesty International and Koffi Annan criticize the Indian Government for not upholding the fundamental rights of the Grasshopper.

The Internet is flooded with online petitions seeking support to the Grasshopper

Opposition MPs stage a walkout. Left parties call for ‘Bengal Bandh’ in West Bengal and Kerala demanding a Judicial Inquiry.

CPM in Kerala immediately passes a law preventing Ants from working hard in the heat so as to bring about equality of poverty among Ants and Grasshoppers.

Lalu Prasad allocates one free coach to Grasshoppers on all Indian Railway Trains, aptly named as the ‘Grasshopper Rath’.

Finally, the Judicial Committee drafts the ‘ Prevention of Terrorism Against Grasshoppers Act’ [POTAGA], with effect from the beginning of the winter.

Arjun Singh makes ‘Special Reservation ‘ for Grasshoppers in Educational Institutions & in Government Services.
The Ant is fined for failing to comply with POTAGA and having nothing left to pay his retroactive taxes, it’s home is confiscated by the Government and handed over to the Grasshopper in a ceremony covered by NDTV.

Arundhati Roy calls it ‘ A Triumph of Justice’.

Lalu calls it ‘Socialistic Justice ‘.

CPM calls it the ‘ Revolutionary Resurgence of the Downtrodden ‘

Koffi Annan invites the Grasshopper to address the UN General Assembly.

Many years later…

The Ant has since migrated to the US and set up a multi-billion dollar
company in Silicon Valley, 100s of Grasshoppers still die of starvation despite reservation somewhere in India,

AND

As a result of losing a lot of hard working Ants and feeding the lazy grasshoppers,

India is still a developing country…!!!

And the american version.

With what looks like imminent passage of the Mother of All Bailouts (following on the heels of a year’s worth of government-funded rescues of private homeowners, lenders, insurers, and the automakers), Washington has turned Aesop’s famous fable about prudence and hard work on its head. The time is ripe for a revised 2008 edition of “The Ant and the Grasshopper:”

In a meadow on a hot summer’s day, a Grasshopper was chirping and carousing his time away. He watched scornfully as an Ant nearby struggled to store up large kernels of food and build a secure nest. The Ant pulled overtime shifts to pay off his loans and accumulate retirement funds for the future.

“Give it a rest,” the Grasshopper said. “Why bother saving and slaving and toiling and moiling? Let’s party!” The Ant demurred: “I am planning ahead for winter and you should do the same.” The Grasshopper blew off the Ant, squandered his supplies the rest of the season, and abandoned his home while on vacation (paid for by tapping every last cent of his home equity gain) instead of holding down a job.

When winter came, the Grasshopper’s pantry was empty and his shelter ruined from neglect. The Ant, weary from planting, harvesting, and stocking up for months, was dining comfortably in his nest.

Cold, hungry, jobless, facing foreclosure, and up to his two pairs of eyeballs in debt, the Grasshopper limped to the Association of Community Winged Insects for Rescue Now and demanded recourse. The office was swamped with thousands just like him. ACWIRN immediately put the Grasshopper to work registering dead ants as new voters.

Funded with tax dollars from the rest of the meadow’s residents, ACWIRN organized mass protests at the Bank of Antamerica, ambushed its top officials at their private homes, harassed their children, and demanded that the meadow’s politicians halt all foreclosures (“We must keep Grasshoppers in their houses!”) and outlaw discriminatory lending practices against starving, homeless Grasshoppers (“Well-stocked shelters are basic insect rights!”)

The banking industry capitulated; the Orthoptera Lobby secured hundreds of millions of dollars in housing earmarks and grants and counseling subsidies to support the Grasshoppers with the shadiest credit and employment histories. Antie Mae, the meadow’s government-backed home lending giant, fueled the push for increased insect homeownership in the name of biodiversity. Its executives cooked the books and headed for the hills. Katie Cricket and the Mainstream Meadow Media joined the grievance-for-profit circus, profiling Grasshopper sob stories and drumming up ratings as bewildered Ants wondered who was looking out for them.

The banks drowned in toxic debt. More Grasshoppers fell behind on their mortgage payments. Bailout mania and panic gripped the meadow.

Our little Ant, minding his own business, heard a knock on his door one late winter night a year later. It was his old, sneering Grasshopper neighbor. With ACWIRN’s presidential candidate, Barack Cicada, now in office, the Grasshopper had been hired by the meadow as a tax collector.

“I’m here to take your provisions,” the Grasshopper cackled.

But it was the Ant who had the last laugh. “I’ve learned my lesson,” he told his shiftless friend. “Why bother saving and slaving and toiling and moiling? I’ve spent all my savings. I’m walking away from my mortgage. Thrift is for suckers,” the Ant said as he headed out the door, leaving the Grasshopper empty-handed.

But there’s this rather interesting economics paper on how we still keep on seeing grasshoppers and ants.

Savings behaviour seems to exhibit heterogeneity across nations, and within nations, too. Large changes in saving rates have been observed in the last decades that can be viewed as signs of the arbitrariness of saving. There is a long tradition in the savings literature that separates people into two groups: those who behave soberly (ants), and those who act in an extremely short-sighted fashion (crickets). A puzzle remains: why does an apparently inferior behavioural pattern persist? Our aim is to provide a model that exhibits the arbitrariness of savings by exploring the two-types idea, and also makes intelligible why both types can coexist in the long run. Our approach consists in setting up an agent-based model starting from a traditional production and factor market framework. The model features an evolutionary mechanism that promotes the behaviour conducive to the highest satisfaction of the consumption goal. Our main findings include the prevalence of non-ergodicity, and the genericity of non-stationarity. The model becomes stationary when the selection pressure is very high, and crickets are eliminated. Though in general ants have somewhat higher per capita consumption than crickets, and are less indebted, we have found cases where the total average consumption is higher with many crickets than without them.

So if you want people to save, crank up the selection pressure…funny, eh?

Show me the money

Another very interesting paper trying to explain the drop of the US savings rate. The savings rate dropped from 8.6% in 1980-90 to 5.5% 1990-2000. The reasons are multiple, such as technology improvements, labour productivity, medical care cost increases, asset appreciation, improved credit access, etc. etc.

The abstract

This paper investigates the effect of mortgage equity withdrawal on saving in the US over the period 1993–2011. A multivariate time series analysis based on a vector error correction model (VECM) is carried out. The saving rate, mortgage equity withdrawal, net wealth, interest rates and inflation are included in the empirical model. The results show that the equity withdrawal mechanism plays a relevant role in explaining the saving rate pattern.

People tend to think that the bankers are to blame for the crisis, yes, sir, but as I have already pointed out so many times, don't be a bloody economic illiterate and then blame the Jews for everything. That ship has sailed a long time back and all it does is to expose you as one of the Daily Mail readers. Just like we did pogroms way back and blamed the Jews for everything, blaming the bankers for everything just tells me that you are a doofus :P

Our economic conditions and civilisation is undergoing some serious changes but at the end of the day, one has to recall that basic economic laws are fairly constant. Don't spend more than you have, if you are going to take on debt, then you will have higher fixed costs, the business cycle cannot be wished away, etc. etc. So having more savings is good, very well. So like the paper shows, people shouldn't goose the mortgage market so much. Rental is a perfectly good alternative, see the situation in Germany for one example of a housing market which is not driven by home ownership lemming like behaviour.

6 Wealth Building Strategies While Living Paycheck to Paycheck

Dear Son

I read this article and thought of dropping you a line about where I went (right or wrong) with each of these strategies.

1. Withdraw less than what you deposit. By and large, your mum keeps us on track, but when I was young and before marriage at the age of 25, I used to sometimes go over. It is not fun, and at that time, without an overdraft, this wasn't fun. So simply had a budget on a weekly basis, and if i ran out of money, then the weekend was sitting at home reading books. You are already keeping track of your expenses and deposits, so that is good.

2. Slashing expenses. Well, now its gotten better because we have simply run out of room to keep things, lol, but generally, yes, we do try to slash expenses by keeping an eye on things we can get cheaper. Books I pretty much always buy second hand, but then that goes back to childhood when we simply couldn't afford new ones. That’s the brilliant part of books, you don't have to buy new ones, the ideas and images are the same. My recent hobby of photography is a tad expensive but then again, researching on the net allows you to purchase stuff fairly cheaply compared to shops. Buying insurance and other financial products SHOULD be checked and they can provide quite a lot of savings. Also cutting out eating out helps. We learnt to cook at home and its so much fun :) I understand you spend quite a lot of time outside now that you are a teenager and you like to buy your Nike trainers, and that’s fine as well. Just remember to be careful with your money, son.

3. Start your investment plan. We started this way back. Never pop your money simply into a savings or current account. Sweat your money, put them into an investment fund or buy stocks. Loan your money to companies who can use it to make more money and thus to you. The investments we have made is now enough for both your and your sister’s education and then some, but not enough to give you a helping hand for two house purchases for you two or if you want to setup your own business. So we have to keep on working. I only wish I had started this when I was very young and had started earning, but your grandfather is a scientist, not really living in this world and we never got going that early. You, on the other hand, have been investing since you have been 13 so that is good.

4. Purchase your own property. This is a debate which people will have, some prefer renting, some prefer purchasing. I used to hold on to the idea that its better to rent as we will be going around the world but your mum said that its better to buy. And I think that’s the best idea she had. Another couple of years and we should be free of the mortgage and then one of the biggest drains on our finances is gone. Then we can do more for you two in case you want to go study postgraduate or just take off where/when you want. We also assisted your aunt in her house purchase and also helped your grandparents in their expenses, that helps as well. Well, this is a bit too early for you right now, but your dad is thinking ahead for the time you will need to purchase your own property. So good for now.

5. Be aggressive with retirement goals. Now this is something that I cannot emphasise more. At this moment, your mother and I are putting 1/3rd of our income into retirement planning. This does mean that we go without many things such as the frequent foreign holidays that your friends and their parents go off to, we drive a 8 year old car whereas your friends have a new car every 2-3 years.But that’s fine, our holidays at home and in England are equally fun and frolic. And Henrietta Honda is a perfectly good car, she gets a full dealer service every year and we keep her nicely maintained. I want a transportation device, not something to show off to my friends. But as soon as you get your regular pay check, I am going to try to convince you to setup your own retirement fund with up to 20 % saving. Good habit to have, son.

6. Improve your skills and knowledge. This is again ok for me, you are good in studies and I am happy with your progress. But sometimes you don't show the dedication that one might require. Yes, I understand that you are exploring and you will pick up something and then lose interest. that’s fine at this age. But sometimes I do feel that you give up too easily sometimes. Don't get me wrong, your grandfather used to say the same thing to me, i picked up the guitar and dropped it, wanted to do cost accounting and dropped it. oh! well, that’s what father’s do, worry and obsess about their kids.

Maybe I should add one more thing, get a partner who shares your investment and financial perspectives (hopefully in the saving/investment sense, not in the lets spend it all mode). Money is one of the biggest reasons for divorce and stress in your life, you do not really want somebody to fitter away your hard earned money, you want somebody who shares and increases your common family wealth. Good heavens, I sound like your grandfather here.

Ah! well, homily over. Hope this helps, Son, to help you avoid my mistakes and build on things which I hopefully did ok.