peak oil personal finance: financial independence
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Early in my current job, sometime in the early 1990s, there was a all personnel management course mandated called “the Winning Edge”, I think it was from these guys, indeed the geezer in the video looks like the chap who led the course, the intervening 20 years has not been too hard on him.
Now most management courses are utter codswallop. Of course we could all get more stuff done if we concentrated more/cared more/worked longer/smarter/harder and pretty much every management course I’ve been on has been a variant of one or more of those themes, together with the latest management school fad. You know, the usual suspects, total quality management, anything from Peter Drucker, management by objectives, management by fear(oops, sorry, I meant to say modern performance management), management by incentives, management by walking around. The one course I’ve never seen is the one titled “What’s the difference between Leadership and Management, Why it Matters and How You can Tell One from the Other” but that’s a rant for another day.
This course was subtly different. At the time the Firm was trying to get rid of a whole bunch of people by some pretty awesome financial incentives, particularly for the old fossils that were about as old as I am now These guys tended to be lifers with some twenty or thirty years at the Firm, and a fairly set view of what they were going to do – ie carry on to 60 and retire. The aim was to jolly them along a bit and get them to take up the financial incentives and reduce the wage bill.
So the Winning Edge was a little different, asking what limiting beliefs people had and what they really want. I sat in the room of a fine hotel in Aldeburgh, looking dreamily out of the window at the seagulls wheeling about in the late winter sunshine. You know how it is when you ought to be paying attention but you’re thinking of that pretty girl who served you lunch. Fortunately somewhere in the back of your mind there’s a little guy with a tape recorder recording what you should be listening to, and every so often he picks up something odd and knocks on the glass window in your brain between the main thread of consciousness and everything else. He says “Oi, you might want to hear this” , backs the tape up a bit and replays it.
So he does that and my mind wanders back from the girl, and the seagulls, and how it is that there’s so much dust in the air that you can see the sunbeams, and the little guy rolls tape.
And I realise that in the last few seconds that Mr Big Cheese Departmental Manager has been standing up in this Aldeburgh hotel and telling the whole department that what he would really like to have is Financial Independence.
That’s what made me sit up and listen. Here was a bloke in his late forties, on a wedge somewhere north of 35 grand at the time. The Bank of England tells me that is £57,000 in today’s money. I was a lowly pup on less than half that at the time, and I was staggered. How on earth can this guy not feel financially independent when he’s on twice as much money, what the heck is up with that?
I was happy in my job at the time and so I didn’t understand a) what financial independence was and b) why you would want to have it. The difference between debt and deficit was not clear to me.
Fast forward almost a couple of decades to April 2009 and I have the pleasure of hearing a sociopathic manager not give a damn about some traumatic elements that had happened to me in the last year, admittedly outside work, harping on that I was in an area where my skills didn’t fit.
There was a different area at work where there were customers and work for those skills, but due to ‘headcount limitations’ he needed bodies. So he said I had to retrain for some Cisco crap which I could see plain as the light of day was going to be outsourced to India in the next couple of years, and I thought to myself “I am pig-sick of listening to jumped-up twits like you wittering on about your damned objectives. I don’t like the cut of your jib, mate, and I can see where this is going. What’s good for you, buddy, ain’t looking so good for me, and it bores me senseless, too.”
I mean, it’s not hard, guys. This is network plumbing. Network configuration is easily remoteable, shifting data from one place to another is what networking equipment does for a living. And there are shedloads of guys in Bangalore that are reasonably bright, reasonably young and are prepared to work for a third of what I am prepared to work for. As a shareholder I happened to know that the Firm had just taken a big stake in an Indian BPO/IT company. So why exactly should I retrain to jump into this bear trap? Obviously I know enough networking to get stuff going as basic professional competence, but memorising tedious Cisco-speak to get a CCIE only to be hoofed in a couple of years (ie now) wasn’t where I saw success lying.
In that interaction I understood what the meaning of financial independence was, and like Proust’s madeleines I recalled Mr Winning Edge and the Big Cheese stating he wanted financial independence. Because I didn’t have financial independence I needed to work to keep a roof over my head. I had to act all nice to Mr Sociopathic Line Manager and smile as he was giving me the BS that this was all good for my career development (ie his objectives), as opposed to what I would do to a double glazing salesman trying to sell me BS – ie tell him to go forth and multiply.
I’ve just been back to Mr Winning Edge’s website and he is still harping on about the same things
- Do you feel that events and other people around you control your life?
- Do you struggle to find the motivation and passion you think you should have?
- Do you find yourself a victim of your own emotional states?
- Do you have a clear image of where your life is going and what you want from it?
- Do you feel fulfilled in your career and do you feel you are achieving everything you can?
Now a lot of this is in danger of being Calvinist cobblers, inasmuch as the aim of life is to have a good time and have fun, not get trapped in Max Weber’s Iron Cage of work. I was okay with all of those five as the young pup, but as I listened nearly 20 years later to the twerp explaining to me that I had the wrong skills some of those answers didn’t look good, a bit more like
- Yes, I have to listen to sociopathic managers like you drivel on trying to maximize your performance at the cost of shafting me
- Yes, see 1 above
- Perhaps yes, there isn’t so much I would like to see now as your smug face missing a few teeth…
- Yup, as far away from here as is practicable.
- No, it’s tedious when I am being told to throw away what I know so I can be outsourced. I wasn’t born yesterday, mate.
Not a good situation. At least I’ve managed to get this twerp out of my life, more by luck than judgement. When you have an experience like that, you have two choices. You can either surrender and suck it up, or you can examine what you need to do to kill the beast.
So I rolled up my sleeves, immediately took out a Cash ISA in March 09 for about three and a half grand, and canned all discretionary consumer spending. In April 09 I topped up that cash ISA to seven and a bit grand, and figured after three months of saving I was done with emergency fund requirements, it was time to start buying financial independence. For various reasons the earliest it makes sense for me to draw my pension is 2015, which is also about the latest it makes sense as otherwise the Government will start stealing more and more of it as tax (pensions are taxed as income in the UK). Although I’d had share ISAs before, the traumatic experience led to all that being liquidated, fortunately before the credit crunch, so it was time to start again.
At the same time it was time to stop the Government stealing so much of my income in tax so pumping up my pension AVCs gets rid of my 40% tax liability and then some. All enabled by locking down spending. Freedom from tossers telling you what to do comes at a price. I haven’t had a holiday away since 2008 and started to attack my energy consumption and any other steady costs – that means cold turkey on consumerism, charitable spending, the lot. I have become slightly less hard-line as time went by and reinstated a couple of the latter items after examining my values, but generally the hatches are battened down.
Financial independence is a funny old thing, and it appears to have crept up on me, silently, without giving me a chance to break out the champagne. I use Quicken 98 to manage my finances, and observed recently that if I divide my total cash savings by four I have more than my yearly essential running costs.
My shares ISA don’t help that much, because I can only buy an income of about £500 a year. That’s assuming a yield of 5% on about £10200 invested a year, and I only have a year and a half because 2009 has half the ISA allocation to cash, and 2011′s year hasn’t started yet.
Now it is a meagre form of financial independence – because I would have to run with everything locked down until 2015. That means living like ERE, which, although I agree with his sentiment
Success is having everything you need and doing everything you want. It is not doing everything you need to have everything you want.
I find it just too spartan for my tastes. I am also older than Jacob and a damn sight less fit, and aware that although I can easily chop firewood now that won’t last 30,40 years into the future. So the financial independence I have now is of a paltry and meagre kind, though I will be significantly better off from 2015. So there are good reasons to carry on working, while accepting I may fall into the one more year before comfort fallacy:
- I have at least one possible reasonably expensive project I want to start when retired for which I’d like to save my part of the money ahead
- The advance guard of Peak Oil seems to be rapping at the door. An awful lot of things will get a lot dearer, and there will be enormous changes to the economy if indeed it survives intact. My financial investments may be rendered down to toilet paper so relying on those may be unwise until the smoke clears a bit…
The original plan was to win freedom in three years time, so I have a year to go, and some other conditions that make it better in a year and a half (Sept 2012 not April 2012). There is something gratifying in passing this milestone a little bit early, as a result of being able to reduce essential spending by more than I had estimated.
Oh and before anybody tries to bite me for being a lazy b*d and being a load on society, note that anybody with capital of more than £16,000 is automatically debarred from claiming any Government benefits until they reach 66 (currently in my case). In saving and discharging my mortgage I took the decision (knowingly ahead, FWIW) to cut myself off from the support of the government for my income. So I’m not living off your taxes, bud
As for the term Findependence, I pinched it from John Chevreau’s Findependence Day. I’ve never read it, but the summary as he was hawking the book inspired me as I made the call whether to suck it up or take the fight to the enemy in 2009. You can read the first chapter here. It’s not that applicable to be as I’d need to lose a few birthdays to start from where his characters start, but I’ve never had some of their problems either