Early-retirement wannabe

N1AK · 19 July 2016 at 12:52PM

edinburgher wrote: »

While I'm impressed by the commitment of posters on this thread, a lot of the posts really make me wonder whether the concept of FI is really just possible for the rich?

Depending on where you draw the line on FI and rich it could certainly be the case. If you consider retiring a couple of years early, and having an income 20% higher through those years of retirement as FIRE then it is accessible to even modest earners. If it has to mean retiring on higher than average incomes by your late 50s at the latest then a much smaller group can viably manage it.

My general perspective is that some of the behaviours that a FIRE mentality encourages are actually even more beneficial to low earners. Managing to save even £500 as a low earner can make a huge difference over a couple of decades if that money is used to decrease high interest debt, avoid paying a premium for short term loans etc. £500 a year in savings (with no other changes) for a low income 30 year old could take them from a late and poorly funded retirement to a completely incomparable retirement.

Wednesday2000 · 19 July 2016 at 1:23PM

edinburgher wrote: »

While I'm impressed by the commitment of posters on this thread, a lot of the posts really make me wonder whether the concept of FI is really just possible for the rich?

It is a lot easier to live a nice 'middle class' (thinking about comfort levels here) lifestyle on 50% of £100k (1 person) than it is on 50% of £30k.

MMM et. al can carp on about how all spending is evil and how it's just a matter of maths, but the fact of the matter is that if I had to save 1/2 of my wages, I'd have to live somewhere !!!! where my children would suffer for my choice (in terms of increased crime, lower educational standards, fewer acceptable role models).

Maybe I'm just being a 'complainypants'?

Trying to make use of salary sacrifice, tax advantages etc. to square the circle, but there is only so much low hanging fruit to identify.

I think you have to be on a relatively good income to become FI, unless you really live on very little. It seems to me when I look on MMM and ERE if you are on a middle-class income in the US you have a wider choice of nice cities/areas to live in than in the UK.

greenglide · 19 July 2016 at 2:09PM

It seems to me when I look on MMM and ERE if you are on a middle-class income in the US you have a wider choice of nice cities/areas to live in than in the UK.

Ignoring that the USA is ever so slightly bigger than the UK, what makes you think that?

There are areas in all cities / areas which I cant image anyone wanting to live but for each one there is a quite reasonable selection where people would want to life. We dont all need or want to live in the south east / London.

It depends on what you class as "middle-class income" and what you class as "nice" place to live?

Wednesday2000 · 19 July 2016 at 2:23PM

greenglide wrote: »

Ignoring that the USA is ever so slightly bigger than the UK, what makes you think that?

There are areas in all cities / areas which I cant image anyone wanting to live but for each one there is a quite reasonable selection where people would want to life. We dont all need or want to live in the south east / London.

It depends on what you class as "middle-class income" and what you class as "nice" place to live?

We have to as we are tied by work here as my husband has a very good pension scheme and he does shift work.

I know a lot of US friends online and there seems to be a higher standard of living there if you are educated and on a decent income. Obviously yes, the size of the country is relevant and especially the size and quality of the houses in comparison to what you can get for the same money over here. It makes me quite envious when I was house hunting a few years ago and was comparing what was in my price range to what you can get over there.:D

Marine_life · 19 July 2016 at 2:24PM

edinburgher wrote: »

While I'm impressed by the commitment of posters on this thread, a lot of the posts really make me wonder whether the concept of FI is really just possible for the rich?

I think it depends on a lot of things.

The focus of MMM is clearly about cutting back on expenses and investing for the long term but in any expense cutting strategy there will come a point at which you become utterly miserable and of course (in the UK especially) the insidious rise of housing costs has made that strategy much less effective.

The MMM crew and a number of other financial bloggers out there have over the last however-many years experienced investment returns of 7.0% of thereabouts. Do we think that will continue in today's low interest environment? Highly unlikely without a lot of risk.

That means if cutting expenses is more difficult and investment returns are reducing the only other avenue to accelerated FI is to increase income and more specifically increase income but not let lifestyle inflate at the same rate. Its a topic which is far less well explored on early retirement blogs (but will be much more important in the future) because its much easier to tell people to buy less frothy coffee or buy a cheaper car than it is to tell them to retrain, change jobs or change locations.

At the end of the day it comes down to combination of all three into a kind of 'conscious realism' i.e. you need to get a spreadsheet out and run the numbers and see what it will take to make things work (and I would dial back both the investment return and safe withdrawal rate). Once you have the figures it's possible to begin formulating a plan about how to get there!

gallygirl · 19 July 2016 at 2:25PM

edinburgher wrote: »

While I'm impressed by the commitment of posters on this thread, a lot of the posts really make me wonder whether the concept of FI is really just possible for the rich?

It is a lot easier to live a nice 'middle class' (thinking about comfort levels here) lifestyle on 50% of £100k (1 person) than it is on 50% of £30k.

MMM et. al can carp on about how all spending is evil and how it's just a matter of maths, but the fact of the matter is that if I had to save 1/2 of my wages, I'd have to live somewhere !!!! where my children would suffer for my choice (in terms of increased crime, lower educational standards, fewer acceptable role models).

Maybe I'm just being a 'complainypants'?

Trying to make use of salary sacrifice, tax advantages etc. to square the circle, but there is only so much low hanging fruit to identify.

gadgetmind wrote: »

what tends to happen is that as someone earns more, rather than saving a big chunk of that rise, spending just creeps up. BTDT!

When you've cut what you can you really only have a few other choices:
- Compromise on where/how you live. You've already made your choice here and could have gone cheaper, or alternatively much dearer.
- Increase 'side hustles' (could you let out a spare room on AirBnB for instance?).
- Increase your income - 'sell your soul' to a job you hate but which pays more vs enjoying a lesser paid job and accepting that you'll have to work for longer.
- Don't fall foul of 'lifestyle inflation' if/when your earnings increase.

I did all of the above - I had between a 3 and 4.5hr daily round trip to the office (fortunately only once or twice a week) rather than pay over double for a house near the office. I did mystery shopping and saved the income. I went back into an area I enjoyed less but which paid 30% more and saved every penny of it.

I earned a good wage (though nowhere near six figures!) but the mix of the above meant I punched well above my weight in the savings & RE stakes.

Don't lose heart Ed, at 36 I was virtually penniless and retired less than 20 years later :T.

edinburgher · 19 July 2016 at 3:04PM

Definitely trying to roll back a bit of lifestyle creep at the moment. Not entirely convinced that wife believes me that £70k mortgage increase and £10k annual salary reduction now that she is p-t worker materially impact our ability to spend

saver861 · 19 July 2016 at 4:22PM

Is FI not predominantly a state of mind?

Some will live happily on a minimum income while others will want 10 or 100 times that and still be concerned they don't have enough!! Equally those with millions and billions often live with the worry that it will all somehow disappear.

Stephen Covey in his book talks about asking you to write a speech for a funeral. The funeral has lots of people - friends, family, work colleagues etc. The only difference is this is 'your' funeral.

So, what final memories would you want your family, friends and work colleagues to have of you? Covey reckons the amount of money you have made or have left will not come into your speech!!

edinburgher · 19 July 2016 at 4:57PM

I think a reasonably broad definition of FI would be having enough money to meet all anticipated future expenses without having to continue working.

So no, I don't think it's a state of mind, the money is either there, or it isn't

saver861 · 19 July 2016 at 5:17PM

edinburgher wrote: »

I think a reasonably broad definition of FI would be having enough money to meet all anticipated future expenses without having to continue working.

So no, I don't think it's a state of mind, the money is either there, or it isn't

Yes but that's the point. Joe and Bill. Joe has a £400k mortgage Bill has £40k mortgage i.e. everything is relative.

Joe could probably have FI today and live like Bill but chooses not to, to maintain the standard that he has become accustomed too.

Bill might have FI today but may choose to carry on working to get closer to Joes's status.

Thus, theoretically, both may have FI but are not prepared to compromise status.

I'm not proffering a view that either is right or wrong - just that maybe FI might be present but not on the conditions that some are prepared to accept - thus material possessiveness tends to dictate, and the ensuing mindset determines FI.

Early-retirement wannabe

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