Jacob: Early Retirement Extreme, ERE

Early Retirement ExtremeJacob Lund Fisker from Early Retirement Extreme, ERE

I am still relatively new in the world of personal finances and have always been questioning whose advice should I be following.  I am sure many people out there are facing the same issues so I am going to try compile information about different financial gurus.  Today I will be covering on Jacob Lund Fisker from Early Retirement Extreme (ERE).


Jacob Lund Fisker is the creator of Early Retirement Extreme, the blog, the book, as well as the concept.  Jacob is from Denmark but has been living in the US since 2004.  He has a PhD in Theoretical Physics from the University of Basel Switzerland.  Jacob was a theoretical astrophysicist before he retired.  He is now working as a quant after “un-retiring”.

Jacob Advocates


  • Find a free hobby – as opposed to those that require constant funding
  • Get “engaged”, find your calling – once you find a hobby (preferably a free one as stated above), the less money you’ll spend
  • Minimise use of resources
  • Join a challenge to stay motivated

Home and Food

  • Stay close to work and grocery outlet
  • Get a smaller house
  • Consider radical alternatives for housing – RV, cohousing, room mate, etc
  • Learn to cook
  • Eat less meat – meat products cost more
  • Avoid pre-processed foods
  • Do not buy unneeded food, use a grocery list if needed
  • Buy groceries on sale


  • Declutter your possessions – Give or sell things that you have not been used for a year (6 months for advanced, 1 month for pros)
  • Join your local freecycle – Give things that you don’t need, acquire things that you need
  • Get clothes used – freecycle > thrift stores > sale events from outlet stores
  • Set up your own personal freecycle to cycle stuff with you friends and neighbours – this is to reduce possessions and in turn expenses
  • Plan to keep everything you own forever – lifetime of the item
  • Learn to maintain and repair your possessions
  • Learn how to mend clothes
  • Get rid of your TV and computer game addiction
  • Buy and own classics instead of cheap
  • Quality over quantity
  • Consider everything you own for sale at all times
  • Buy clothes when necessary
  • Drop the cell phone plan – I personally think this is hard to do with our current lifestyle.  I propose doing some research and get the lowest possible plan


  • Do not buy and hold forever
  • There are no special times
  • Investment is a future cash stream – with a discount rate of 3% + inflation
  • Future and security of cash stream > value of portfolio
  • Rules for buying and selling
    • For any company, set a minimum entry point yield, typically 5% for companies and 10% for REITs
    • Enter position gradually, buying stocks in round lots of 100
    • Set exit point yields, typically 3% for companies and 5% for REITs
    • Once stock price moves close to exit point, if
      • Volatile, set calls with strike price around exit price
      • Nonvolatile or does not have options, set a limit order at the exit price
    • If no stocks to buy, buy short maturation (next year) single issue corporate bonds rating above junk
  • Jacob’s personal portfolio strategy
    • Do not own more than 20 stocks of different companies – this allows for substantial diversification while still making it possible to follow each company individually
    • No company should exceed 10% of total holdings – Jacob will not rebalance it, but he will not buy more
    • Own mainly US companies – It is easy to get international exposure by owning transnationals
    • No strict asset allocation
  • Method #2, Dogs of the Dow – For people who do not want to spend too much time dealing with investment
    • Rebalance into equal amounts of the 10 highest yielding Dow stocks each year
    • Each year, check back and sell any position that is no longer on the list and buy new positions in the top 10
    • To minimise capital gains tax, hold gainers for slightly more than a year and losers for slightly less than a year – I am guessing this does not apply in Singapore
    • Trade only once a year
    • Add or withdraw cash the rest of the year
    • Either use dollar cost averaging or value averaging

General Money Matters

  • Emergency fund is less relevant to a person on an ERE strategy – can always cash out the latest position if needed
  • Self insure
  • No need for detailed budgets or tracking expenses
    • Basically, 2 categories, money spent and money kept
    • More money in money spent means more money in investments which translate to income
    • Money spent is therefore seen as how large a principal must money kept be in order to accumulate enough for money spent
  • For extreme early retirement, there is only 1 way to calculate net worth
    • Sum up the following
      • Savings account and checking accounts
      • Brokage accounts
      • Real estate owned for rental (if any are mortgaged, subtract the debt)
    • Do not include the following
      • Any kind of tax-deferred/locked retirement account (unless you are older than 55) – I am guessing this would be the equivalent of CPF in Singapore, and the age bumped up to 65
      • The house you live in
      • Cars, boats, aeroplanes, or other big ticket items (unless you rent them out)
      • Bling-bling – I am assuming this to be jewellery
    • Compute expenses
      • If you are a home owner that does not own your home, the mortgage is an expense
      • Subtract any pension coming in
    • Calculate your annual expenses
      • Multiply by 25
        • If number is lower than net worth then congratulations, you are financially independent and can go for a few decades without a job
      • Multiply by 35
        • If number is still lower than net worth, you can go on forever


To quote the ERE wiki, “Early Retirement Extreme (ERE) is a movement… By embracing simple livingself-sufficiency, and prudence, a worker with a typical wage income can comfortably achieve a savings rate of 50-80%. The mathematics of compound interest and safe withdrawal rates dictate that an individual with such a high savings rate can achieve financial independence after only 5-10 years.”

Essentially, the idea of ERE is to achieve financial independence through (significantly) living below your means.  The concept is simple.  The implementation would, however, need hard work.  Jacob’s ideas definitely work.  Hack!  He even has all the math figured out in his book Early Retirement Extreme — A philosophical and practical guide to financial independence!  We just have to be prudent and really want this (financial independence) to happen!

My suggestion is to start (relatively) slow.  Follow Jacob’s 21-day make over.  Every single small step leads us to FI!  Alternatively, we can always start with Mr Money Mustache‘s methods which are not as extreme.  But what’s Early Retirement Extreme without some extremes?!  Let’s strive to get up some early retirement through some extreme means!!

Ms. Finding Money

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