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.
Lake Garda, Italy
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.
Rapid accumulation
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’.
Investing
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).
Finally…
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!
This post was featured on The Heavy Purse, Budgets are Sexy, The Money Principle, thank you!
Hey Maria! I have full faith you will reach your $3.7 million goal by 2018 because you have a plan! One of the most curious things I’ve encountered is how difficult it is to change our spending habits once we have retired. For example, I don’t need to save for retirement anymore and should spend 100% of all income streams every month as a result, yet I STILL save the majority of my income.
I’ve spoken to other retirees and they admit the same situation. Old habits die hard. Good luck!
Sam
Thanks for the confidence, Sam; we’ll keep people posted :). As to the matter of habits you raise – yeah, these are hard to change and I have noticed that I really dislike spending ‘ready’ money.
Wow, very impressive! Now that’s a plan.
I have also plan not to work for someone within 2 to 5 years from now. Working and commuting is very stressful. Stress makes you ill and sometimes it may cause death to some folks.
Thus, I like to have my own business and investment. I dream to have a log house as retirement house in the middle of the farm. Then my earning during my stage either from my investment or from my rental properties. I am also looking forward to help the local community or to teach in the local university.
Commendable! One of the points on our agenda is to do good as well.
I love that you guys have a specific date and dollar amount in mind. It’s certainly an ambitious plan, but by aiming high you guys will push yourselves and learn a lot along the way. Best of luck on this journey!
Matt, one has to be specific about this things; this is how we paid off $157,000 in three years. Some call it luck; I know it is focus, planning, strategy and smart work :).
I think it is great that you have a plan that you are working towards. Reading this post makes me think I need to do a little more forward planning.
What are you waiting for? How likely is it that you’ll get somewhere if you have no idea where you are going?
ah, yes, the retirement issue.. Been hearing a lot about that debacle from my dad. He´ll be 67 years this summer, which means he HAS to retire from his job (working off-shore), because the oil-company has a weird policy. However, he does not want to retire at all! He would love to work 10 more years or so if his health allows him. So he´s doing everything he can to become a private consultant which his former company can hire if they need him (which they do). More and more people in Norway are working way past their normal retirement age, because they have good health and don´t want to sit on their ass all day. Not saying that this is all retired people do off course, but you get the picture.
But you see, most people are still in the thinking framework of ’emloyment’. I make a very clear difference between ’employment’ and ‘work.
I love your plan! I personally am not sure I will ever “fully retire” as I have so many things I want to pursue in life that I’m sure I will keep myself very busy when I am no longer working full-time at a 9-5. I think building diversified income streams can really help fuel a non-traditional “retirement,” especially income from rental property, small businesses, and dividends from stock investments.
I am glad you like it DC; and yes, we’ll be very busy and productive. The main difference is that when one is financially independent (in the way I was discussing it) one need not to ‘ask for permission’ nor for ‘forgiveness’. I’ve never asked for permission in my whole life but the forgiveness thing kills me :). Creatives!
Wow great post! I don’t see myself ever fully retiring, but I want to reach the point where I have a choice in what I do.
Thanks, Michelle. This is exactly what I wand to achive – I may be still a respected (and respectable) university prof in five years :).
Good for you! I made the decision to stop working for people and do what I enjoy on my own. I agree that businesses and investment allow you to grow much faster but people like what they think is more stable. No risk no reward. Calculated risks that is. As for retiring I don’t think I will ever retire but rather just want to be at the point financially were I am working because I enjoy doing it not because I need the income.
Exactly! And well done on taking the decision. I am not that brave. As to what is more stable, thius stability is often deceptive – being employed is probably more un-stable than working for one slef because you have no control over what happens.
It all starts from there. The idea first, make a goal, then creating a plan, and put it all into action. I’m confident you will reach your goal.
Ha, ha, KC! You know that I love working out things and…on The Money Principle there is an article setting out the ten steps between a vague idea and its successful realisation. As people visiting know, I live what I preach!
Wow, that is quite the plan! That’s what it all starts with though and it definitely looks well thought out. We have no desire for the traditional retirement either as we see it in our family now and it’s just plain sad. We plan on being active doing the things we want and looking for ways to be productive members of society.
Sounds like a plan; one I admire and approve of 🙂
Great plan. It sounds like you have a great foundation and ability to change the plan if necessary. Most people never make detailed plans, then if they do and fail, they give up. Financial freedom gives so many choices. Best of luck.
Kim, I firmly believe that a good plan is like a worn in shoe – it is comfortable and you can work on it. I also believe that planning should be done backwards – you start with what you want and then fifure out the conditions to get it. Simples 🙂
I would love to fully retire, at the right time. I don’t really want to veg out in front of the TV when I retire, but I would like devote myself entirely to non-income producing past times. Once I figure out what those should be, and I have a sufficient level of financial independence to finance them, I’ll consider retiring.
Ummm. Tempting. And…this is why I want to write full time when I don’t have to be employed. Write books people want to read, but I’ll probably go for a ‘best-written’ rather than ‘best selling’ writing. On this one, I am not a fast learner.
Sounds like you’re doing a great job and it’s not boring by any stretch of the imagination. All the best with your future plans.
Hey, Adam, have I told you my moto? ‘It can be heaven, it can be hell but it will be interesting!’ Why not apply it to the path to financial independence?
I love that you took the time to figure out what you wanted to do in retirement. So many people just say “retire” – to me (I’m a financial advisor). Well, what does that look like? And how do you know how much money you need, if you don’t know what you want to do? I also love how you’re viewing retirement which is becoming more and more common. Gone are the days of just sitting around (again as you noted, not all retirees actually did this) but of being active, living the life you want and still earning money, either passively or through things you’re passionate about. It’s sounds like a beautiful life and I hope you achieve it!
Shannon, elsewhere I wrote that it is time to start seeing ‘retirement’ as ‘life-style design’. Our later years can be about joy and life full of freedom and beauty rather that waiting to move to the next realm. And thanks – we have a chieved quite a few ‘impossible’ things and hope that this will come off as well. Willl keep you posted 🙂
My parents are fully retired and living a life many dream about. Traveling to far off lands when they want. My mom volunteers for a couple organizations she is passionate about and my dad golfs whenever he wants and sometimes he plays some tennis. They don’t regret no longer working and both stay busying and don’t “veg” out in front of the TV. They also spend as much time as they can with their two brand new grandchildren!
Quite!
A dream (goal) and a plan is all you need! Just break it down into daily/weekly/monthly tasks and it gets down. It worked for me!
Well said, Krant! It’ll work for us as well.
To me, it is more about financial freedom than retirement. I would like to work, but only on what I want and how I choose to do it (and when). Sounds like we have a lot in common there.
Eric, I always suspected we have more in common than meets the eye :). Great minds, may be :)?
Great post. I admire the ambition!
Just one question. Where does “we would like our future grandchildren to stay with us” come from? I have heard that before, so has a friend and my siblings. Not that there is anything wrong with the prior generation, it’s great to visit them. Still it scares the shit out of us and we keep piling up excuses whenever this “offer” comes along. 🙂
Interesting. Don’t you let your children visit, and stay for a bit, with their grandparents? I somehow assumed that our sons would like to visit with their children and/or have the visit from time to time. But if not – this is OK. I can have three studies, all lovely and write different stuff in each of the rooms.
Gosh, what have you done :)? I have a reputation to keep (this of a tough, no non-sense intellectual and hard-nosed blogger) and now all Pauline’s readers know that I am actually a middle aged woman dreaming of grandchildren!
Your ambition is contagious. Ever since I read this article I have not been able to stop thinking about what my plan is and how much I need to save.
Me all over :)! Good luck with working it out and if you need custom tools give me a shout.
We ought all to have heard the roaring applause for the publishing of this post. Maria, this is grand. My parents went by the old model. They have a boring and not terribly healthy retirement. It is being squandered on tedious errands for grand-kids, TV and the like. I’d rather compose, teach guitar, write and blog til I die. I recall from his book Mortality that Christopher Hitchens was still writing on his deathbed. In fact, the end of the book is his scribblings and random thoughts which may have become later chapters or pages had he lived longer.
Thanks, CJ. All we need to do is tweek the way we think about things. I know many people who do exactly that – they are very productive in their 70s and 80s.
Its definitely a differnt ballgame now, in a good way! I also don’t want to retire and “veg-out” but not having to report to work at a certain time each day is high on my priority list, as is building my own business. Great post, thanks for sharing a new look at “retirement.”
You are very welcome; and good luck with building your wealth and your business :).
I like how you emphasize that you don’t have to work, you want to work. We were on the fast track to working until the first day we didn’t have to as retired public school teachers. We were growing wider and madder by the year. Now, we are working for ourselves, and we love life.
What we love is to hear stories like yours, Maria. We can use your experience and wisdom to add to our plans. Thank you so much!
Thanks, Tammy. It is a steep learning curve, isn’t it. What I find hardest in all that is to get beyond what I know well – hard but so re-warding.
Looks like you guys have a great plan and realistic target date. Good Luck!
Thanks! And thanks for seeing this as a realistic target date; most people around think we have gone completely mad. Then again, I can’t see a problem with this one either :).
WITH THE PROGRAM CALLED RERACHING FOR INDEPENDANCE HERE FORTUNA CALIFORNIA I SIMPLY HATE THE PRORAM BECAUSE OF HUGENE HE IS THE STINKY PERSON WHO DOES NOT EVEN TRYES TO TAKE A SHOWER ALL AND HE SMOKES ALL OF THE TIME AT THE PROGRAM AS WELL AS PAYING THE STAFF TO PAY MORE ATTACHIN TO HIM AND NOT THE REST OF THE CLIENTS AT ALL SO WITH BOB FRAWLEY HE IS LETTING THE OTHER CLIENTS DOWN AND NOT EVEN CARING ABOUT THEM AT ALL AND ALSO WITH BOB FRAWELY HE LIKES HUGENGE THE BEST AND NOT THE CLIENTFS AT ALL FROM WENDY SELLS