Financial Independence: Early Retirement Extreme.

How to reach Financial Independence and Early Retirement: the story of Jakob Lund Fisker.

What Is Financial Independence?

Reaching Financial Independence is the most important objective for most individuals.

Financial Independence means having enough savings and investments, to afford the lifestyle you want and never work again.

In other words, you find yourself in a position where you don’t have to work anymore – unless you want to – because your money is actually working for you day and night.

You are finally in control of your money and your life. 

Debts, mortgages, and other financial burdens often can force you to make desperate choices.

Your lifestyle can get you trapped in a cage, forced to work for decades, imprisoned by debt that you have, to buy useless things you can’t afford.

A Plan to escape

To get out of this cage and escape the Rat Race, you need to make a plan.

Execution may seem extremely difficult at first, but I’ll show you the way.

Getting in financial shape isn’t so easy for many people: It takes strict self-discipline and effort.

It doesn’t matter if you are rich or poor: you actually have the same tools the rich have to create generational wealth for their families.

Create Your financial Independence.

Anyone can build wealth and financial freedom for themselves and their families.

But first, you have to answer two questions:

• “What does financial independence mean to me?”
• “Why financial independence is important to me?”

For me, Financial Independence means Joy, travels around the world, free time spent with family, a sense of solid security, and no need to work.

Remember, if you don’t have a clear view of your objective, you can’t reach your goals.

Achieving financial freedom is one of the most important and mind-changing decisions of your life, and you must be secure in your choices.

Financial Independence is different for everyone.

So What is your personal definition of Financial Independence?

There are no wrong answers, but you do need to point to a destination.

Think about what it means to you.

Once you know what it means, it’s time to write down a plan, and have a strategy to reach it.

What is Early Retirement?

Early retirement is a situation in which a person stops working earlier than at the usual statutory retirement age.

When people talk about retiring early, they often refer to the FIRE movement.

The FIRE (Financial Independence, Retire Early) movement is a lifestyle movement with the goal of reaching Financial Freedom to retire early.

The followers of the FIRE movement intentionally maximize their savings rate by finding ways to increase their income and reduce their expenses.

The main goal is to accumulate wealth and assets until a consistent passive income provides enough money for living expenses during the retirement years.

Many supporters of the FIRE movement use the 4% rule as a guideline for withdrawal, setting a goal of at least 25 X the estimated annual living expenses.

Once financial independence is achieved, paid work becomes optional, allowing retirement from traditional work decades before the standard retirement age.

One of the founders of the Fire movement is Jakob Lund Fisker.

He is a Danish astrophysicist, known as the author of a philosophy of extreme early retirement that has inspired many people of the FIRE movement.

After his degrees, Jakob Lund Fisker continued to live on an extremely low budget, corresponding to the SU stipend ( SU  – Statens Uddannelsesstøtte is the Danish state educational grant for students- about $1355,28) he received as an undergraduate, but his income increased year after year.

As a postdoc, he saved almost 80% of his income and easily reached financial independence in less than 5 years.

How to save money for Early Retirement.

Fisker retired at the age of 33 yo, and left his astrophysics career in 2009, with a net worth of 25x his yearly expenses of about $7k, following the 4% rule.

As Fisker’s income increased, this surplus was initially set aside in a savings account, but later Fisker understood that the money should be invested in the stock market and generate larger returns.

He realized that he would inevitably reach Financial Freedom, due to the big gap between his income ( a median income) and his expenses ( extremely low).

Absolute Wealth vs Relative Wealth

This fact led Fisker to the conclusion that “relative wealth” ( your wealth in relation to your expenses) is way more important than “absolute wealth”.

In 2007 Fisker started his blog “Early Retirement Extreme” and published a book in 2010.

In his book, he analyzed the impact of savings rate on a person’s possibility to retire early.

Conventional financial advices recommend to save 10–15% of income for retirement.

Extreme saving for extreme early retirement.

Adopting Fisker’s extreme savings rate (not considering ROI and Compounding effect) if 75% of income is saved, he concluded that it is easily possible to cover 3 years of expenses for each year worked.

This means that high savings rates allow earlier retirements, in comparison to the conventional savings rate.

In order to achieve and maintain low expenses, Fisker used a version of systems theory applied to his personal finance and lifestyle.

Conclusion. Early Retirement Extreme Blog.

Reading about Fisker’s experience, changed my life and my mental models.

Now Financial Independence is my short term objective;

Frugality, Saving and Investing are my Strategy.

Early Retirement is the final goal.

If you want to know more about Early Retirement and Jakob Lund Fisker, here’s is his Blog.