I was invited to a lunchtime presentation about twelve months ago by IBISWorld that, while reasonably technical, I believe has a lot of relevance for any aspiring early retiree. I want to share a key takeaway from that session with you, but before I get to that, I should at least explain who IBISWorld are and what they actually do.
Who are IBISWorld?
For those of you who don’t know them, IBISWorld essentially make it their business to understand various industry sectors and report this information so that others can benefit from it. Each industry sector that they identify (e.g. pharmaceuticals) then has a report that is frequently updated that anyone (even with limited background) should be able to read and then have a basic understanding of the industry.
Putting together this information for just about any industry then helps them understand what the key changes are (e.g. which industries are growing, which are declining, which are profitable, etc.) in any economy, and in their presentation there was one key change that I thought was particularly relevant to our crowd.
And that change was… outsourcing. See here for an article re IBISWorld and their thoughts on outsourcing.
What is outsourcing?
While I can’t recall the actual stats from the IBISWorld presentation, the message was essentially that growth in Australia’s economy over recent decades has significantly been driven by outsourcing. You see, we are becoming a “service economy”, rather than an economy that makes hard goods (e.g. furniture, cars, etc), simply because with globalisation we cannot compete with the cheap labour available from Asia. So instead of making more “stuff”, we provide more “services”. While IBISWorld’s presentation was about Australia, don’t think you non-Australians are missing out as this shift is happening in pretty much every Western country in the world.
So what does outsourcing mean for us? Well, over time people have come to “outsource” a huge array of tasks around the house (as well as in their businesses) when they would have traditionally attended to these tasks themselves. Some examples include:
- Lawn mowing and gardening;
- General house repairs;
- Basic car maintenance;
- Beauty (applying makeup and all of that other stuff); and
- Repairing things that are broken (rather than throwing them away and buying new ones).
And with this change, people have not only come to take on a higher level of “overhead” to pay for this outsourcing but they have also lost (or never gained) the skills required to attend to these tasks themselves. If you don’t believe me then just ask your grandparents – chances are they knew how to do pretty much everything on the above list (and actually attended to these tasks quite regularly).
Now all of the outsourcing described above is what a typical hyper-consumer does. They “work hard” so they feel like they “deserve” to have someone else take care of these tasks, and they blow a heap of cash in the process. Surprise surprise, the typical early retiree can actually attend to many of these tasks themselves, because they are more “self-sufficient” than the typical hyper-consumer and first try to solve their own problems.
Solving problems primarily with your brain rather than with your wallet
Now I am not any smarter or mechanically minded than any average Joe, but when I am faced with a problem I first try to solve it with my brain rather than immediately reaching for my wallet as the typical hyper-consumer does. I like to think that this is because I have the aim of being as self-sufficient as possible, which just so happens to cost a lot less.
Some examples of the things that I have managed to do (and if I can do them then why can’t anyone else) include:
- Installing retaining walls in our garden;
- Installing insulation (batts) in our ceiling;
- Painting the inside of our house;
- Ripping out our kitchen, bathrooms and laundry so that professionals could come in to renovate them;
- Servicing our cars (including oil changes);
- Fitting new brake pads and brake rotors on our cars;
- Installing the timber decking on our outdoor entertaining area;
- Pulling apart one of our plasma TVs that wasn’t working and fixing it;
- Replacing the broken hinge springs in our dishwasher;
- Mounting a flat-screen TV on a wall; and
- Designing and installing our automatic watering system for our gardens.
Some of these things I didn’t know the first thing about when I started, but by seeking out advice from others, and with the help of Google and Youtube, you would be amazed at what you can find out and how you can diagnose many problems yourself. And you can save so much money too!
Funnily enough, I find that I also get a lot of satisfaction from being able to solve a problem myself rather than having to call in an “expert”, and if people would just have a go at some of their problems they would surely understand what I am talking about.
Now, if you are an aspiring early retiree, you would know the importance of bringing down your annual cost of living, because you will essentially need 25x this amount to be able to retire at a 4% withdrawal rate (the commonly accepted calculation method in these circles). So, if you are paying a stack of cash to people for all of these tasks, then a sure-fire way of bringing down your annual cost of living is to “insource” them again by taking on those tasks your self once more!
Maybe you can’t take back all of these tasks in one go, but if you put your mind to it you might be surprised at what you can do yourself.
So, what problems have you managed to solve with your brain rather than your wallet? And what do you think you can actually do now that you think about it?