Thanks Jacob, this clears up a lot for me. This recent post on the 4% rule also helped. I’ll introduce myself later but I wanted to share the insight that resulted from contemplating these words.jacob wrote:I see ERE as something quite different from "extremely ER" both in terms of skill-set and attitude when it comes to earning and spending. I see ERE as multidimensional and E-ER as fairly one-dimensional.
To me, FI is just backstop safety-net. It's not something I depend on. At all.
There’s a very important distinction to be made between ERE and “extremely ER.” E-ER is one-dimensionally focused on attaining ER through the practical application of FI math, that is, frugality and investing. Those pursuing E-ER are likely motivated by the desire to quit working and as such try to find the shortest path. Retirement is largely nonproductive and solely supported by investment income, as attempts at self-directed value generation will likely fail with a limited skillset. Such shortcuts result in quality of life being constrained to fit within the planned SWR.
By contrast, ERE is a more deliberate and thoughtful endeavor where needs and wants are satisfied in the most appropriate and efficient way possible, using the strategies in the book. Those pursuing ERE seek to maximize quality of life, which in turn is limited only by an individual’s skill level. The value generation and income resulting from the constant acquisition and application of new skills makes financial independence a natural consequence of this lifestyle, even if it is not a goal. Because investment income is just one of several income streams, it is also more resilient.
For those like me who picked up E-ER first because it aligned with our goals and was easier to understand, there may be a huge blind spot where we can’t see the difference between E-ER and ERE. The ERE people stand out as being much more skilled, but we E-ER people still see ourselves as one of them. But those who understand ERE will certainly know the difference. I think PF-bloggers like Jacob and MMM personify ERE while many of their followers only ever get to the E-ER level of comprehension and practice.
E-ER is freedom through investments, ERE is freedom through skill. Period. What they have in common is low expenses. For someone with an ERE mindset, the function of investment income is to provide enough confidence to start relying entirely on the skills that got him to FI. Whereas if the E-ER practitioner were to be separated from his investments, he would have no choice but to get a job. That’s the difference.