Early-retirement wannabe

mgdavid

thanks for all replies, much of use in different ways.
Utilities etc - I live in an area that regularly comes in the top 3 'best places to live' type lists, our central government contribution for local services is one of, if not the, lowest in the country so council tax is enormous. The house is detached and not modern so is probably not very energy-efficient (and I refuse to have a cold house).
The 'big ticket, white goods' list will include house maintenance like plumbers, gravel for the drive, fencing, not just the odd TV or cooker.
I do not regard us as extravagant or even average in the buying consumer goods stakes, we've had one new kitchen in 30 years, I suspect some of our friends think I'm cheapskate which I'm quietly proud of :-)
Ermine, I didn't mean to suggest 'it's impossible to have a very good life on less' , was just asking how is it done as the basic living essentials of keeping warm and dry and well-fed plus some tools to do a job seem to come to far more than 15k p.a. Was the Mr Mustache link correct? - it seemed to be the unrealistic Retire early if you save half your income rather than How to live on less (I've read some of his stuff before and found it over-simplistic, maybe I'm missing something.).
I'm also an INTJ (borderline ISTJ) so I do think and plan, and I think I know what I want to do after retirement, and it still isn't DIY or painting fences. It seems to me that some folk find ways of being busy in retirement by allowing chores to expand into the time available, but who knows, I'd love to hear more from gfplux please...

ermine

mgdavid wrote: »

so council tax is enormous. The house is detached and not modern so is probably not very energy-efficient (and I refuse to have a cold house).
The 'big ticket, white goods' list will include house maintenance like plumbers, gravel for the drive, fencing, not just the odd TV or cooker.

You've probably nailed most of the problems there. Retirement (and early retirement in particular) is tremendously sensitive to small variations in static costs. These must be ruthlessly hammered down - there's a tendency for them to creep up, and MMM again points the way...

You've got a lot of house there for a retired person/persons, which even if it were energy-efficient would still need more heating than a smaller space. The lack of energy-efficiency doesn't help the case, and indeed the rising cost of fuel over the next 20-30 years would give me concern with a house like that. Then you have a high council tax to add another millstone... There is, of course, an obvious way to tackle this problem!

Property is a funny old game in the UK. I was 'lucky' enough to be hammered by my first experience of it, when I stupidly bought in '89. As a result unlike every other Briton I hate the asset class with a vengeance, and never bought too much house, and paid it off as soon as I could. It's a much smaller proportion of my networth than is typical in the UK.

A family home that you've raised kids in is probably too large for your retirement needs. The excess square footage will insidiously bleed you dry - in extra council tax, in heating, in maintenance, in the simple effort of keeping it clean.

There's a strong case for rightsizing this, but it usually runs up against severe emotional roadblocks because in the UK we invest a lot of our nervous energy and hopes and dreams in housing.

A typical BTL landlord seems to allocate about 1% of the property value to annual maintenance, which I don't find hugely off as an owner-occupier. It shows the problems of having too much house - more house = more maintenance = more annual cost.

It is possible that MMMs post resonates more with me because of my much higher percentage of networth in financial as opposed to property assets. Property is a deadweight asset to my eyes - the worth of the house you live in is the imputed rent you'd otherwise have to pay. If I lived in a house worth twice as much I wouldn't use the extra space, though the costs would bear on me. The imputed rent doesn't go up but the costs would. Whereas with most financial assets twice as much asset pays you twice as much return, and you don't have to keep the damn thing clean or heat it

MMMs central thesis is that most middle class Americans buy way too much stuff for their needs, typically in depreciating assets like cars, or sterile assets like McMansions. If they put some of that money into assets that pay a return (property occupied by other people, financial investment or their own sweat equity in what we would know as BTL) and spent their money more intentionally they would find they can retire earlier.

In the UK we put more of our money into bricks and mortar than into SUVs, but his principles still apply

mgdavid

yep, spot on! However before downsizing I would need to dispose of a motorhome, trailer and two race cars (I said before I have an expensive hobby although worth mentioning it is not funded out of earned income). When I can no longer race through ill-health or penury then that will trigger a move. I agree excess space should earn its keep, I've suggested letting a room a few times but my CEO disagrees....

gallygirl

Totally agree with the comments about houses. The bigger the home, the bigger the liability. There is a real tendency when you get promoted to say 'woohoo, now I can afford a bigger house' - so, bigger mortgage, bigger running costs and the need/want to fill it with more 'stuff', rather than say 'woohoo, now I can save/invest more'.

Thanks to house price inflation, our house is worth just less than our combined income (slightly misleading as Mr GG and I together don't live together permanently). 2.5 times my income. I know very few people who have such a low salary: property ratio, but it's allowed us to buy btl properties and make big inroads into saving up to pay off all mortgages. We thought of moving a few years ago which would have added say 75k to mortgage - not that massive in the scheme of things, but the associated costs would have left us in a weaker position.

Having said that, I've never had a home I've loved - liked, been happy in, but never had the country cottage of my dreams that may make me feel differently. Mainly because the dream wasn't strong enough.

Marine_life

ermine wrote: »

Sit on the top of a green grass hill in summer with the bees buzzing around and maybe a glass of Pimms. And ask yourself what does a good life look like to me?

First of all I hate the imagine of sitting in grass in summer, I really hate the heat . A few years ago I was test driving convertibles and there was something strange about the experience - I just done like the wind in the hair experience!

However, its a very good (and difficult) question, what does a good (retirement) life look like?

Of course there are bits which are very easy to visualize - living in the mountains and spending days walking or exploring (in summer) or skiing in winter. Then there's the time spent cooking and discovering wine and (fitness permitting) long cycle rides.

But what's missing from my mental picture is the aim or goal. During our working lives we are always working towards something, whether it be directly to do with the job itself or something that the earnings from the job might deliver (perhaps a holiday or paying off the mortgage). I am not sure where everyone goes through that transition or whether there are new goals I should be looking for?

gallygirl

Marine_life wrote: »

But what's missing from my mental picture is the aim or goal. During our working lives we are always working towards something, whether it be directly to do with the job itself or something that the earnings from the job might deliver (perhaps a holiday or paying off the mortgage). I am not sure where everyone goes through that transition or whether there are new goals I should be looking for?

Personally, my goal will be contentment and time to BE rather than doing all the time.

dreaming

Have read this thread with interest as am shortly to take early retirement following redundancy at work. I will be 58 (the day before I leave work) and panicked a bit when it was first mooted nearly 2 years ago. However I have done the sums and will have a pension of circa 11k which I think I can live comfortably on (need a fingers crossed smiley here).
I live alone in a 2 bed bungalow with reasonable sized garden, and plan to pay mortgage off with some of my severance pay. I recently had solar panels fitted and have also increased insulation in house so hope to benefit from that power-wise. I have worked out a budget which includes allowance for car(both running and repairs), bills, food, clothes, gifts (Christmas + birthdays for family), and hopefully everything else I have paid out for in the last couple of years.
It's obviously a smaller budget than many have mentioned on here but I have no ambitions to travel or take up expensive hobbies - spending more time with family and friends is the main aim, as well as taking some creative writing courses and growing more. These are all budgeted for, and I plan to invest the rest of my severance pay to cover any major expenses which may crop up.
I love hearing about people's plans and experiences as it all adds to help me decide what I want out of life.

jamesd

mgdavid wrote: »

However before downsizing I would need to dispose of a motorhome, trailer and two race cars

Or you could look to downsize to a place that still has space for those things - land rather than building, perhaps.

mgdavid wrote: »

I didn't mean to suggest 'it's impossible to have a very good life on less' , was just asking how is it done as the basic living essentials of keeping warm and dry and well-fed plus some tools to do a job seem to come to far more than 15k p.a.

That's in part because of differences in views of what is essential and what is discretionary.

Two people, so a two bedroom flat or one bedroom flat is sufficient to be necessary. More is discretionary and could be eliminated. So I have a cheap place in a not expensive part of town and the lowest Council Tax band. Annual costs for the tax, insurance and maintenance aren't likely to exceed £1,500 a year. Add another thousand or later maybe two thousand if prices rise for heating and electricity use. Maybe £500 for water and sewerage charges. Now compare to yours and see how much is discretionary compared to mine that is closer to what is minimally required.

I don't have a car. Grocery deliveries in bulk are cheap, cheaper than just parking in town. The property is less than 50 meters from a corner shop and local Coop. Less than 800 meters from the local mall and main shopping area. Taxis are cheap at the rate I use them, compared to car ownership and its costs. How much of your spending is discretionary compared to mine in this area?

Food? Big deliveries get the core essentials taken care of, at moderate prices, though I could go cheaper. I might spend as much as a couple of thousand Pounds a year on such deliveries, extravagant compared to the true minimums. Maybe another five hundred a year on hot food deliveries.

Clothing? Insignificant for me.

I'm definitely not frugal but I do have a lower cost and spending base and that means that the thought of £12,000 a year doesn't scare me.

jamesd

dreaming wrote: »

am shortly to take early retirement following redundancy at work. I will be 58... will have a pension of circa 11k which I think I can live comfortably on ... and plan to pay mortgage off with some of my severance pay.

Why on earth would you choose to use severance money to pay off the mortgage?

You're just about to enter what is probably going to be the most financially stressed time of the rest of your life. That's not a time to be spending capital when you could take an income from it instead.

In eight or nine years your state pension will start. Why spend now instead of letting that increased income take care of the mortgage when you have that higher income?

What I'd be looking to do is extend the mortgage until ten years after state pension age, even better on interest only, to get a more even spendable income level between now and then.

Or, beyond that, I might even use equity release for that purpose, to get an income that's still more even. I don't care about inheritance but if you do, you could use the state pension income to pay this off.

dreaming

jamesd wrote: »

Why on earth would you choose to use severance money to pay off the mortgage?

You're just about to enter what is probably going to be the most financially stressed time of the rest of your life. That's not a time to be spending capital when you could take an income from it instead.

I have heard this advice before but I'm not entirely sure it is the correct thing for me. Apart from the psychological/emotional
satisfaction I would have from owning my house outright, I don't think I would generate enough income to do more than service the mortgage payments. To be honest I haven't looked into it in minute detail but I am meeting with an IFA in a few weeks so it will definitely be considered. However it doesn't "sit right" with me somehow - I will have to look at the facts and figures before I can make the final decision.
I am not sure that this is going to be the most financially stressed time of my life. I think I lived through that when the children were young and interest rates were sky high and we (then husband and I +2 kids)seriously came close to losing our home. We had to sell the car and look for all ways to make a bit more income (a bit how people are finding life as it happens). At least now I only have me to think about and still have the option of looking for work if absolutely necessary. But actually I would rather sit in the garden and read (library books whilst the library service still exists!). There is definitely more to life than money.