Early-retirement wannabe

YoungBusinessman

mildredalien wrote: »

I don't think this is a good link for talking about retiring early on a moderate income - what this guy calls 'a normal salary' in fact is a salary that goes from $40k to $160k joint income in only 5 years and is at around $200k after 8 years.

Also I think it's a bit of a red herring to talk about 'if you work hard you can retire early'. Plenty of people work hard but earn average salaries. Is there anyone who has retired early on a salary of £25k or so? Is that even possible with smart investing?

I'm doubting my ability to retire much earlier than 65 as I'm not even on the property ladder yet. Bad choices in my early 20s are mainly at fault there, but the huge property bubble isn't filling me with confidence! I'll keep soldiering on though and squirreling money away, can never save too much for retirement I guess :rotfl:

Well im early 20's, hopefully time on my side to make the right choices. I think in 40 years time, 60 will be considered early retirement as opposed to my idea of early right now being by early 50s. According to above link, expenses for a year times 25 being enough to retire at any age i need about £350k. So i hope its not an accurate calculation!

jamesd

It's possible to retire early on a salary of £25k. Not as early but the same fundamental question of earnings vs spending applies at any income level. Spend less than you earn and you accumulate money. How fast depends on how much less. Then the time taken depends in part on the difference between how fast you accumulate and how much you want to live on. The bigger the gap, the less time it will take to get there.

Choices like where to live can make a really big difference. A cheap place with small mortgage can save a lot of money compared to renting or buying a full house as a starter home. A place that needs work can save significant money and increase potential capital gains. It's not hard to save more than even bubble-sized property value drops if you buy a cheap enough place and save enough in rent. Just think of say a real example I know of, an interest only mortgage of around £55k variable at Bank Rate plus 2.49% vs rent of £425 a month and more in the same street (estimated at more like 525 for the place with the mortgage). The full mortgage interest cost is just £137.50 a month so you start out with a gain of £3,450 a year before the other costs of owning a place, like perhaps £150 a year of buildings insurance and assorted other costs. Double the interest cost and you're still going to be well ahead. Even at 8% the mortgage interest costs is only £367 a month and you're likely to be ahead.

With smart investing you might make 10% a year plus inflation, compared to a long term average of around 5.25% plus inflation from the UK stock market. Perhaps more, perhaps less.

itm2

jamesd wrote: »

It's possible to retire early on a salary of £25k. Not as early but the same fundamental question of earnings vs spending applies at any income level. Spend less than you earn and you accumulate money. How fast depends on how much less. Then the time taken depends in part on the difference between how fast you accumulate and how much you want to live on. The bigger the gap, the less time it will take to get there.

Choices like where to live can make a really big difference. A cheap place with small mortgage can save a lot of money compared to renting or buying a full house as a starter home. A place that needs work can save significant money and increase potential capital gains. It's not hard to save more than even bubble-sized property value drops if you buy a cheap enough place and save enough in rent. Just think of say a real example I know of, an interest only mortgage of around £55k variable at Bank Rate plus 2.49% vs rent of £425 a month and more in the same street (estimated at more like 525 for the place with the mortgage). The full mortgage interest cost is just £137.50 a month so you start out with a gain of £3,450 a year before the other costs of owning a place, like perhaps £150 a year of buildings insurance and assorted other costs. Double the interest cost and you're still going to be well ahead. Even at 8% the mortgage interest costs is only £367 a month and you're likely to be ahead.

With smart investing you might make 10% a year plus inflation, compared to a long term average of around 5.25% plus inflation from the UK stock market. Perhaps more, perhaps less.

Something else that helped me alot was choosing mortgages with discount rates, then ditching and switching to a new discounted deal as soon as the discount period ended. Over the last 10 years of my mortgage I was effectively paying about 2% below the market rate the whole time, and I reckon this saved me at least £20k over that period. It took a bit of organisation and discipline, and some paperwork every 2-3 years, but I ended up paying off the mortgage earlier than planned.

elantan

That'll be the spam then ... So we have went from ham and cheese to spam ... Now that's money saving

Marine_life

Another week roles by in the life of a ERW.

I feel slightly guilt that I occasionally dabble with this http://7is7.com/otto/countdown.html site. Which not only tells me that I now have 509 days left until my potential early retirement date but seems to rather depressingly point to how quickly life is wasted!

Anyway its been a funny week of ups and downs.

Earlier in the week we had a nice chunky tay refund which will not onl pay for some much needed work on the house but will also pay for the family holiday this summer and leave some change over to pa for the final instalment of son's school fees (yay-hay). This is only a temporary reprieve as hopefully next year we will begin paying university fees.

Also on the positive side I was told I was getting a promotion (subject to confirmation) which is nice as I thought I had largely been passed by. Somewhat surprisingly there was also some discussion about whether I would be interested in a stint in the middle east! I must admit to being a little bit tempted.

On the downside I've been feeling exhausted this week - maybe its the persistent rain but it seems like its been on the one hand difficult to sleep but on the other hand feeling very tired - I think the soluton is more alcohol

taktikback

don't pay university fees up front. Save the money and give it to them later if you must. The "debt" isn't a debt, it's just a deferred tax liability @ 9% of income over £21K -and it all gets written off after 30 years. Only simpletons pay it up front...

jamesd

One of the "interesting" things when getting close to having enough money is that the net pay I get each month is now around the daily volatility of investments, getting towards rounding error territory when I wonder whether I will or won't go over some convenient round number investment value by the end of a month.

jamesd

taktikback, the time value of money is indeed worth knowing. The gain from not paying up front but then say buying a home sooner using that capital can be substantially more than any interest cost!

Marine_life

taktikback wrote: »

don't pay university fees up front. Save the money and give it to them later if you must. The "debt" isn't a debt, it's just a deferred tax liability @ 9% of income over £21K -and it all gets written off after 30 years. Only simpletons pay it up front...

I think "simpleton" is a bit harsh ;-)

It is indeed a debt and one that accrues interest. Like any other debt or investment there are a number of things that need to be taken into account including earnings potential and (in my case) currency risk. So we will likely pay - you don't have to.

atush

taktikback wrote: »

don't pay university fees up front. Save the money and give it to them later if you must. The "debt" isn't a debt, it's just a deferred tax liability @ 9% of income over £21K -and it all gets written off after 30 years. Only simpletons pay it up front...

I don't agree. At over 6% interest for new students, and with children who have graduated and will graduate with law degrees etc which means high salaries- I think they will be better off w/o debt.

On the other hand, if you have the prospect of degrees in women's studies and media studies and the like- yes you'd be better off helping them with property and pensions as the chances of them earning enough to pay back those loans in full is not certain.

So it depends on the degree and university and their likely career.