How I became financially independent in 5 years

How Jacob Lund Fisker, author of the Early Retirement Extreme blog, reached financial independence in about five years on a modest academic salary. He didn't earn more; he spent radically less.

Starting point

He was never in debt and didn't care much for "spontaneous fun" spending: sweets, nights out, taxis. His weakness was gadgets: saving up for a computer, a camera, a hi-fi, a telescope. His first step was to swap expensive hobbies for free ones (Linux, system administration, reading about geopolitics).

As a PhD student he lived in a shared dorm (18 people, one kitchen) within walking distance of work and shops. He chose it to meet people, but it also meant no car and no bike needed. He graduated with no student debt, and his grad-school savings made up half his later net worth.

Two books that changed his thinking

Your Money or Your Life (Robin & Dominguez): work out your real hourly wage after taxes, commuting, work clothes and the time spent getting to and preparing for work. It's often shockingly low. Then price things in hours of your life: a $400 games console at $8/hour is 50 hours. Buying on credit adds even more hours, so he avoided debt, including a mortgage.
Rich Dad Poor Dad (Kiyosaki): changed his view of money from something to spend into something to invest so it earns more. The poor save cash, the middle class buy on credit and pile up liabilities, the wealthy buy assets. He thinks it may be easier to go from poor to wealthy than from middle class, because of all those liabilities.

How he cut spending

Small expenses add up. He cancelled subscriptions and the gym, had no TV, kept cheap internet, and bought clothes from charity shops.
Simple food. At his most extreme: oats for breakfast, bananas for lunch, and two batch-cooked dinners (lentil soup and tuna salad) made in 30 minutes for six days. He loosened this later when living with his partner, as the extra cost was worth it.
One rule: don't skimp on things that make you smarter or healthier. That took his savings rate from about 80% down to a still-huge 70%.
Independence from stuff. He mended socks, repaired electronics, learned to cope with heat by sweating instead of air conditioning, and tested living through a winter without heating. He studied how people living in vans and boats use space, and learned skills like making soap. Everything he needed fitted into two suitcases, yet he lived comfortably.
Housing and transport. A cheap rented house within walking distance of work, mostly second-hand furniture (which he later passed on or resold), and a $35 used bike. Running to work was often faster than driving.
He saved 60–90% of his take-home pay, averaging the mid-80s.

Why the savings rate matters most

If you can live on 4% of your savings each year, you need about 25 times your annual spending. At a 15% savings rate that takes roughly 25 years, a normal career. At 70–80%, it takes about 6–10 years, and compound interest barely matters at that speed. The jump from 70% to 80% shortens the timeline dramatically.

Investing, learned along the way

For his first three years he only kept cash in savings accounts. By luck that avoided the 2001–02 crash, though it also missed the 2003 rally.
At the end of 2004 he bought bonds, and realised return on investment mattered, not just saving. He wrote a program to project his net worth and watched investment income approach his expenses.
He then bought a handful of stocks on fairly random reasoning (an ageing population, cheap valuations, oil running out). Most did very well by luck, which he now treats as a warning about investing on hunches.
He reasoned that improving the return on $100,000 from 5% to 6% was worth more per hour than his job, so he learned investing seriously: fund managers' philosophies, then options (matching the market at lower volatility in 2006, though the taxes were a headache), then valuing small, overlooked companies.
He now thinks of himself as "Me, Inc.": managing investments became more lucrative than a second job, which is why he no longer needs a regular one.

On education

A degree isn't a guaranteed route to wealth. Money-handling skills matter more than income. A PhD was "financial suicide" in pay terms, but brought travel to 10+ countries for conferences and work he found deeply satisfying.