Partial Early Retirement

It may be Friday, but this one isn’t frugal as I think I’ve exhausted all my ideas for the moment. I may try to write one once a month, but we’ll see. Instead, it’s time to take stock.

Could I really achieve financial independence and retire early?

Is FI/RE realistic for me?

Although I talk about FI/RE on this site, in terms of my situation, this isn’t truly realistic at my stage of life. I’ve started too late and unless I am going to put a lot of time and effort into a side hustle, then I am unlikely to have enough money to stop work completely over the next ten years.

I started thinking about this the other day whilst listening to Chrissy’s new podcast. Although it is a Canadian-focused venture I thought that I would check it out. There have only been a few episodes so far, but the most recent one was about the 4% rule or as the presenters concluded, the 4% ‘assumption’. What was interesting for me was they talked about lots of different ways people could achieve financial independence and that when looking at how much money you need, you should consider what your pension would provide when you reach traditional retirement age. Therefore, you don’t always need to make your money last for the rest of your life. You also don’t need to ‘retire’, but could work part time or change your job to something more rewarding, but which doesn’t pay as much.

I am lucky enough to have a defined benefit pension

My pension

One of the benefits of working for the public sector is that I have a ‘defined benefit’ pension i.e. I know exactly how much money I will receive when I retire. Nowadays most pension schemes are ‘defined contribution’, so that you put in a set amount, but what you will receive depends on how the market performs.

Although my pension scheme is a good one, I didn’t have a full-time job until I was 32. You might say that I had my period of ‘early retirement’ in my twenties. Whilst others were getting married and having kids, I was living in a shared house, working part-time, volunteering and travelling. Mr Simple refers to it as my time as ‘a bum’. Although life was easy and I didn’t have any responsibilities, neither did I have much money. When I got my full-time job, after going to college for three years, my salary tripled overnight. I then started on the traditional route of buying a car and three years later a house. That wasn’t too far from being paid off when Mr Simple and I moved in together and bought a larger house, with a bigger mortgage.

A lot of my salary goes towards the house

Current expenses

As you may have seen from my spending reviews I am currently paying off the mortgage by making twice the actual payment each month, as well as saving some money into an ISA and another high interest savings account. I am also paying all of the bills, as Mr Simple’s money is going on the renovations to the house. If we didn’t have any work to do to the house, and Mr Simple and I were sharing the costs, then my savings would increase dramatically. But, there we are. We chose this house and I love it, but it comes at a price.

I am sure that many of you would say that I should stop overpaying the mortgage and invest the money, as with such low interest rates, financially this makes sense. I completely agree with you, but there is just something psychologically comforting about owning the house outright. So, whatever anyone thinks, that’s what I want to do and each of us has to make our own choices.

At the current overpayment rate we will pay off the mortgage in seven years and three months. By that time I will be 57. I would really like to pay it off in five years’ time, but to do that I would need to find an extra £20,000.

Savings

Leaving that to one side for the moment, if we now look at my savings. I currently have approximately £34,000. In the FI/RE world that is nothing, but compared to a lot of the population it isn’t bad. If I keep saving at my current rate, even at an interest rate of 4% I will have £71,000 in five years’ time. I give it that low interest rate as although I have some in a stocks and shares ISA, which is currently making 10%, some of my money is in a cash ISA, locked away until November 2021 and it is only earning 1.75%.

In five years’ time all my money would be in investments and hopefully earning more than 4%. When I consider that £71,000 and apply the 4% ‘assumption’ i.e. draw 4% every year, I would get £2840 per year. £2840 divided by 12 is £236. At the moment I am paying all of the monthly bills, but in five years’ time, Mr Simple should be contributing his half again as all of the DIY will be done. If we don’t count the mortgage, this £236 per month would go quite a way to paying my half of the bills i.e. gas, electricity, water, council tax, etc.

I spend two-fifths of my wages on the mortgage

How my salary is divided

At the moment I think of my wages in fifths. Two-fifths go towards the mortgage, one fifth towards the bills, one fifth is saved and I live on the other fifth. If I could:

  • pay off the mortgage somehow = 2/5ths  gone
  • Mr Simple starts paying his half of the bills and my investments pay my part of the bills = another 5th gone

I could continue saving and would only have to work two-fifths of the time that I do now i.e. two days a week instead of five.

I hope that you’re keeping up.

This may need replacing soon

A potential problem

One large potential spanner in the works is having to buy a new car over the next five years. Now, when I say ‘new’, I obviously mean ‘new to me’. My car is nine years old and has recently started using more oil than it should do. The garage can’t find out what is wrong with it and in order to do a more thorough investigation they tell me that it would cost £3000, which is probably more than the car is worth. The temporary solution is to check the oil each month and fill it up if it is low. I am also driving around with a bottle of oil in the boot.

At some point I fear that the problem will get worse and eventually I will have to buy a new car. Currently a second hand Toyota Yaris, which is what I have at the moment, is between £7000-£10000. The cost would have to come out of my savings. Best case scenario, that would take my savings down to £63,000, which wouldn’t be quite enough to cover my monthly bills, but would cover a lot.

More than 4%?

There is also the question of whether I could, in five years’ time, withdraw more than 4%, because that figure is chosen as it is believed that at that rate, the capital will last and still increase in value for many years to come. I though, don’t need this to last for 30 years, I just need it to last until I get my pension. My current pension age is 67, but I could retire earlier, say at 60, although my ‘defined benefit’ would be less. It is too far in the future for the pension company to tell me how much I would get if I wanted to draw on it early. They will only say how much I will get at the standard age. It is though a possibility that I could draw 5% from the £63,000 and that would definitely cover my half of the bills.

It therefore seems very likely that I could work part time from aged 55, but I just need to find £20,000 to pay off the mortgage. One possibility is to do AirBnB, which Mr Simple and I have discussed, but at the moment we’d have to pay guests to stay here rather than the other way around. It is a real possibility for the future, although I am not sure how much it would bring in. We could rent out a room and you can earn £7,500 a year doing this before having to pay any tax. Having a lodger for three years would cover the shortfall in the mortgage payments, but on a practical level I would rather have occasional guests than a full time one.

Mr Simple thinks that we should just stop overpaying at that point and just pay the £200 a month that we would owe, shared equally, for the rest of the period. That would certainly be a lot more doable than the £1000 that I am currently paying.

Sorry, that was long. I don’t usually write so much, but this has been a good opportunity to try to set down what exactly I am aiming for, which until now I haven’t been sure about. It will probably change as time goes on, but at least for now I have a goal and can track my progress towards that. As always, I will let you know how I am getting on.

Are you aiming for FI/RE, or are you just hoping to work a little less in the future? I would love to know your thoughts on my plan as well as your ideas for the future.

Saving Ninja Thought Experiment #6

Thought Experiments are a bi-monthly event set by Saving Ninja. Anyone can take part and you will see the others who have contributed listed at the end of this post.

Here’s the question for this month:

A different opinion is somewhat frowned upon in our clique-based society, but some of the greatest minds of all time were outliers. They weren’t scared to go against the grain and stand up for what they believed in. So, for this Thought Experiment, I’d like you to reveal yourself: What opinion do you have that most of your peers do not share?

Just not my thing.

When I was a teenager and in my early twenties I followed the crowd in respect of alcohol consumption – out on a Saturday night and spent Sunday recovering, sometimes with my head down the toilet.

But that was a phase, a period of my life that I was passing through. The trouble is that most of the people I know have been stuck in this phase for the past thirty years. The ‘group think’ is that in order to enjoy yourself you have to get very drunk when you go out, spend the next day on the sofa telling your kids that ‘mummy isn’t well’ and then laughing and joking about all the stupid things you did when you were drunk with your friends/colleagues, etc. on Monday morning.

The day after!

Sorry, I know that I sound like a grumpy old woman, but I just cannot see the attraction anymore. It’s a waste of money and a waste of a day if you have to spend 24 hours recovering. I think my colleagues are used to me bowing out of social events if they are going to involve a lot of alcohol and have no expectation that I will attend. At our annual Christmas party I will have a couple of glasses of wine and that’s it. And I’m happy with that. But people think that you can’t be having a good time if you aren’t drinking. I would say, if you need to have a drink to enjoy something, then you probably aren’t having fun.

My theory is that people struggle to challenge peer pressure to conform to the unwritten rules of society. If you want to achieve financial independence (FI) and perhaps retire early (RE) you’ve got to learn not to follow the crowd. You’ve got to be prepared to say no, be different and be proud of it. If you’re constantly worried about keeping up with the Joneses and doing things you don’t want to do for fear of upsetting others, then you’ve got a few lessons to learn before you are going to be equipped to face those challenges that you will most definitely meet along the way.

That’s what being part of the FI/RE community can help with. Reading all those blogs can give you ideas e.g. check out Radical Fire who publishes lots of great posts every week and realise that you’re not doing this on your own. There are others out there treading the same difficult path, challenging the norm and saying no to choices which don’t fit with their goals.

I would urge you to think about each of the choices that you make in life. Are you doing this because others expect it of you or is it because you truly enjoy it? Does it get you closer to where you want to be? This takes strength and faith in what you are doing, but it is achievable.

How about a picnic instead?

So next time your friends suggest a night out, how about thinking twice before accepting the invitation? Perhaps think of a cheaper alternative – a movie night at home, a dinner party where everyone brings one course or a picnic with food for sharing. You and your friends might just enjoy themselves more and won’t have the spend the next day recovering. You’ll also have saved a few pounds as well.

Other Participants

Please have a look at them all and tell them what you think:

Saving Ninja

Indeedably

Caveman @ Ditch the Cave

Mr A Way to Less

Miss A Way to Less

Merely Curious

Marc @ Finance Your Fire

Money for the Modern Girl

Ninja Thought Experiment #5

Life is good. You finally did it! You pulled the plug on your day job after reaching financial independence. You never have to work for money ever again. But, you’re bored. You need something to do… You need a project! You grab a piece of paper and a pen and start thinking. Now that you’re financially free, what projects do you want to complete? However ambitious, however small, you now have the time to pursue anything that you like, what will you accomplish?

I started writing this post some time ago and then I happened to be watching Mr Money Mustache’s new YouTube channel and in episode four he said the following:

When you are retired you are the same person, it’s just that the work part goes away. The question is what are you filling your days with now, outside of work i.e. what are you doing on the weekend? If you can get a good weekend package then that is just going to expand to be your full-time life when you retire. He went on to say, you should plan your post-retirement life around these five factors:

  • Outdoors
  • Social
  • Physical
  • Generous
  • Challenge

As I cannot dispute that MMM knows what he is talking about when it comes to early retirement I thought that thinking about each of these points would be a good way to answer this challenge.

So here we go…

Spend more time in the garden

Outdoors

At home I would have more time for the garden. As I write we are only just developing our garden. By the time we retire it will hopefully have matured. Not working would give me more time to grow vegetables all year round. I would love to be able to open it for the National Gardens Scheme. Several houses in the village do this and I would like to be able to join them at some point.

I have recently considered selling some produce from the garden. A couple of years ago we had loads of courgettes, just too many to eat, and I put them in a box outside the house with a notice telling passers by to help themselves. I expect I could have made some money selling them. Mr Simple makes jam, as we have fruit bushes in the garden, so maybe he could do a bit more of that. Eventually we could have a permanent stall outside the house. It wouldn’t make a fortune, but it would be fun.

Social

I belong to a couple of social groups in the village where I live. Quite a few of the members are retired and go out together on weekdays. Obviously I can rarely go along as I am in work. I would therefore be able to be a much more active member of these groups.

My main social interaction is though, sadly to say, on line. Probably because I find that I have a lot more in common with people whose blogs I read than I do with some of my friends. Sad, I know, but the truth. At the moment I struggle to find enough time in the day to post on Twitter, so I would have more time for this and other social media.

Physical

The joys of hiking

You’ll hopefully remember from my staycation posts that Mr Simple and I enjoy walking. In fact, we met through a young ramblers group. We used to go walking every Sunday. Since we have moved house weekends have been taken up with chores and DIY. If we didn’t have to work we would have time again for walking. We also have bicycles, which spend most of the time in the garage. We live in a rural area with lots of lanes to explore and so cycling would definitely be on the agenda.

Generous

Before I had a full-time job, which wasn’t until my early thirties, I used to spend a lot of my spare time volunteering for an international charity. My current job involves helping people, but it’s more about decision-making than hands-on helping. I think that once I don’t have to work for money I would want to do more direct helping work. I know that there are lots of charities and I am sure that I could find something to do, maybe just once a week or once a fortnight.

More time for reading self-help books

Challenge

I would probably need some mental stimulation, as currently the main way that I get that is via work, but also through reading all those great FIRE blogs and self-help books. Over the past few years I have learnt some French and Italian. Many classes are held in the day time and so weren’t available to me. My French evening class involved not getting home one night a week until 10pm, which for someone who is a morning person I found really difficult. It was also hard to maintain concentration after a day’s work. A daytime class would still enable me to get home at a reasonable hour. I would also have plenty of time for homework and to meet up with classmates to practise what we had learnt.

So, I am not sure whether I have answered Saving Ninja’s question, as technically none of these are projects. They are though things with which I like to fill my time, or with which I would like to fill more of my time if I didn’t have to work for money. They are I suppose ‘a simple life’, which is what I want my life to be.

How do you fill your weekends?

What did you used to do before you started that well-paid, but stressful job, before you bought that big house which needs lots of cleaning and decorating, or before you had kids?

What would you fill your time with if your whole life was just one long weekend?

Other thoughts:

Saving Ninja

Cashflow Cop

Ditch the Cave

Merely Curious

A Way to Less

in-deed-a-bly

Gentleman’s Family Finances

Marc @ Finance Your Fire

Dr Fire

The Fire Shrink

Young FI Guy

Advantages of the Public Sector

I have just finished ‘Financial Freedom’ by Grant Sabatier. Like many other financial independence bloggers he recommends ‘hacking your 9-5’. Often this involves asking your boss for a rise. If, like me, you work in the public sector, this is not an option. The only way of getting more money is to apply for another position, doing something different. Alternatively, you could move to another organisation or leave the public sector altogether. Neither of those are options that I want to consider, so I’m probably going to be where I am until I retire.

This post is therefore about what I see as the benefits of my job and how I can make the most of them. If you also work in the public sector I hope that it may give you some ideas about how to take advantage of your 9-5 benefits on your way to FIRE.  

Remote working makes the commute a distant memory

Working at home

This is not possible every day as my responsibilities involve visiting people and attending meetings, but very often, if I am just sitting at a computer, then it is at home. Working at home equals no commute. In the morning I therefore have plenty of time for reading, exercise, meditation and breakfast – all of the things that I like to do before starting my work day. If I get up at 6am, which I have been doing recently, despite Mr Simple’s complaining, then I have three whole hours to myself before I have to start work – a luxury.

Many jobs could be done at home, but often it is the mindset of the organisation that prevents this. Strangely it seems that being seen sitting at one’s desk is regarded as a measure that one is being productive, whereas in my experience trying to get work done in a busy office is a challenge. I tick off more of my to-do list at home, even if I take breaks occasionally to hang up the washing or answer the door when a parcel is delivered.

I believe that it is always worth asking the question. The worst that can happen is that they say no. Even working at home one day a week can give you some extra precious hours. Then it’s up to you how you spend them – exercising, reading a good book or working on your side hustle.

Car allowance

I feel frustration when I hear time and again the suggestion that in order to get to FI quicker you need to move nearer work and get rid of your car. Even if I moved to within a mile of my office I would still need a car as my job involves visiting members of the public. The necessity of having a car is reflected in the receipt of a monthly allowance and a good mileage rate. I don’t ringfence this allowance for sole allocation to car costs, but if I did, over several years it would make up the large part of a new (well new to me) vehicle.

Pension

I have a defined benefit pension which I can take from aged 55. Due to having not had a full-time job until I was 32 my pension pot isn’t enormous, but DB pensions seem to be few and far between, so I need to count myself very lucky. My employer also contributes much more to my pension than I do.

Take advantage of being able to plan your own diary

Managing my diary myself

A lot of the time I get to choose what I do on what days. I plan my supermarket shopping day when I pass through the nearest fair-sized town. This means that I don’t make a special journey in order to do the shopping. Sometimes I do the shopping over my lunch hour if I have time between visits. This means that I am not battling the rest of the population at the checkout at 6pm.

Generous annual leave

I have been amazed to read American FI blogs stating that in the US workers only get two weeks of annual leave as I get six. It’s so many that I don’t always get around to taking them all, particularly as we are trying to save money on holidays. An idea came to me when thinking about how best to use my allowance and I thought that maybe I could book the occasional day off to work on a side hustle or my blog or any other way that I can think of to make money. So if you get plenty of annual leave how could you use some of those days to help you get closer to your goals?

Hopefully that’s given you some ideas to chew over if you also work in the public sector.

I’m sure that there are plenty of others so please feel free to comment and let me know what they are.

I would love to hear your ideas.

An Absence of Obligations


It has been difficult this week getting back in to work. I am lucky enough to have a job that I really enjoy, even though it can be stressful at times. I am good at turning my work phone off and completely shutting off from work when I am on leave. I did check my emails on Sunday afternoon just to see what I would be returning to on Monday morning and I felt an absence of any enthusiasm for getting back work.

On Monday morning Mr Simple was sitting at the breakfast table looking as though he completely lacked any interest for the day ahead. When I asked him if he was struggling to get going after our staycation he said that it had been nice last week not having any obligations.

I think that the difference between our staycation and our usual holidays is that when you are away you know that it is not reality, you are staying somewhere different, often having meals out every day and it is quite clearly not the norm. Last week, on the other hand, featured a lot of our usual life – the same environment, eating out at our favourite restaurant and visiting places on our doorstep.

On some FIRE blogs I have come across the suggestion of taking mini-retirements, a few months off from work in order to practise being retired. From my perspective I had always seen this as something that wasn’t possible. I can’t just take a few months off work as my employer doesn’t allow it, so practising what having achieved FIRE would look like has not been on my radar. Looking back at our staycation I can see that it was a ‘mini’ mini-retirement. A glimpse of what life could be like if we didn’t have to go to work, or as Mr Simple put it, if we didn’t have any obligations. I think that this is why I have struggled getting back into work, as it involves doing things that I don’t want to do, which to some extent everyone’s working life contains.

On Monday I almost wished that I had never discovered the FIRE movement. Before, I was just ticking along nicely, planning to retire maybe at 60, not realising that anything else was possible. I almost felt resentment about having to work, which is a shame, because, as I say, on the whole I enjoy what I do.

Our main aim is to pay off our mortgage, which I know not everyone agrees with, but that is what we want to achieve. Any other objectives have to date been quite vague, but having had a taste of the good life has made me more determined to consider exactly what we are striving towards. As Stephen Covey says, ‘begin with the end in mind’. We need to know our destination before we make a plan as to how we are going to get there. So that’s my challenge to myself over the next few months, to get a clear picture of what our ideal life would be like and then draw up a roadmap of how we are going to get there.

So have you tried a staycation or a mini-retirement? If so, how did it feel when you didn’t have those usual obligations? I would love to hear. If you haven’t tried it, how about having a staycation over the next few months to get a taster of what life could look like at the end of your FIRE journey.