How My ERE Strategy to Financial Freedom is Faring?

by Vinaya HS on June 22, 2011

in Finance

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I’m a big fan of ERE. When I embarked on my journey towards financial freedom last year, I followed many of the principles outlined in ERE, just that I didn’t know there was an official term for doing what I was doing.

My ERE strategy is quite simple. Each month:

  • I contribute first and foremost to my financial freedom fund. My paychecks now pay for my paychecks later. I have a defined target that I absolutely must meet each month. This tactic has worked so well that I can’t believe how much I have saved over the past nine months.

  • I then contribute to my short-term goals. Sounds weird? Sounds counter-intuitive? Whatever happened to my medium-term goals? I want to enjoy the “now” as well — completely and without regret. My medium-terms goals (such as saving-up cash for my next car) are certainly important but come lower down the pecking order.

  • I then contribute to my medium-term goals. I just have one at the moment.

  • Finally, I either splurge whatever’s left or, if I’m in an aggressive ERE mindset, I contribute whatever’s left as a bonus into my financial freedom fund.

Here’s what my ERE-chart looks like:


Monthly ERE-savings are, on an average, 43% of my monthly income. Monthly expenses are, on an average, 26% of my monthly income. The remaining 31%, on an average, goes into everything else. I can break this down further if you’d like me to.

I want to bump-up that 43% closer to 50%! That would be serious ERE. That would require me to burn less petrol each month — consider this: 49,000 kilometers on the Swift odometer, 10 kilometers per liter of petrol, 4,900 liters of petrol, Rs 65 per liter of petrol (on an average), you do the calculations.

D won’t let me do it. She’s smitten with the Swift.

Thanks for reading this article. I'd love to hear your opinion. Please use the comments section below to share your thoughts. I frequently write new articles that also cover several other aspects of personal finance including credit cards, financial goals, health insurance, income tax, life insurance, mutual funds, retirement planning, and much more. You can Subscribe through Email and receive new articles directly in your Inbox or you can Subscribe through the RSS Feed and receive new articles in your feed reader.

{ 6 comments… read them below or add one }

pattu June 22, 2011 at 9:32 PM

75% would be serious ERE. Which is what ‘he’ did. 50% is pretty good ERE.

I save 55% but only 30% towards retirement. The rest if for my sons education.
Parenthood changes everything. Easier for Mr. ERE as choose not to tread that path. Dr. ERE actually, he is a physicist.

Got to make a ERE calculator in terms of % savings.

Early Retirement Extreme June 22, 2011 at 10:28 PM

Actually, I did more than 75%. More like low-mid eighties.

If you want to build a calculator, I can send you the equations. They’re also in the ERE book in chapter 7. If you skip the compound interest part, which is realistic for working periods <10 years, the equation becomes very very simple.

PS: I'm confused by "everything else". If you took that money and put it into savings,you'd also be in the 70s%.

pattu June 23, 2011 at 2:27 PM

Nice to see you here Dr. Jakob!
Using your own rough estimate:
30% savings, 30% expenses and 4% withdrawal rate (not sure if this applies to India)
(1/4%)* (30%/30%) ~ 25 years for me to retire. This suits me fine as I have tenure for 29 years.
Vinaya could retire in (1/4%)*(26%/43%) ~ 15 years.
The only trouble is inflation in India hovers around 8-10% more for specific commodities. So I think its a bit of an underestimate.

Vinaya HS June 25, 2011 at 8:30 AM


50% is pretty serious ERE for me. Especially given my two splurges: Petrol and Travel. He he he…


The 31% mainly comprises of savings for short-term goals (usually, travel, travel, and more travel) and savings for medium-term goals (only one now which is to pay cash for my next car so that I can travel some more). Looks like a vicious cycle to me. :-)

Sathish June 27, 2011 at 10:10 AM

Could you give the break-up investment structure(PPF, ELSS, Equity,etc) for the 43% that goes into ERE?

Vinaya H S June 27, 2011 at 2:37 PM


Of that 43% ERE Savings, 32% goes into pure-equity mutual funds (just two of them; stay tuned for a follow-up post on why), and 68% goes into a mix of debt instruments. Of that 68% in debt instruments, the split between PF and other debt instruments is nearly 50:50.

I’m naturally debt-oriented and my debt:equity ratio seems to be a natural fit for ERE.

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