Plough money in, live quite frugally, am I wrong?

MovingForwards

You're planning on doing what I've started to do, save as much as possible to enable early retirement. Difference is I do have health issues, nothing life shortening, but does impact day to day living and I do feel not working full-time / at all would give me a better quality of life.

First thing I did was work out how much my expenses are, without work / mortgage / most savings (kept car savings in as I also only run an old car). Knowing that figure meant I knew how much I needed each year on retiring and how much I would need to knock one year off my working life.

There is a fine line with saving every penny and parting with cash to do things eg property repairs and maintenance. 

sevenhills

I live on £1200 per month, so living frugally is a must. I am amassing more wealth as I get older, I don't want to end up an old skinflint, I am trying to judge when I can relax my frugalness.

I am 59 so not too far to go, I project that I will be richer when I get my state pension, but the gap is too big yet.

MaxiRobriguez

"Why save when you could be hit by a bus tomorrow. Live life now!"

If you get hit by a bus tomorrow then whatever you've bought today you've only got 24 hours of enjoyment out of at best, and that assumes you actually get enjoyment out of the things you buy. For many people, they end up buying "stuff" to keep up with the Jones'.

Turn the question on it's head. "What if you're not hit by a bus tomorrow, what if you live to 100?"

Will you be able to live in a dignified way for 30 odd years or are you going to be one of the people choosing between a meal and heating later on in life because a flash new car was more important than saving?

Ultimately it's your choice, people have different things which motivate them and different desires for their life. For me personally I want to leave the rat race as soon as possible so I can focus on my passions which unfortunately are not something I can monetise. I also want to be able to allow my wife to retire early despite her low earnings and give my son (and possible future son/daughter) a headstart in life because I think he/they will find it just as difficult as I have to get ahead in life. That combination of things for me means a pre-tax saving rate of 60%. So whilst I earn enough to buy a new Audi A8 outright, the car we're running is a ten year old Yaris. That's the sacrifice made to generate enough wealth to leave the workplace before 50 whilst also paying for 2 kids uni fees, house deposits and leaving them both six figure inheritances. 

Your money, your choice.

whatstheplan

Alexland said:

The house opposite has new owners who are spending lots of money making it really nice but it's made the lack of investment in our house more obvious so this year we are doing jobs that I had been putting off such as removing roof moss, replacing garage doors, relaying the drive, etc to make ours nice too.

Yeah I get that.  My property is in need of some tlc to keep it in the 'average' bracket (it'll never be an A1 property whilst I own it due to previously given reasons) so I intend to spend a bit on it this year.  I've just accepted the fact that if I do ever move, the house will have a 'non-modern' kitchen, bathroom, decor and will be seen as needing updating.  I don't intend to splash cash on upgrades that at best secure you an extra few thousand on the asking price.  I suppose it's a lot to do with your personal circumstance, if I had a wife and kids I might be motivated to keep it updated (or a wife 'asking' me to keep it so!) however that's not my life.

Marcusian said:

I want to do things that give me a buzz now, not when I am 70. I am more than happy to chill and live a spartan life when I am older.  I guess it's a balance, but I just don't get much pleasure from thinking I can be better off when I am 70 at the expense of being better off at 40 when I am looking to obtain assets that need my energy. 

Yeah I get this also, suppose that's all down to personal choice and income.  If I earned £x more than I do now, I could in theory use that money to do more things now and I'd still have my remaining income for investing.  However if I was to do more stuff on my current income, my investment pot would be reduced perhaps quite significantly.  The fact I'm only starting now (investing) and not 20 years ago also has a bearing.  I think I'd rather sacrifice now to hopefully get out my 9-5 a few years earlier as oppose to spending more now and resigning myself to more years of work.

Albermarle said:

And my car was bought new ... in 2008. 

It might feel good to be saving money on not buying a new car but there are some downsides  . The pollution from modern cars ( and not just electric/hybrids) is a fraction of what it was even 10 years. and fuel economy is better . Also cars have a lot more safety features nowadays - automatic braking - blind spot monitoring - lane departure warnings - more airbags etc 

I suppose for me, I'd almost look on a newer car as a poor use of my cash.  Even before lockdown I simply wasn't doing the miles.  Car mainly used for my 9-5 commute (16ish miles there and back)  and popping to family/friends all local.  Whereas years ago I had to do more work miles and also travelled about more.  It's changed priorities for me.  If my current car costs me £500 a year to keep it on the road (e.g. service/mot repairs)  for me that's still cheap motoring.  Spending x thousands on a newer car will only happen when my current car gives up completely, although I do take your point re environmental and safety aspects.

steampowered

whatstheplan said:

'But what if you don't live to an older age, you'll have been investing all that money that could have been going towards things that give you pleasure during your working years?'  

My response would be "What if you live to 100? If you retire at 65 with nothing saved, then that's 35 years you'll be living in poverty".

I know lots of retired people that go on holidays, take up new hobbies and help their communities. Life doesn't stop just because you have retired !

There is of course a balance to be struck between spending now vs. saving for later. You should never feel guilty about spending on things which improve your enjoyment of life, so long as you can afford it.

I like Martin's money mantras. If you are skint - "Do I need it? Can I afford it?". If you are not skin - "Will I use it? Is it worth it?"

Albermarle

 I suppose it's a lot to do with your personal circumstance, if I had a wife and kids I might be motivated to keep it updated (or a wife 'asking' me to keep it so!) however that's not my life.

I can imagine if I was single , there would be less spent on home improvements 

whatstheplan

Albermarle said:

 I suppose it's a lot to do with your personal circumstance, if I had a wife and kids I might be motivated to keep it updated (or a wife 'asking' me to keep it so!) however that's not my life.

I can imagine if I was single , there would be less spent on home improvements 

There are some benefits to solo living.  I can unbox something and if I so desire leave the box in the corner of the dining room, hall wherever for days, weeks, months and there's no one to bend my ear about it

I can leave dishes unwashed for a day or two ...

I can channel hop to my hearts desire ...

etc etc.

dunroving

whatstheplan said:

As I've touched on in other topics, I'm 49 years old, live alone, no kids etc.  Work full-time, reasonably secure employment, been paying into a workplace pension for 16ish years.  Other than 3 x BTLs (low value properties, mortgaged, low rental income) I've never invested in my life.  I now plan to change this with the objective of retiring as soon as possible, ideally in the 58-60 age bracket as oppose to working on until I'm 65-67.

Tbh I don't do much with my life, therefore my expenditure on so-called luxuries is quite low.  I'm not interested in doing my residential property up with the latest kitchen, bathroom etc.  I don't holiday abroad.  I don't splash cash on clothes, gadgets etc.  And my car was bought new ... in 2008.  I say none of this to invoke sympathy, I'm generally quite happy with my life and my personal rationale is if I go out tomorrow and buy a £40k car, x weeks later the novelty of having it will have worn off so why bother.  If I genuinely had the cash to burn I'd no doubt have many of life's material luxuries, however I'm not in that financial position.

My thought process is, starting this year, to invest as much as I reasonably can to work towards retiring earlier.  I'm still scoping options, one of which might be making additional contributions into my workplace pension.  I'm also looking at a stocks and shares ISA.  Note, I don't intend to leave myself devoid of ready cash and will likely retain circa £8k in my standard savings account for day to day living and to cater for the odd occasion when I do decide to treat myself e.g. new telly or to cover unexpected bills.  So my high level strategy from hereon in can probably be summarised as maintaining the £8k 'float' and investing every ... other ... penny.

However, regardless of how I actually invest, I was speaking to a family member about this earlier and they weren't convinced.  I'm not saying they were wrong (we all have different objectives and approaches to life) however they intimated 'But what if you don't live to an older age, you'll have been investing all that money that could have been going towards things that give you pleasure during your working years?'  My reply was that my planned strategy is indeed a gamble, a gamble in the sense if I peg it before I retire then obviously whatever I've invested to that date hasn't garnered me any direct (material) enjoyment.

However surely that's the gamble with any medium-long term investing, no? (if we discount drawing any profits.)

I came off the call on a slight 'am I doing the right thing?' downer, however I soon regrouped!  In my personal circumstance, I'd sooner take the gamble of investing with the goal of retiring that bit earlier as oppose to spending it on 'stuff' over the next 5-10 years, meaning I'd then be resigning myself to work until 65 or thereabouts.

Essentially, you are describing what I did. 
At the age of 33, I decided to retrain and went to grad school. After spending 6 years and all my savings on a graduate (postgrad) education, I entered my new (more highly paid) job market at age 39 with nothing but a 25-year-old Volvo and a $3,000 bank loan (that's what paid for the Volvo).
For the next 21 years, I was in accumulation mode - as in, accumulating investments, not "stuff". Even though I made some rookie mistakes (2000 tech bubble and a BTL that cost me about a net £20,000 loss when I eventually sold it), I was able to retire early, at age 60. Factors that helped were:
1) I don't feel the need for lots of toys and big holidays, so living frugally didn't feel like a major sacrifice, and my retirement needs were similarly quite modest (but see 4, below).
2) Being in a profession with a decent defined benefits pension.
3) Doing a large chunk of my accumulation after the financial crash. My mortgage was a tracker, so my interest dropped like a stone, providing lots of disposable income for investing, plus of course the markets recovered solidly post-crash - so my investments did well.
Now I am 3 years into retirement, I have a few reflections:
4) I have two very steady sources of defined benefit, inflation-proof type income that meets my basic needs - and I still have state pension to come in 2 years (I'll get about 70% of a full state pension), which gives me huge peace of mind.
5) I still have absolutely no desire for major expense "toys". A close family member and a close friend celebrated retirement by both spending about £50k on new cars - that have sat on the driveway since March 2020. I look at £50k as a huge portion of savings that I spent a lot of blood, sweat and tears accumulating. There's no way I would splash it on a massive, polluting chunk of metal.
6) I am now spending on lower-expense luxuries (£50 to £700, mostly on my hobby), and on reflection, I realise I could have got away with treating myself to at least a few similar toys while I was working. My advice to you would be to not overkill the denying yourself treats during your working years.
7) Barring major catastrophe, I will never run out of money, even if I live to 100. 

Eco_Miser

ratechaser said:

The shame of selling a house that needs 'modernisation' while we are still alive - what would the neighbours say 

Don't know what the neighbours would say, but the purchaser would say "Great, I buy cheaper and rip everything out and modernise as I want without paying for the tat that was put in to make it look better"

ratechaser said:

Back to the core point of the OP - live at a level that you are comfortable with, it sounds like you are easily able to do so while putting money away for the future. But please don't end up being the richest corpse in the graveyard...

Yep, get cremated, it's cheaper.

But seriously, OP, an occasional splurge on getting a new bathroom or kitchen can make your life easier, and if you're going to do it eventually the sooner you do it the sooner you get the benefits. It's not a recurring expense. But you may prefer to wait and pay for improvements from your pension tax free lump sum.

My plans include living to 100, apparently I've a 4% chance of that, and I wouldn't want to arrive there fit and well, and broke. Still less would I want to arrive there needing 24 hour care, and broke.

OTOH if I drop dead tomorrow, I wouldn't care a bit.

PS I was 58 when I retired, thirteen years ago.

whatstheplan

Eco_Miser said:

PS I was 58 when I retired, thirteen years ago.

Being realistic, retiring at 58 would be my platinum achievement level, 59 gold, 60 silver and 61 bronze.  However any of them are preferable to me than retiring at 65+