This is a guest post by David Sawyer, author of the brand new UK-focused financial freedom book: RESET: How to Restart Your Life and Get F.U. Money. David suggests you don’t do any of the steps below while operating heavy machinery.
I have been on a journey, which led me – via my discovery of the largely US financial independence movement – to reset my life.
In my first book RESET, I draw on my family’s experience – and that of myriad academics, athletes, self-help authors, and philosophers – to present a programme for midlife professionals to, within a year, take stock of their lives and transform their futures.
The plan is multi-faceted but The Investor asked me to cut through the 373 pages, 511 Notes and 15-page index to give his readers (that’s you) – my top ten tips.
Here is my best shot. If you want the full bhuna, buy the book!
1. Find what matters to you
Life’s about being happy, right? Well, if it were as simple as that we’d all be eating junk food, glued to our smartphones…
What we’re really chasing is the meaningful happiness that comes through accomplishments, putting one foot in front of the other, deciding what we stand for and against, stepping up to the crease and showing folk what we’ve got.
People on their deathbeds regret unfulfilled dreams, missing their kids growing up, working too hard, not saying what they thought, not spending enough time nurturing friendships, and not realising there is another way.
Don’t be those people! Nail a clear vision of where you want to be when you’re financially independent (mine involves Andalusia) and work out what exactly you’re going to do to get there.
A measurable family mission statement pinned on the corkboard works well.
2. Go digital to future-proof your life
The increase in broadband speed this past ten years has changed the world and we’re all struggling to catch up. For many midlife professionals, going digital has become a stick to beat us with, as we fight to juggle the competing priorities of family, work, our God-given right to drink two overpriced giant coffees a day and that old lady who’s driving 20 in a 40 zone.
Working out a way to increase your profile by grasping the digital nettle is one of the best ways of enhancing your career prospects and getting more cash in. Read blogs, set up your own, start an email list, buy a giant bulldog clip and index cards to record and work out your worldview.
Commit to lifelong learning – or at least have a dabble for Pete’s sake. It’ll help your money, and your life.
One of the best ways to do meaningful work, achieve things, to struggle every day to make yourself happy, is to declutter your life: digitally, mentally and physically.
The Internet is amazing, but when it comes to social media, it’s messing with our minds. Turn off your notifications, charge your phone overnight anywhere but your bedroom and ween yourself off those dirty dopamine hits (Ding, ping, whoosh: where’s my phone, someone’s contacted me, someone likes me. I’m going to get a doggie treat. Give. Me. That. Phone…).
Be mindful, offload on a friend, try adopting the Morning Pages habit. Marie Kondo your house. There’s a life-changing magic in tidying.
4. We’re rolling in it
As midlifers who always feel completely skint, it’s hard to believe that we’re rolling in it.
But say you’re a primary teacher on £30,000. That £30,000 turns into £23,780 after-tax. Did you know that places you in the top 1.18% richest people in the world?
Or how about the findings of Danko and Stanley in their unrivaled The Millionaire Next Door? Many people they interviewed with a net worth of $2m or even $3m got there on a joint pre-tax annual household income of $80,000 (that’s £56,000).
Our best chance of FIRE (financial independence or early retirement) is not winning the lottery (odds of 45m to one) but protecting the money we have and making it work harder.
Achieving financial independence is tantalisingly within our grasp. We just need someone to shine a light for us.
5. Do your stash maths
Maths, man. How did you find it at school? The biggest thing holding back financial independence in the UK is overwhelming fear of the morass of pensions, shares, windfalls and long-dead great aunty inheritances that comprise most people’s financial future until – in their mid-50s, often too late – they realise they better start thinking about these things.
All this becomes simpler when you do your stash maths (Mr Money Mustache devotees like you and me will be familiar with this concept).
Simply establish how much you need to live on per year after-tax when you achieve FIRE. Find what size stash you need to get you there. See what you already have. Then – based on stash-size required, frugality/efficiency of your family, target FIRE-date, and budget – identify how much you need to save every month.
Okay, it’s not quite as simple as all that, but working out these figures with your partner is fundamental to resetting your family’s life, and will give you great heart that your lucid vision will one day become reality.
No one runs a business without doing the numbers once in a while, so why do most midlife professionals have little clue how much ‘life energy’ is slipping through their fingers every day?
Why is our work more important than our one and only life? I calculated last year that every latte I buy adds 10 minutes on to my working week; I buy a lot less coffee now.
Let’s get something straight: this is not an anti-work manifesto. I love my job. But I’d much rather be doing it because I want to, not because, like most people, I need the money.
Budgeting is easy. Use Money Dashboard and a spreadsheet (I use Martin Lewis’s Budget Planner). Like Kiyosaki, track every pound that comes in and out of your pocket. You’ll soon be marvelling at your previous twice-weekly meals out at the kid-friendly posh café, because you were too worn out from your day’s work to go home and cook your family a nutritious meal.
7. Frugality and efficiency
I’m a PR consultant, my wife’s a social work manager. We live comfortably in an upmarket suburb of Glasgow. Partway through our RESET, we slashed £900 off our monthly spending. We allocated an extra £100 to our holiday pot, and invest the rest.
We’re not living on mung beans: we both work full-time, holiday six weeks every year and spend more precious hours with of our kids. This makes us happier.
Efficiency is a mindset. Once you reset, people who drive Range Rover Evoques will cease to provoke feelings of envy. Embracing efficiency will run through your life like a sinuous automatic muscle, affecting everything from where you place your shoes when you get in from work to where you shop. I recommend The LAHs (Lidl, Aldi and Home Bargains).
What to do with your stash? Consider investing in a globally diversified portfolio of super-low-cost index funds and ETFs. Do so within your work-defined contribution pension, or when it comes to workplaces you left long ago consolidate them into your own SIPP.
Dabble if you must – some people are only human – but never invest more than 5% of your stash directly in individual shares.
Remember, when working out your appetite for risk, that your net worth is different from your stash – your net worth includes your house equity and any final salary pension, if you choose to leave it where it is (or can’t transfer it out). If you have, say, a final salary pension, house equity, and a mishmash of investments and pensions, split in equal measure, you may feel a little more comfortable investing 100% of your stash in index funds.
Always keep a disaster fund (accessible money, say in an ISA) that’ll cover at least six months of family living expenses.
And I assume, as a Monevator reader, your only debt is your mortgage.
9. Your legacy
Secure your legacy by sorting your life insurance, making a will, setting up a Power of Attorney, and ensuring that your partner is the beneficiary of any big money pots you have.
Teach your kids the magic of compound interest by transferring their child trust funds to junior ISAs and investing a la you, setting them up with a cloud-based tracker.
Did you know that a couple can pass on up to £1m to their children tax-free when the last man/woman standing dies? If you commit to getting rich slowly, your kids could be set for life at an age (averaging 61) when they still have time to enjoy it.
Crucially, there’s usually one partner who does the money and one who has absolutely no interest in all things investments. So make sure you take a leaf out of Mr Buffett’s book and, on your death, transfer your stash into something that doesn’t need any manual intervention from the surviving spouse.
For us in the UK, I suggest Vanguard’s globally diversified, reduced-UK-weighting, 0.22%-fund-management-charge LifeStrategy 80 fund.
10. Live a principled life
RESET is a coherent, super-detailed programme, backed up by more sources than you can shake a lightsaber at.
We all feel our own force: we are all made from a different kit parts. But there are a few common principles to living a good, meaningful and happy life. Never give a monkey’s what other people think about you, make time for deep work, be boring to be creative, work hard, act on enthusiasm and see where it takes you.
Use negative motivation to propel yourself and find somewhere you can test your developing worldview to see whether what you believe actually works in practice (my experimentation ground is running).
Resetting your life can be as long or short or complicated as you want, but do, please, consider it.
Never, ever, despite your outwardly successful appearance, accept that the hopes and dreams you had as a kid are gone forever.
Never accept that this is it, and just live for your family. It is never too late to RESET, even without the external force that commonly prompts a reassessment of what we were put on this earth to be.
Last, I leave you with William Ernest Henley’s fine words in Invictus:
“It matters not how strait the gate, or charged with punishments the scroll. I am the master of my fate. I am the captain of my soul.”
David Sawyer is an award-winning PR man and 2:40 marathoner. He lives in Glasgow with his family and hamster. RESET is his first book. Jacob Fisker of Early Retirement Extreme fame describes RESET as: “A comprehensive introduction to things you didn’t learn in school but should have.” The Kindle version costs just £2.95 this week. Or you can invest £10.95 in the paperback.