Sometimes I hit the jackpot in my quest to find old material about retirement and early retirement. Last week, for instance, I was reading Early Retirement Dude's history of the financial independence movement when he mentioned a Life magazine photo essay about early retirement from February 1957. Say what?

Within minutes, I was reading the article via Google Books. Within an hour, I had ordered not just that issue of Life but three others with retirement articles. Within days, the magazines were on my doorstep. I'm telling you: We live in the future!

In my ongoing quest to build a library of pre-1990 money books, I recently heeded a reader recommendation to buy and read How to Get Rich and Stay Rich by Fred J. Young. Spoiler alert: I liked it! But I almost didn't read it.

You see, everything about this book exudes scamminess. The title is scammy. The cover looks scammy. The amateurish formatting seems scammy. But the book is not scammy. How to Get Rich and Stay Rich is a marvelous prototypical book about early retirement. I enjoyed it.

Fred J. Young, the author, was born and raised in rural Tennessee during the 1910s. His family was poor, as were all of their neighbors. Young decided he wanted to do something more than be a farmer, so he left Tennessee to become a lawyer. After military service, he worked for Harris Bank in Chicago, where he spent three decades advising wealthy clients.

During the 1960s and 1970s, Young supplemented his bank income by giving motivational talks on how to get rich and stay rich, basing his presentations on observations of his clients. In 1979, after he retired from Harris Bank, Young collected much of this material into a book called How to Get Rich and Stay Rich.

How to Get Rich and Stay Rich

"For 27 years, I worked in the Trust Investment Department of the Harris Trust and Savings Ban in Chicago, Ill.," Young writes at the start of the book. "Most of my time during this period was spent helping rich people 1) stay rich, and 2) get richer."

He continues:

"During those 27 years of working with rich people, I made a number of observations about getting rich, being rich, and staying rich, and about the difference wealth makes. I am delighted to share those observations with you in this book."

I am both a money nerd and a book nerd. Naturally, I get a little giddy when I find old books about money I've never heard of before.

While browsing Oregon's best used bookstore earlier this year, I stumbled on a 1989 book called How to Retire Young by Edward M. Tauber. Tauber retired at the age of 43 from a tenured full professorship as Professor of Marketing at the University of Southern California. He's written a number of marketing textbooks, but this was his first (and only?) foray into the realm of personal finance.

How to Retire Young is one of the oldest books I've found on the subject of early retirement. It's fun to see how much of the modern financial independence movement is foreshadowed in the book's pages.

It's also fun to see how closely How to Retire Young adheres to my own "get rich slowly" philosophy. "Much [financial advice] is oriented toward the quick buck," writes Tauber, "taking paths that often have a low probability. In short, you might as well play the lottery."

Tauber has a different philosophy. He urges readers to "take the high road". He wants them to follow the path with the greatest odds of success, even if that path might not lead to quick wins. He also cautions that "there's no best way for everyone", just as I say "do what works for you". There are certainly best practices and mathematically optimal options, but there aren't any right options.

You Can Retire Young

Tauber's premise is that many people can retire early -- if they plan and remain dedicated to the plan. He writes:

"If you want to retire early, there are no magic formulas. It requires hard work to make money and requires smart work to learn how to invest on a pretax basis. If you invested 15 to 20 years in school to learn how to make money, why not spend a little effort to plan how to capitalize on your earning power to be able to enjoy it for a third of your life on your terms in early retirement?"

"Think of life has having three periods: schooling, working, and savoring," he says. Most folks spend the first 20 to 25 years of life in school, work for 40 to 50 years, then leave what's left for "savoring". He suggests shifting our perspective. "Why not plan life in three equal installments?" he asks. Spend 25 years in school, work for 25 years, then savor another 25 years -- or more.

The issue, as you know, is that there are trade-offs. The opportunity cost of retiring young is the stuff you could have had (and the things you could have done) during your working years. "Early retirement is like anything else that you can purchase," Tauber writes. You probably won't have as much discretionary income while you're saving or when you retire, but you will have the time to enjoy what you do have."

Tauber says the reason most people don't retire early is they don't think it's possible. More than that, they're not willing to wait to spend their money. They want to spend it now. They're working hard, earning money, and they feel like they deserve to indulge themselves.

What's more, the average person "cannot visualize the possibility that [work] might slow or stop". People fall victim to the forever fallacy. As a result, they get trapped in what Tauber calls the work-spend cycle.

When you want everything now, you get it now -- but that means exactly what it implies: having it now, not later. "It's a prescription for a lifetime of work and spend," Tauber warns. It's also a prescription for living on less when you're older. If you want money now and later, you have to plan for it. You have to want it badly or it won't happen. And "if you want to retire early, you have to do it yourself, using the system to your best advantage."

I read a lot of books. Nearly every book has some nugget of wisdom I can take from it, but it's rare indeed when I read a book and feel like I've hit the mother lode. In 2018, I've been fortunate enough to read two books that I'll be mining for years to come.

The first was Sapiens, the 2015 "brief history of mankind" from Yuval Noah Harari. I finished the second book yesterday: Thinking in Bets by Annie Duke. Duke is a professional poker player; Thinking in Bets is her attempt to take lessons from the world of poker and apply them to making smarter decisions in all aspects of life.

"Thinking in bets starts with recognizing that there are exactly two things that determine how our lives turn out," Duke writes in the book's introduction. Those two things? The quality of our decisions and luck. "Learning to recognize the difference between the two is what thinking in bets is all about."

We have complete control over the quality of our decisions but we have little (or no) control over luck.

The Quality of Our Decisions

The first (and greatest) variable in how our lives turn out is the quality of our decisions.

People have a natural tendency to conflate the quality of a decision with the quality of its outcome. They're not the same thing. You can make a smart, rational choice but still get poor results. That doesn't mean you should have made a different choice; it simply means that other factors (such as luck) influenced the results.

Driving home drunk, for instance, is a poor decision. Just because you make arrive home without killing yourself or anyone else does not mean you made a good choice. It merely means you got a good result.

Duke gives an example from professional football. At the end of Super Bowl XLIX, the Seattle Seahawks were down by four points with 26 seconds left in the game. They had the ball with second down at the New England Patriots' one-yard line. While everbody expected them to run the ball, they threw a pass. That pass was intercepted and the Seawhawks lost the game.

https://www.youtube.com/watch?v=RgloErF-H2c

Armchair quarterbacks around the world complained that this was the worst play-call in NFL history. (I've linked to just four stories there. They're all brutal. You can find many more online.)

Duke argues, though, that the call was fine. In fact, she believes it was a smart call. It was a quality decision. There was only a 2% chance that the ball would be intercepted. There was a high percentage chance of winning the game with a touchdown. Most importantly, if the pass was incomplete, the Seahawks would have two more plays to try again. But if the team opted to run instead? Because they only had one time-out remaining, they'd only get one more chance to score if they failed.

The call wasn't bad. >The result was bad. There's a big difference between these two things, but humans generally fail to differentiate between actions and results. Duke says that poker players have a term for this logical fallacy: "resulting". Resulting is assuming your decision-making is good or bad based on a small set of outcomes.

https://www.youtube.com/watch?v=NSj1sjDRYwI

If you play your cards correctly but still lose a hand, you're "resulting" when you focus on the outcome instead of the quality of your decisions. You cannot control outcomes; you can only control your actions.

Over the past decade, I've attended a variety of camps and conferences to speak to people about money. Most of these events are money-related, but every once in a while I'm asked to speak at a non-financial function.

In 2011, for instance, I was on a panel at the International Game Developers Association summit, which is a conference for videogame designers. (How perfect for nerdy ol' me!) My colleagues and I spent an hour discussing the "gamification" of personal finance — learning to manage money using techniques more commonly associated with games. Continue reading...

All his life, Paul Terhorst wanted to be rich. Even in grade school, he looked forward to having a corporate job, to joining the world of big business. "I didn't just dream about money and power and expense account living -- I planned for it." He grew up and made it happen.

He got his MBA from Stanford. He became a certified public accountant and joined a large accounting firm. At age 30, he became a partner in the company. He had "a huge office, a leather chair, and a view of a polluted river". He'd achieved everything he'd always dreamed about.

But at age 33, while on a business trip to Europe, he overhead two guys talking about a friend who had retired early. Terhorst was intrigued. "I began toying with the notion that if I could come up with a way to live off what I already had, I'd never have to work again."

It took him two years to figure everything out. But in 1984, at age 35, Terhorst made the leap. He retired. (And he's been retired ever since.) In 1988 he published Cashing In on the American Dream to share his experience -- and the experience of others who made an early exit from worklife to pursue their passions.

"We need to find new opportunities for sharp, hardworking people who leave the corporate structure," he writes. "Up to now, those outlets have been second careers, the Peace Corps, turning a hobby into a business, and the like. Those outlets give you at least some money to live on. The route I describe in this book offers more freedom."

It Takes Less Money Than You Think

The first part of Cashing In on the American Dream is devoted to Terhorst's three-part formula for achieving early retirement:

• Do your arithmetic, by which he means crunch the numbers to see how low you can trim your expenses and how much you need to have saved in order to cover your costs.
• Do some soul-searching. Decide if early retirement is right for you. If so, what does it look like? How will you find meaning after work?
• Do what you want. Terhorst advocates a life of "responsible pleasure": Do what you love, but don't spend a lot of money to make it happen.

It takes less money than you think to retire early. "Millions could retire right now," Terhorst says. But many folks are bound by "golden handcuffs". Their high incomes fund lavish lifestyles, which means they remain voluntarily shackled to their jobs.

In 1984, Terhorst believed you needed a net worth of $400,000 to $500,000 -- which would be $972,000 to $1,216,000 today -- to retire early. With this level of wealth, he thinks you could live well on $50 per day. (According to official government inflation data, $50 in 1984 is equivalent to $121.62 in 2018. That means Terhorst advocates spending roughly $44,000 per year.) If you opt for what he calls "bare-bones retirement" -- what we might now call LeanFIRE -- you can retire much sooner.

In 1988's Cashing In on the American Dream, Paul Terhorst wrote about retiring at age 35. Although his aim was to show readers the path to early retirement, he also sang the praises of temporary retirement -- retiring young with the idea that you might go back to work later in life.

As I mentioned a few days ago in my article on the five types of retirement there's another way to mix work with financial independence. In Work Less, Live More, Bob Clyatt makes the case for semi-retirement.

The Way to Semi-Retirement

In many ways, Work Less, Live More (published in 2005) reads like an updated (and more detailed) Cashing In on the American Dream. Even the author bios sound similar. Here's how Clyatt describes his background:

In 2001, after 20 years of sustained high-pressure work, the last seven spent battling in the Internet wars, my wife Wonda and I chucked it in, mothballed our suits, rented a small summer house in Italy, and began our new lives as early retirees.

But early retirement was no paradise for Clyatt and his wife. They were stressed, and their friends were stressed too. Did he really have enough money saved? What about the sluggish stock market? He began to question his assumptions: Had he made a terrible mistake?

Ultimately, he realized the worst-case scenario wasn't so bad. He probably did have enough to stashed away to sustain his early retirement, but even if he didn't the downside was that he might have to do a little work. This realization allowed him to embrace the idea of semi-retirement.

"Doing some amount of engaging work offers a comfortable transition between full work mode and full retirement mode," Clyatt writes. "With a modest income from part-time work, early semi-retirees may not have to face the dramatic downshifting in spending and lifestyle that so often confronts those who live only on savings or pensions."

Here's an extended explanation from the book:

Semi-retirement -- reclaiming a proper balance between life and work by leaving a full-time job -- offers a way out of the madness of overwork. By reducing spending and switching to a pared-back but more satisfying lifestyle, less money goes out the door.

Tapping into accumulated savings in a sensible way provides a steady annual income. Any shortfall can be filled with a modest amount of work, done in an entirely new state of mind: With less need to work for the largest paycheck possible, you can find low-stress work that you truly enjoy, on a schedule that gives you time to breathe.

Clyatt divides Work Less, Live More into eight chapters, each of which explores one of his rules for semi-retirement:

1. Figure out why you want to do this.
2. Live below your means.
3. Put your investing on autopilot.
4. Take 4% forever.
5. Stop worrying about taxes.
6. Do anything you want, but do something.
7. Don't blow it.
8. Make your life matter.

Let's take a closer look at the semi-retirement approach to creating work-life balance.

There are a lot of great personal-finance books out there -- here are a few of my favorites -- but despite the diversity of titles (and subject matter), they all share a remarkably similar format. These books are money manuals in which the author shares prescriptive advice. They tell the reader how to get from point A to point B.

From time to time, somebody will publish a book like David Chilton's The Wealthy Barber, which provides financial advice in the guise of a story, but these attempts are very, very rare. (It's a bit ironic that one of the oldest, most revered personal-finance books -- The Richest Man in Babylon -- is story based, yet few have followed in its footsteps.)

All this is to say: For years, I've believed there's a hole in the market waiting to be filled, a place for a story-based book about money.

Enter Meet the Frugalwoods, the brand new book from Elizabeth Willard Thames. Liz writes the excellent Frugalwoods blog, which chronicles her young family's experience with extreme frugality. (Her site also documents their adventures owning a 66-acre homestead in rural Vermont, a subject I love.)

Meet the Frugalwoods isn't a money manual. It isn't fiction. It's memoir. The book covers ten years in the lives of Liz and her husband Nate, from their post-college job-hunting experiences in Kansas to purchasing the afore-mentioned Vermont homestead.

Through their story, Liz shows readers it's possible to move from a life of consumerism to a life built around frugality and purpose.

In some ways, the book seems to contradict the blog. On the blog, Liz maintains that she and Nate have always been savers: "Mr. Frugalwoods and I have always been frugal -- it’s just how we’re wired." In the book, she paints a picture of a couple that succumbs to run-of-the-mill American consumerism before being liberated by a philosophy of extreme frugality.

A Regular Middle-Class Lifestyle

After graduating from the University of Kansas in 2006, Liz and Nate experienced typical young adult struggles. While he got job using the skills he'd developed, Liz struggled to find work that made use of her degrees in political science and creative writing. As a stop-gap measure, she took a position preparing files for digitization in a document scanning center. (This reminds me of the worst job I ever had, selling insurance door to door after I graduated from college. Haha.)

In a quest for more meaningful work, Liz took a position with AmeriCorps in New York City. Her job was to raise money for a small non-profit organization. The experience was formative. It taught her the essence of extreme frugality. (Her monthly food budget was her $120 food stamp allotment. She ate on four dollars per day!) Still, she managed to save $2000 of her $10,000 annual salary.

Liz lived in the Crown Heights neighborhood of Brooklyn, where people were poor and struggled to get by. During the day, however, she hobnobbed with billionaires, seeking contributions to her non-profit. It was a jarring juxtaposition.

In time, she moved to Boston to be with Nate (who had found work there as a computer programmer). She found a job doing fund-raising for WGBH, Boston's public broadcasting station. They fell into a regular middle-class lifestyle, complete with lifestyle inflation.

I was promoted to senior development associate, accompanied by a raise, and decided to start getting my hair cut at a chic salon in Harvard Square that a woman in my office recommended. They massaged my neck, brought me herbal tea, washed my hair, cut and styled it, for just $120. The fact that I used to eat for an entire month on that same dollar amount didn't register at the time. I worked hard, so I reasoned I deserved to treat myself. What was the point of this job otherwise?

Over the next few years, Liz and Nate moved to Washington, D.C. -- and then back to Boston. Liz went back to school to get a masters in public administration. They bought a house. They got a dog. From the outside, everything seemed rosy. On the inside, however, it felt like something was missing.

"We stopped micromanaging our spending," Liz writes. "By which I mean I had no clue what we spend in any given week, month, or year." But the increased spending didn't bring increased happiness.

Now that I'd experienced a life of spending $40 a week on artisanal cheeses and $120 on haircuts and $200 on dinners out, I realized it wasn't what I wanted. What was the point of being able to buy whatever I wanted if I didn't control my time?

Something had to give.

Figuring out the financial implications of marriage can be a challenge. Do you merge your money completely? Do you keep some or all of the accounts separate? And who takes care of which household financial chores?

As difficult as marriage and money can be, things are even tougher for unmarried couples. There's a maze of legal, financial, and emotional issues to navigate, but sometimes it's difficult to get good advice in a society that's geared toward married partners.

Kim and I have been dating for nearly six years now. We've been living together for almost five. For that entire five years, we've been slowly negotiating the financial implications. At what point to we designate each other beneficiaries in our wills? On our retirement accounts? What things do we purchase together? How intermingled do we allow our bank accounts to become? Who pays for which utilities? Or do we split the costs equally? What about groceries? Pets? Vacations? Gifts?

In a nutshell: By diligently applying four simple rules, you can move from being at the mercy of money to being a master of money.

In 2004, Jesse and Julie Mecham were twenty-year-old newlyweds trying to make ends meet. They lived in the 300-square-foot basement of a sixty-year-old home. He was pursuing a master's degree in accounting, while she was finishing a bachelor's degree in social work. Plus, they were planning for their fist child.

The Mechams felt flat broke.

But because Jesse was (and still is) a self-proclaimed "numbers nerd", he decided to create a spreadsheet to budget for every day of the year. The couple steadfastly stuck to their budget, and something surprising happened. Despite their meager circumstances, they no longer felt desperate about money. They paid their bills and still had a little left over for a couple of date nights each month.

Later, while brainstorming ways to earn extra money, Jesse wondered if other people would be interested in his budgeting method, which involved four simple rules. He started teaching others these rules and sharing his spreadsheet. In time, that spreadsheet morphed into a piece of software called You Need a Budget [my review].

Today, You Need a Budget is one of the most highly-regarded personal finance apps available. (Seriously. Everyone who uses it seems to love it. Its users are die-hards.)

In his recent book -- also called You Need a Budget, naturally -- Mecham shares the method that has helped him (and thousands of others) overcome financial anxiety. Let's take a quick look at the YNAB method.