FI-losophy

Amish as a Model for FI/RE

I was performing a thought experiment the other day and was wondering what it would be like if you took all of the approaches typically taken to achieve financial independence and took them to the extreme. Would it be possible to create such an existence and what would it look like? You would have no car, you would make your own clothes and grow your own food. To avoid a mortgage on your house you would build it yourself or maybe with some friends. You would cut your electricity bill, cable bill and cell phone bill. You wouldn’t borrow money. You wouldn’t go to college. You would have your own business but pay as little tax as possible.

Then it hit me. You would be Amish! You may not understand the parallels yet, or why I say that, but that’s the point of this post.

Now I, for one, would never want to take as extreme of an approach as they did. They went beyond financial independence, and established complete societal independence. I don’t want to do that, but I do think there is value in taking a closer look at what they do to see if there are other tricks to achieving financial independence that we may be missing out on. Oh, and it may surprise you to learn this; but there are many wealth Amish people. You would just never know it because they don’t spend their money in flashy ways. Sound familiar?

Car-less Amish working on raising a barn

I’ll take a step back here and give some context to lend credence to what I am about to tell you about the Amish. I have two sets of experience which make me more knowledgeable on the Amish than the average Joe. First off, much like the Amish, I am of Pennsylvania Dutch heritage and I grew up in a religious tradition that has very similar roots to the Amish. Had it not been for WWII, my first language would have been a dialect of German called Pennsylvania Dutch, much the same as the Amish still speak today. Most people wouldn’t guess it today based on the fact that I am a software developer that has spent time living in both California and London; but never-the-less, these are my roots.

Beyond my heritage, my second set of credentials comes from the fact that I attended college in the heart of Amish country. A professor at my school was the guy that CNN would call up any time something happened in the Amish community that made nationwide news. In fact, one of my computer engineering professors had him come in and give a guest lecture on “The Amish and Technology”. It was wild. But I can honestly (also read sadly) say I remember more from that lecture than probably the rest of the lectures combined.

You see, many people see the Amish and assume that they have no technology at all. But I learned that isn’t true. There are just special rules for the technology they have and how it can be applied. These rules, called an Ordnung, can vary from community to community and are set by the members of the community. And to understand why the rules are set the way they are, you have to first understand that the whole of Amish society revolves around family, community/self-reliance, hard work and spirituality. Anything which would eat away at any of these is forbidden. As an example, many people believe the Amish can’t use electricity. That isn’t true, but what is true is that the electricity they use can’t be from the grid, because it makes their community dependent on others rather than self-reliant. Therefore electricity from the grid is banned.

So with an understanding of what drives the Amish, let’s take a look at some of many parallels between their society and the financial independence community. When I started my thought experiment I started with the three key needs to sustain life: food, shelter and clothing. I envisioned what a FI/RE purest might say about providing these needs. For food, the answer is simple. You would grow it yourself rather than buying it at the store. This would likely mean having some sort of farm with livestock and fruits/vegetables. It is fairly well known that the main livelihood of many Amish comes from farming. To cover shelter, you wouldn’t want to have a mortgage so you would build your house yourself. Ideally on land that was gifted to you. Again, in the Amish community they are renowned for their carpentry skills and will often be seen building barns and homes for members of their community. Often on land that is gifted from father to son or from the community. And as for clothing, a FI purest would be making their own clothes. Exactly as the Amish do. For the Amish, frugality is simply their way of life.

So what about beyond the basics, what kinds of parallels exist between the Amish and the financial independence community? As most people know, the Amish wouldn’t have an electricity or cable bill for the reasons I explained above. But some of the lesser known parallels are that many Amish are actually business owners. Not selling those “Amish Heaters” that were being advertised back in 2010, but real businesses making furniture or doing carpentry. Another little known parallel: the Amish despise debt and make every effort not to borrow money. The only time they will borrow money is for real estate or investing in their business. And when they do that, they place huge down payments and pay it off as quickly as possible.

Let’s keep going: many in the financial independence community question the value of higher education and some are encouraging the next generation to skip out. The Amish would agree, they tend to discourage higher education as not necessary. So does that limit their knowledge and creativity? Not in the slightest. As an example, we know the Amish are not allowed to be grid tied for power, but a power source they are allowed is pneumatic (or compressed air). That college professor I referenced earlier showed us pictures of tools, blenders and even a washing machine that had been re-engineered by Amish families to be pneumatically driven so that they could be used. Although the motive was different, I can’t help but see similarities between this and the lengths the Frugalwoods went to in order to hack their Sodastream.

So if there are so many parallels between the financial independence movement and the Amish, how can we learn from them? One interesting thing that I would be curious to see if it could be extended is the fact that the Amish do not pay into social security or medicare. They view these systems as insurance, which they do not believe in. It was a battle, but they were able to get the federal government to recognize the fact that they take care of their elderly within the community itself and do not need the aid of the federal government. I personally hold the same view. I don’t anticipate the government being able to support my needs when I retire. I am planning on putting myself into a position that I can fully provide for myself. I would be curious if we, as a community, could get the federal government to allow us to opt out of Social Security and Medicare. I may have paid in so much at this point that it wouldn’t make sense for me, but I would like to see it as an option for future generations.

One other idea that I have extracted from observing the Amish so far is the idea of a FI/RE Rumspringa. I will save that topic for a different post because it warrants a deep dive. But I’m curious to see what other helpful nuggets can be extracted by observing the patterns and behaviors of the Amish.