Why I dislike extreme retirement blogs

There is a small but growing interest in the term ‘extreme retirement’. This is made popular by a person called Jacab who retired early through extreme frugality. To think about how frugal is his living, he spends only USD7,000 per year. That, to me, is simply amazing. I know of people who spends nearly that much in a month!. Heck, even I spent at least SGD5,000 in a month. (See my living expense numbers in this post: how much do I need to retire early need).

Being a numbers person, let’s look at his numbers and analyze why I cannot never do it.

Items Jacob monthly expenses Mine monthly expenses
Mortgage 0 USD2,880
Rent + Utilises USD270 USD456
Food USD100 USD560
Health Insurance USD95 SGD20
Hobbies USD95 0
Car USD50 0
Internet USD20 USD80
Dog USD50 0
Parents 0 USD560
Total USD680 USD4,556 (USD1,676)

On first glance, there is a big difference but let’s look at the details.

Mortgage: The biggest difference is that I have a huge mortgage while Jacob doesn’t have. I don’t treat this as an expense but as an investment. Property prices in Singapore is similar to major cities such as New York. We have very limited land but a rising population. This pushes the prices up, almost every year. As a personal example, I bought my first public housing apartment at SGD200,000 in 2004. I sold it in 2011 at SGD390,000. That is almost a 100% gain within 7 years. Hence, by investing in a SGD1.7 million condo today, I expect to be able to sell it at around SGD2.5 million in 10 years, with a remaining loan of around SGD1 million. That cash intake of SGD1.5 million is part of my strategy of being able to retire early and in a comfortable condition.

Jacob doesn’t have this expense but that also means he doesn’t have an upside. I don’t really believe in not making your money work for you. It might be tougher now to finance the investment but the returns will be worth it down the road.

Rent + utilises: Rent is relative cheap in US if you don’t live in the major cities. I am afraid this is not the case in Singapore. A small room in the furthest reach of the country will already cost you around SGD500. It is fortunate that I don’t pay rent as I have my own condo. However, there is a heavy maintenance fees that I need to fork out every month, although I get to enjoy facilities such as swimming pools, tennis courts etc.

Food: Jacab has his own garden which we don’t. We don’t have enough land for us to grow our own stuff. Having said that, I will not do that even if I can. I enjoy food and I don’t mind paying more to enjoy what I love. Jacab might say this is wasteful but I would say that this is enjoying life.

Hobbies and Car. I don’t spend on any of these. Cars are super expensive and I intend to use my fully paid up car to the max.

Internet: All I can say is that Internet charges are more expensive in Singapore.

Dog: I have none.

Parents: This might be an Asian thing but we do give our parents allowance so that they can live more comfortably. I don’t see Jacab mentioning this anywhere so I assume this is a US thing.

After looking through the numbers and understanding why I can’t lived on USD7000 per year while Jacab can, let me tell you why I dislike such extreme retirement plans:

  • No plans for investment: Investments are instruments to help grow our wealth so that we can have a better living standard. Foregoing this spending just to retire is financially unsound and is something I will never do.
  • Limit on what you can experience: Retirement without the freedom to experience what you like is limiting to me. The purpose of having more time in my life is so that I can do what I enjoy. If I don’t have the money to do that, what do I do with so much time? In the food example, if I had to forgo the different restaurants and food outlets just so that I can survive on salads everyday and save money, it is not retirement.
  • No mention of income creation: My plan to retire early is to build up a portfolio of income creation. To me, that needs to go hand in hand with savings so that your retirement can be more fulfilling. You need to have both time and money to do what you want such as traveling, or start a side business or do charity work. I dislike the extreme retirement approach where you only focus on the spending aspect where you try to cut out as much unnecessary spending as possible.

In summary, extreme retirement is possible but you are sacrificing your future income growth and you are placing a limit on what you can really experience. That approach is not for me. This is why I set up this blog because I have my own way to retire early.

As I said:

early retirement is about taking control of your life and creating processes to make it happen.

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