Mindmap around Early Retirement Extreme

Posted on wo 29 juli 2020 in mindmaps

Mindmap of ERE

  • why is it important to me?
    • freedom to persue my interests
    • takes money out of the decision making process
    • gets me out of the rat race
  • resources
  • observations
    • having no expenses means you don't need an income and you can immediately stop working for money
    • spending all your income means you can never stop working for money
    • having a buffer large enough to cover your expenses for the rest of your life also means you can stop working for money
  • mindset
    • core concepts
      • spend less than you earn - but extreme
      • create a large buffer (> 10 years living expenses) fast
      • develop alternative income streams
      • become a producer ←→ consumer
      • create a resilient (permaculture) system to support yourself and your family
    • common objections / blocks
      • I'm not good with money
      • It's too difficult / hard
      • I don't know where to start
    • my own observations
      • (change of) mindset is essential
      • it's a skill
      • it takes time and practice
      • anyone can learn it
      • start with observing inflows and outflows
      • start simple
      • start small
  • expenses side
    • plug all recurring leaks
    • keep only the essential
      • that what makes you truely happy to pay for
      • what you cannot reasonably provide for yourself
    • DIY: do things by yourself and learn something
    • money to buy / hire specialist help is there as a backup
    • "Using money to solve problems is a huge crutch"
  • income side
    • create income streams
      • diversified
        • some streams may do poorly for a time
        • to try new stuff out
        • to keep it fun
      • (mostly) independent of effort
        • part-time work (barrista fire)
        • pension
        • royalties
        • subscriptions
        • commission on sales or referrals
        • revenue from advertisements
        • interest or dividend from investments
        • capital gains from selling investments
        • turning waste into income
        • renting out something
          • lodging: a room / an appartment / a house / a tent
          • equipment
          • experience
            • teaching
            • repairing
            • designing
      • non-monetary income / capital
        • 9 forms of capital
        • examples
          • growing your own food
          • bartering for food
          • work in exchange for lodging
          • teach someone in exchange for equipment
  • links with permaculture principles
    • earth care / people care / fair share
    • produce no waste
    • multiple elements x multiple functions
    • obtain a yield
    • work with nature
  • metrics (financial)
    • burn rate
      • divide how much you have by how much you spend
      • time it takes to run out of buffer when / if
        • all income dries up and
        • all expenses stay the same
      • typical ranges
        • 3 months of expenses
          • emergency fund
          • apply not only to money, also to food
          • bare minimum
        • 10 years
          • need to keep working part time
          • good balance between security and agility
          • next 5 to 10 years are reasonably predictable due to inertia
          • after that: who knows?
        • 25 years
          • 4% rule / Trinity Study
          • when invested, historically provided sufficient return in most cases to cover living expenses over a 25 year period
        • 33 years
          • 3% rule
          • when invested, historically provided sufficient return in all cases to cover living expenses over a 25 year period
        • caveats
    • saving rate
      • divide how much you make by how much you spend
      • typical ranges
        • below 1
          • too many expenses, not enough income(s)
          • dangerous for too long, eats into buffer
        • 1
          • a year of income covers all expenses
          • all income is spent
          • unexpected expenses can easily push you below 1
        • 1.1
          • typical Western household
          • saves 10% per year
          • also spends most or all savings some time later
          • work ten years, take one year off
          • creating a 10 year buffer takes 100 years
        • 2
          • every year of income covers 2 years of expenses
          • work one year, take one year off
          • creating a 10 year buffer takes 10 years
        • 3
          • every year of income covers 3 years of expenses
          • work one year, take two years off
          • creating a 10 year buffer takes 5 years
        • 4
          • every year of income covers 4 years of expenses
          • work one year, take three years off
          • creating a 10 year buffer takes 3.3 years
        • 5
          • every year of income covers 5 years of expenses
          • work one year, take four years off
          • creating a 10 year buffer takes 2.5 years