frugality living intentionally shares: early retirement
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It’s coming up to about nine months since I retired about eight years early from work – that’s eight years than the normal retirement age for The Firm. Truth be told, I retired for negative reasons rather than positive, but I’m not going to go on about those particularly. Because people just don’t bang the drum for the positive things that happen when you are retired. Like everybody else, I assumed it was all about the money. That’s everybody’s greatest fear. What you don’t hear about is the multiplicity of little things that all add up to a far better experience of life.
I caution that to make these work for you, you must eliminate debt, and that means all debt. Yes, your mortgage too 1, and that means doing without a lot of consumables while working, and probably having a reasonable amount of luck at times. You don’t borrow money from a bank, you borrow it from your future self, and if your future self will have less income than your current self, it makes no sense to be in debt.
So what does life retired look like? It’s all about owning your own time. It was given you as your birthright but was taken away from you early in life. Somebody said to me that time is the ultimate consumer good. He has a point, though I had to live it to know it, and also to have enough time to crawl from the wreckage of my curtailed career.
Owning your own time is delightful – you have the choice of what to do and when to do it. Before retiring it pays to prepare your human setting too, who will you know and spend time with, and that’s worth giving some thought to that before you retire. It’s particularly important for early retirees because a lot of their existing friends and acquaintances will still be working, some people I knew who retired even earlier than I did felt lonely, particularly those that retired in their mid forties, and I learned from their experiences – these were typically single guys, it took me longer than for them. Give thought to how you will maintain and develop your human connections, because as you get older it is Who is in your life that matters, not so much What is in your life.
The upside – my skin looks better and younger, the bags under the eyes fade, I slowly lose some of the weight that accumulated over my years behind a desk and in the lab. I walk more and bike more. I hear the birdsong, if there’s a good blackbird I will sit and listen to him for a while. I sit down for meals at a table rather than scoffing overpriced sarnies at my desk, I have more time to spend with the people I care about, I can read books, I can build things, learn how do use woodworking tools better, enjoy the company of people more, listen to people better, learn more, play more.
I watch less TV than I did while working. I tolerate no ads – I use ad-block plus on the Internet and less TV cans that at source, on the occasions I do watch TV I use a PVR and fast forward over the ads. If I have a requirement that may need buying something I use google – I buy things on my own terms, not because somebody is creating a desire in my head for shit I don’t need. I don’t buy anything on impulse, I wait at least a couple of days to see if the want is really a want. But if it is, and it fits my values, I buy it. If an offer has gone and I need to pay 10% more, so be it, that’s the price of living on my own terms and agenda. I don’t piss about with low-rent stuff like quidco and cashback, I have three credit cards but if I use them I pay them off in full. I’ll never get another credit card because I have no wage income, just investment income so I presumably look like a deadbeat living under railway arches on a credit check. Do I care? No – if the existing cards kick me off then I’ll pay by debit card or by cash, because I Don’t. Borrow. Money. ever since discharging my mortgage.
I can’t recommend early retirement enough. But you do need to be prepared to make the ‘sacrifice’ of living on less. I surrendered eight years of income when I retired, if you add all that up it’s a lot of money. I was happy to pay the opportunity cost, because that’s also eight years of life I’ll never live again. For me that was the right call – indeed perhaps I should have looked ahead and done it earlier.
Early retirement means I have less Stuff in my life. But I have more joy. Early retirees needs to speak up for it, because where are the ads on TV for Earn Less and Buy Less but Live More? We in Britain are so much richer now than we were thirty years ago, when I started my working life, I heard an estimation on the radio we have about twice as much disposable income as people had then. Stuff rather than Time seems to have got the thick end of our extra income. I am in my early fifties – the London I grew up in used coal fires and many houses had no central heating, some still had outside toilets. Cold and damp and the associated aches and pains were prevalent in the adults, so when I hear the Joseph Roundtree Foundation talk in terms of needing Sky TV to take an active part in society I wonder if perspective hasn’t been lost. We really have so much now. Ivan Illich called it out well in Tools for Conviviality in 1972. We are so much richer now than we were then, but are we any wealthier, I wonder? You are wealthy when more money wouldn’t massively change where you live, and how you live…
For each of us the sands are running through the hourglass, one day at a time. Making the call on as to where you place the balance between More Stuff and More Life is one of those things that is Important but not Urgent, so it always goes to the back of the to-do list. It’s worth dusting that question off and taking the time out to work through the options. You can measure more Stuff, and you can measure More Money. You can’t measure More Life. And I’ll stick my neck out and say Tom Peters was absolutely full of shit when he said you get what you measure. It works a peach in business, maybe. But in Life, it causes you to prioritise the measurable, the ‘how big is my…’ insert KPI here. And yet, when people look back on their life at the end of it, it is often the immeasurables – seeing their children grow up, and who they spent time with – or didn’t’ spend enough time with. The days are long, but the years are short. Though it’s schmaltzy in a uniquely American way, Gretchen Rubin nailed it. Don’t forget to live in the moment, because those moments are precious and they are running out.
My eventual projected annual expenditure is about a fifth of what I was being paid at The Firm, and I have a better quality of life – because I determine what a day looks like. There are other things that are odd about being retired. I have deliberately and intentionally avoided the whole work issue. I toyed with claiming JSA but figured a) I’m not looking for work and b) the stress of wanting to lamp some pipsqueak in the Jobcentre wasn’t worth the £1500 that six month’s contributions based JSA is worth, particularly as I’d have to pay tax on it.
Managing personal finances after work is enormously different to when you are working. While working, my income was single valued and knowable. Now, it comes from multiple volatile and erratic streams. I have the ISA income, which I reinvest. A similar sized lump of non-ISA shareholdings, that I have to capital gains spring and shift to the ISA over the years. And then cash holdings. These are horrendously different from what they were when I was working. What you must not do, when you retire early is to look at these accounts, and go Wow, I am rich. It is the lottery winner’s curse – most people have been used to a regular income and virtually zero savings all their working lives. So suddenly when it’s all savings and no income they see Big Numbers in their bank accounts and think they are rich, and lose their heads.
They’re not rich. Capital is worth about 5% as income, so divide all those numbers mentally by 20, high-roller. So unless you have half a million in the bank, then you aren’t even going to be living on the UK average wage. I don’t have anywhere near that much in the bank, BTW, though I don’t have the parasitic housing costs most people have because I paid down my mortgage. And if you do have half a million pounds in the bank then you need to remember what happened to the good people of Cyprus recently, and make sure you don’t have it all in one place, because you will probably be called upon to help with the national debt at some stage.
When I left work, I started to see those big numbers, and it is hard to explain just how scary and unreal they seem. I froze, and tried to keep the headline networth figure from falling. I’ve never worried about networth before, indeed there is no figure for house networth in my accounts, whereas this evanescent figure seems to be all that my fellow-Brits seem to concern themselves with. Maintaining networth was not the design aim of the plan, but there is a visceral aspect to money. All of a sudden I see strange numbers, and the power is cut, there is not steady income. The analytical solution I had designed over the preceding years was correct, but I found it hard to live it at first, to surrender a little bit of networth each month, in a long glide path for about three years. Even at the planned rate of descent, I would have half the nominal value of the capital, though more would be in ISAs by then.
I consider myself a reasonably hardened investor. I flew into the 2009 storm, in both AVCs and ISA savings. I’ve seen individual stocks plunge by over half, and recover, first on a total return basis and then on a nominal basis. But I quailed when faced with living a plan I had designed and was going slightly better than planned, because it was so alien to my experience of handling money. Don’t underestimate that effect of losing an income, even if you amass large amounts of capital compared to your mortgage-paying wage-slave life. Perhaps I was overly irrational etc, but I believe that it is not possible to be successful and totally rational about money. It is crystallised human work, a claim on other people’s effort. I must be involved to animate the plan and couple intention with action. And it still took me months to overcome the resistance to doing what I had planned myself
I recently discovered I have been working without knowing about it, fortunately in time to stop getting paid before the tax year ends In times gone by I was interested in sound recording, and made a few field recordings which I added to a microstock agency. I’m not talented enough as a photographer or a recordist to make headway in that sort of this as Ermine photography. But microstock works for me – I don’t have to deal with people or rights and all that, the agency sorts that for me. The downside, of course, is you expect to make the price of a couple of pints of beer on it, or maybe a decent meal out.
I haven’t bothered to track any of this for a while. It appears that these firms are making me significant money, and I also have a few website estates that bring in a fair amount of Adsense revenue (this isn’t one of them ). I have told all these guys to hold payment till mid April to forestall creeping over the personal allowance this year. It is, however, very sobering to find that this stuff, which I had forgotten about, is actually making me about the same amount of income as my ISA, which has received by far the greatest part of my attention. My field recording equipment lies on a shelf covered in dust now, because the river of creativity dried for a few years as I focused all energy on getting out of The Firm.
I had a strange experience a few weeks ago, I travelled to London to listen to a concert by a singer whose records once kept the thin thread of the young ermine’s fire alive through a long night until the break of dawn during a difficult time at university. The past is a foreign country – thirty years ago there were no mobile phones, indeed without phones at all in the typical sort of crummy bedsits I rented them. If you passed midnight then you had to reach the break of day before assistance could be raised if you couldn’t haul your ass up the stairs and into the cold city night with no Tube service.
As I heard the song once again it resonated across the years and changed something. In reminding me of that turning point it invoked another and the dead hand that jammed the creative centre unblocked, and the spark flickered into life once again.
For several years I fell back and fell back, trying to save enough money to derisk the financial issues. I had saved enough money – I still have no pension income, and my run rate is a little bit lower than originally designed. But I also focused a lot of effort on trying to understand the financial conundrum of how to make money out of money. That was reasonable, because towards the end of working for the Firm, the flame of creativity flickered and failed. The accumulated financial capital was all the resources I could count on, because my human capital had fallen to zero – without the creative spark I could not drive things forward. I would look at code and it would all swim before my eyes and have no relation to other bits, my photographs were technically okay but pedestrian. I would hear things that once meant something to me and they did not lift my spirits. It was too easy for projects to end up as half a page of scribbled lines or half a circuit board and nothing else. I’m not going to sell my time to another employer – I am too old to be employed at a level that would meet what I would charge for my time. That means I would have to create value, and doing that without a creative spark just doesn’t happen.
However, when I discover that two lots of legacy activities are now passively earning me more return than my multi-year and reasonably well performing ISA is then it begs the question on whether I have the focus right for the me now as opposed to the me 12 months ago. Money is not the only way to buy passive income, and the tragedy is you can only buy about £500 worth p.a. of tax-free income in an ISA every year. And obviously it costs you 10 grand a go, though this is ideally not a sunk cost. I can probably beat that income without breaking a sweat with a bit of improvement ot the website and some recordings. I could blow the dust of my Sound Devices 702 field recorder and Sennheiser microphones and get out in the field are record interesting sounds. I think people use the sounds in video games, I haven’t played video games since the 1980s but I got a book out of the library to see how people master audio for games when I discovered this.
I don’t miss work. One little bit. I don’t miss the Calvinist sense of purpose or all that sort of garbage. I have no time for the ‘find the work you love’ brigade. I’m with the Mexican fisherman. That isn’t to say that I spend my days lying in bed – the world has plenty of wrinkles enough to keep an inquisitive Ermine’s mind entertained.
There is the lovely story of the flight of the sparrow through the mead hall by the Venerable Bede’s Ecclesiastical History of the English People
the present life of man upon earth, O King, seems to me in comparison with that time which is unknown to us like the swift flight of a sparrow through mead-hall where you sit at supper in winter, with your Ealdormen and thanes, while the fire blazes in the midst and the hall is warmed, but the wintry storms of rain or snow are raging abroad.
The sparrow, flying in at one door and immediately out at another, whilst he is within, is safe from the wintry tempest, but after a short space of fair weather, he immediately vanishes out of your sight, passing from winter to winter again. So this life of man appears for a little while, but of what is to follow or what went before we know nothing at all. If, therefore, this new doctrine tells us something more certain, it seems justly to be followed in our kingdom.
Work is somehow like an inverse of that – the young sparrow starts in childhood from the warmth of the mead hall, then enters the life of work, where he battles the wintry storms of other people having control of his time and purpose, until perhaps later on he re-enters the warmth of the mead hall, in control of his own resources and destiny, perhaps for the first time.
I didn’t particularly dislike work for the vast majority of my working life. But work isn’t what life is about. It’s a means to an end. It’s far too easy to lose sight of that, on the long journey through the wintry tunnel of work, and it’s too easy to build must-haves into life to compensate for the long winter. But the tragedy is that these must-haves – the extra house square-footage, the chichi holidays and city breaks, they all add up. And so you can find that your winter holds no spring, and the sparrow must fly onwards till he falls out of the sky.
Work. It’s overrated compared to Life IMO… Each to their own, but I hear a lot of grumbling about work. And for sure, I’ve done my fair share of grumbling too, but at least in the end I took the fight to the enemy. It’s not all all about the money. It’s also about the time. You can save money, sort of. You can spend less of it. But you can’t save time – try spending less than seven days over the next week. That’s why you need to think about living in the moment. The Moving Finger writes; and, having writ, moves on…
- an exception can be made for this if you are saving tax-free in a pension with the aim of using the 25% pension commencement lump sum to pay off the mortgage in full on retirement. In my view this isn’t the clear-cut win for early retirees who will defer their pension for 5 years or more, but IFAs seem to recommend it for many people. ↩