Early Retirement Extreme by Jacob Lund Fisker: Book Overview

This article is an excerpt from the Shortform book guide to "Early Retirement Extreme" by Jacob Lund Fisker. Shortform has the world's best summaries and analyses of books you should be reading.

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What are you willing to give up in order to work less (or not at all)? Do you carry debt that isn’t really necessary?

In Early Retirement Extreme, Jacob Lund Fisker shows you how to do what he did: break free of consumerism and live a fulfilling, meaningful life—well before the typical retirement age. He provides straightforward strategies that you can adopt to make this significant lifestyle change.

Continue reading for an overview of this book that invites you to take control of your life and future.

Overview of Early Retirement Extreme by Jacob Lund Fisker

The modern world lures us into giving away our freedom. The vast majority of adults are caught in an unfulfilling cycle of consumerism: They sell decades of their lives to employers so they can buy consumable goods and status symbols that don’t make them happy. In doing so, they deprive themselves of time they could be spending on the pursuits and people they care about.

In Early Retirement Extreme, Jacob Lund Fisker (a retired astrophysicist) argues that it’s possible to break out of this system through a combination of frugal living, skill-building, and smart financial management. With these strategies, Fisker built a life for himself that allows him to survive on just $7,000 a year. After saving 75% of his income for just five years of salaried work, he permanently retired at age 33. In 2007, Fisker began sharing his frugal living advice on his blog, Early Retirement Extreme, eventually collecting, organizing, and adding to his blog material in the 2010 book of the same name.

We’ll detail Fisker’s view of modern consumer culture, outlining his argument that you should abandon this mainstream lifestyle. Next, we’ll explain how to follow in Fisker’s footsteps by retiring at an extremely early age: First, we’ll offer tips on how to minimize your living expenses; then, we’ll explain how to increase your financial security by diversifying your skills; and finally, we’ll discuss how to invest your savings and become financially self-sufficient for life.

The Problem: The Cycle of Consumerism

Fisker argues that the dominant cultural narrative of the modern age influences people to work far more than they need to survive. The average worker believes that the ideal life is to be as busy and productive as possible, earn as much money as they can, and then spend that money on consumer goods. For this reason, as their income increases, they increase their spending in lockstep rather than saving their money and buying back their time by retiring. They don’t question this narrative and end up living unfulfilling lives.

Is life as a habitual consumer really so unfulfilling? Fisker says it is, offering three reasons to break out of the cycle of consumerism.

Reason #1: Your purchases don’t make you happy.
Reason #2: Habitual spending keeps you dependent and vulnerable.
Reason #3: Paying off debt wastes precious time.

Reason #1: Your Purchases Don’t Make You Happy

Many people falsely assume that you can find happiness by spending money, asserts Fisker. Because the dominant cultural narrative defines “successful” people as those who earn and spend the most money, people who want to feel successful spend excessively on status symbols with little intrinsic value.

Others seek fulfillment in the intrinsic pleasure of accumulating possessions. They enjoy building collections of items that are personally meaningful to them, like antique toys or designer handbags.

Fisker argues that both of these spending habits position spending money as your life’s source of meaning, and consequently, they lock you into a cycle where you feel you always need to spend more to be happy. Spending money becomes a compulsion, something you feel you must do rather than something you want to do.

Reason #2: Habitual Spending Keeps You Unskilled and Dependent

According to Fisker, people in consumer culture are unskilled because they’ve internalized the habit of solving their problems by spending money. They deprive themselves of the opportunity to grow through solving their own problems; consequently, they become dependent on the products they buy.

When you believe you need to buy a certain product or service to survive, Fisker argues that this limits your freedom by creating the illusion of a greater cost of living. You believe you need to work more to afford all your expenses, so you spend all your time working rather than pursuing more fulfilling activities.

Reason #3: Paying Off Debt Wastes Precious Time

Debt is one of the most limiting constraints possible on your time and freedom, says Fisker. Going into debt means selling your future time and labor to buy something now. Additionally, you’ve committed to selling more of your time to pay interest on that loan. The deeper in debt you are, the more time you must waste working to pay interest and the less time you’ll have to live your life the way you want to. Despite this, it’s common practice in modern culture to live perpetually in debt.

Fisker argues that it’s almost always entirely unnecessary—and against your best interests—to take on debt of any kind. This means only purchasing something when you can afford it instead of racking up credit card debt. It also means forgoing auto loans, expensive mortgages, and student loan debt.

The Goal: Buy an Early Retirement

Fisker explains that you’ve escaped the cycle of consumerism when you’re no longer buying things that won’t make you happy. Once you’ve done this, it’s possible to buy yourself an early retirement and work only as much as you want to.

People differ in how much they want to work. Many choose to pursue total financial freedom as quickly as possible, saving up enough money to never have to work again—a lifestyle that Fisker argues is more attainable than most people believe.

Alternatively, some people may not feel the need to immediately swear off work for the rest of their lives. In this case, Fisker notes that you can save enough so you can partially retire, only needing to work a few hours every week. Another option is to save enough to buy back your freedom in the short term—a mini-retirement, you might say.

To survive off of such a low income and retire early, Fisker argues you must learn to do three things: minimize your expenses, diversify your skills, and invest your savings.

Tips for Minimizing Expenses

According to Fisker, most people can do without many things they think they “need.” As you lower your annual expenses, the time it takes to save for retirement drops rapidly. Lowering your expenses not only leaves you with more income to save—it also means you’ll be free of that expense every year you’re retired, so you don’t have to save as much before retiring.

Here are Fisker’s three tips on how to minimize your cost of living.

Tip #1: Avoid unnecessary debt.
Tip #2: Don’t buy things you don’t need.
Tip #3: Maximize the value of every purchase.

Tip #1: Avoid Unnecessary Debt

As mentioned earlier, minimizing your living expenses means refraining from taking on debt of any kind, including auto loans, mortgages, and student loans. Now, let’s discuss how to do this.

You Don’t Need Auto Loans

If you need to buy a car, Fisker recommends saving up and paying for it in cash to avoid taking on debt. That said, he says it’s better not to own a car at all, if possible, as it’s one of the biggest expenses the average person has. On top of the cost of the car itself, fuel, maintenance, and insurance costs can add up and significantly delay your retirement.

The best way to avoid owning a car is to plan ahead when choosing where to live. As long as you live close enough to walk, run, or cycle to your workplace and a grocery store, you can live without a car. Additionally, walking, running, or cycling every day is a great source of exercise, improving your overall health and helping avoid unnecessary health care costs.

You Don’t Need a Mortgage

Many adults believe that the most responsible housing decision they can make is to invest in real estate by taking out a mortgage and purchasing a “starter home.” Fisker disagrees, arguing that although you gain equity as you pay off your mortgage, this addition to your net worth is more or less counterbalanced by the interest you have to pay. For this reason, purchasing a home with a mortgage is no safer than investing the principal of any other loan. Although it’s possible to make money as your house appreciates in value, it’s always possible for the housing market to decline.

Because real estate is an uncertain investment, Fisker argues that renting a place to live can be more economical than buying a home. Sometimes, you can make more money by taking what you would spend on a mortgage and investing it elsewhere. Whether it’s more profitable to rent or buy depends on the strength of the real estate market relative to other investment markets. Instead of worrying about the value of your home as an investment, Fisker recommends viewing it as just another living expense.

Early Retirement Extreme by Jacob Lund Fisker: Book Overview