Good morning! Today I have a post from Maria, the blogger behind The Money Principle: a personal finance blog that will ‘make your head hurt and your wallet sing’. There she writes about money management, wealth, health and anything that takes her fancy. Enjoy!
Once upon a time retirement was a relatively simple and relatively automatic affair. One worked for forty years, one retired and then one did what retired people usually do: pottered around in the garden, looked after the grandchildren, generally led a life of routine and tedium and eventually passed to another realm.
This was the time when the economy was dominated by large corporations; people had jobs for life; and self employment was for artisan, tradespeople (ok, mainly tradesman) and the ‘arty’ types. Back then people patiently waited for their retirement, saved what they could, were resigned with their lot and aged early.
This time is gone! The economy has changed to include a multiplicity of ‘small players’ and, lately, networked individuals; it’s been sometime since any of us has had a whiff of a job for life; and the numbers of the self-employed are rapidly increasing: in the UK in 2012 there were 367,000 more self-employed than in 2008 or a 10% increase.
Do I feel nostalgic about the time past when things were easy and predictable? No; I say ‘good riddance’. Yes there was security but it came at the price of predictability and boredom. Do you know, whenever I read (or watch) The Hobbit I know exactly how Bilbo Baggins feels: the Shire is lovely but boring for the spirit craving adventure.
The best thing about the change, I find, is that we don’t age so early. Frankly, I could never imagine my mum in her shorts running a marathon at fifty; well, for that matter I could never imagine her doing anything like that. Or planning to dance Flamenco with the gypsies in Granada.
Retirement stopped being a fixed point in people’s lives; quite the reverse, the combination between the possibility to retire at any time and the hunger to do the things we crave, made the dream of early retirement possible.
This is not a dream I share; I don’t want to retire ever. I still belong to a generation that associates retirement with ‘vegging’ in front of the TV, worn out cardigans and twisted ribbed stockings. Not for me!
What I want is
- not to have to be in employment if I don’t want to be in five years time when I will be fifty five (please note that I am not saying ‘not to work’); and
- while not needing to be employed to be able to live the life I/we want.
Here you have it: I don’t want retirement! Having achieved financial health by paying off all our consumer debt I want financial independence that meets both conditions set out above. Why do I emphasize that?
Because if John and I focus only on the first condition – not having to be employed – we can be financially independent in weeks, if not days. This is possible by doing one of two things:
- We have rather substantial equity in our house; were we to sell it, we could buy a slightly smaller house, at a bit less prestigious address, for cash. Not having mortgage and not having consumer debt would mean that we can live on the passive income we currently have (and any side hustle that comes along) but we will have to be careful.
- We can sell everything in the UK and move to Bulgaria where we already have an apartment in Sofia and I still have not sold my land. We will be able to buy a nice house, have money left over to invest, rent out the apartment and have our current passive income. We’ll not only be financially independent, we’ll be positively well off.
But why chose the standard when you can go after your dream? And here comes the second condition: to be able to live the life we want. This includes keeping our house and having the resources to do all the things we want to do: I want to ride a motorbike across the US, walk the Camino route, dance Flamenco and chase marathons; John wants to fly planes, to drive Range Rovers across the desert and take photographs; we both want to travel and live in other countries learning languages and exploring the local culture. Oh, and I will write a novel people want to read!
As to keeping the house, it is too large, I agree. But it is our home and we would like our future grandchildren to stay with us – we would love to show them how to live life to the fullest, looking forward not back and regretting not the things they’ve done but the ones they didn’t have the courage to do.
Using the ‘retirement’ calculator we designed, we calculated that for that we need £2.5 million (roughly $3.7 million). Sounds impossible? Great! I love impossible. And we have until October 31, 2018 to get there.
If you think this is a dream, think again; because we have a plan. Without disclosing too much detail – we would rather do that step by step when we try things – our plan includes rapid accumulation; investing and business building.
At the moment, we have a generous cash flow. Keeping to the sound money management principles we set out when in debt allows us to stash it all away. Further, we are projecting an increase of cash flow on the basis of:
- My already decent salary will increase substantially (by about 40%) in the next six to twelve months. Most of the increase will go towards ‘rapid accumulation.
- John’s web-hosting business is going to be launched very soon; further we intend to develop other on-line businesses – couple of new blogs are in the pipeline. This income stream will pick up in the next six to eight months.
- We have started offering short term accommodation to academic visitors: good for the cash flow and most are interesting people once you start talking to them.
We are already off to a good start: three months after paying off our consumer debt we have close to £15,000 ($22,000) stashed away. Most importantly, we are not keeping this money in a savings account that pays 1.5% interest and incurs tax. It is all in a Nutmeg ISA which is currently returning over 20%.
Our projections show that by next March will have about £60,000 ($90,000) and this is a rather conservative estimate. Building a substantial sum will get us in a position to invest in ‘big deals’.
This second stage of the ‘M&J get wealthy’ programme builds on the following:
- Mobilising the assets we have. I have just sold an apartment in Bulgaria that I inherited from my parents and am selling the land. With our share, we’ll do up the apartment in Sofia to make it really attractive for ‘short lets’; after all, it is in a very exclusive part of Sofia. Even if this doesn’t make a fortune it will help grow our investments. We are exploring investment possibilities in Bulgaria.
- John has been looking at a wide range of investment options. This is still an open question but we will have to invest a proportion of the ‘nest’ in higher risk ventures. And before you say anything, don’t forget that the risk for us is not one that will put our livelihood at stake – the worst that could happen is to lose some of the money we can afford to lose; oh, and I may need to stay employed for a bit longer. We both have very serious occupational pensions.
So nothing ventured, nothing gained.
This occupies a place of honour in our plan: a) businesses are the area where fast growth can be achieved (both as income streams and asset building); and b) businesses can be automated (£2.5 million translates into £10,000 per month and doesn’t need to be in cash; equivalent will do).
We have a dream and we have a plan. Having been on this Earth for over a century between us, we do know that plans can go wrong and we don’t always get what we wish for. Would this make us abandon our dream?
No chance! I am going after the dream with a target and the determination of a drug addict: and if you hear a motorbike passing look for me!