Like other solitary human endeavours, the road to financial independence (FI) is long and daunting.
The perfect conditions for demons to materialise and siphon away your confidence!
Catching you off-guard, they snicker in your ear that it will all be for naught.
Whoever gave these psychological trolls the log-in credentials to our minds wants shooting…
…except that it turns out to be us. If you’ve ever sent the self-sabotage brigade into battle against yourself then you may find the following scenarios familiar (and possibly the strategies I’ve used, helpful.)
Death
How about a nice, easy one to warm us up?
Naysayers ridicule FI-ers with the classic: “You might drop down dead tomorrow.”
Sure, it’s a statistically innumerate cliche, but it’s hard to shake the nagging fear that they might be right.
Over-emphasising the small risk of a catastrophic outcome is a known cognitive bias. So forgive me, but I often wondered how Mrs Accumulator and I would respond to an untimely diagnosis.
Would I jack it all in for a final few months of trying to make the last memories the most precious of all?
Or, would I work on in an ill-conceived attempt to give Mrs Accumulator more to fall back on?
(You’d think this one answers itself, but demon-slaying isn’t logical.)
I stopped the gob of this demon with a few pieces of paperwork, as follows.
Life assurance
The policy would have paid enough to see Mrs Accumulator alright if it had been needed. I cancelled the policy once we hit financial independence.
Monevator has some insurance articles that provide excellent food for thought.
Emergency instructions
A handwritten letter lays out where to find everything, clear instructions on what to do, and who to call for help.
Like many couples, we split family investment duties like this:
- I’m obsessed.
- Mrs Accumulator happily outsources the detail to me.
That’s just the way it is, so I’ve done my best to create a paper trail. It includes ‘boil it all down to a Vanguard LifeStrategy fund’ simplification measures, and ‘call The Investor for guidance’ emergency ballast. TI is an old friend of Mrs Accumulator as well as mine.
Obviously I’m trusting that TI will deploy his passive investing 101 module and not set Mrs Accumulator up with a portfolio of his favourite meme stonks, as featured on WallStreetBets.
A will
This should be obvious but it’s often missed by couples who get together early in life, never marry, and forget that they’re not as young as they feel.
Attitudes to death matter when thinking about these precautions. You may think it’s morbid, I think it’s practical.
Still, I wouldn’t blame anyone for putting the Admin Of Death at the bottom of their to-do list.
The payoff on completion is that it’s very reassuring to know you’ve done what you can.
Mental health setbacks
We don’t have a great tradition of talking about mental health in Britain. And it’s just occurred to me as I write, that I’ve never talked about this with anyone.
Some corners of the internet make financial independence sound like a short sprint to the finish line, blowing kisses to well-wishers along the way.
In reality, it’s a slog. The danger of a breakdown cannot be discounted.
It happens. I’ve seen it. We probably all know people who’ve been set back years, or permanently diminished, or quietly get by nursing a drink or drug dependency.
I’ve put myself through personal hell a few times. Though the stress was surmountable, it has left its mark. We’re all feeling our way through the dark, but you start to get a sense for where the cliff edge might be.
There’s a school of FIRE1 that says ‘cost-cutting is for the birds’ and that you must scale your income. Hit the career accelerator, show the CEO your brass nuts, and drive your pay up, Up, UP!
Survivorship bias tells us we’re not going to hear much from people who try that, and then burn out.
That was one risk I didn’t want to take. I decided to level out my career, and to focus on what I knew I was good at.
I found a mental comfort zone where I still accepted challenging assignments but I didn’t risk being overwhelmed.
This strategy meant that bonuses and merit rises kept the savings rate climbing but there was no boost from a big promotion.
There’s a small ego-hit to take but this was the right move for me. My overriding goal was to leave work with my sanity intact, not to win a few more pips on my epaulettes.
If you’re young, you absolutely should climb the career ladder as high as you can. The rungs become narrower through your 40s though, and can turn as slippery as snakes. So it can pay to hold fast rather than try to knock another 18 months or so off your timeline.
My other hedge against prematurely failing health was to take out an income protection insurance policy.
I discontinued this as soon as financial independence was within touching distance.
Loss of joy
This fear could be lost on anyone who became accidentally financial independent, or who is naturally frugal. But if you get there by suppressing your inner consumer, you can worry you’re forgetting what life is all about.
Consumer society causes us to over-identify with what we buy. For example:
- I shop in Waitrose.
- I eat out twice a month.* (*Life before COVID.)
- I deserve a gorgeous espresso machine.
- I am this chic outfit or sporty convertible.
You might get into stormy ‘We can’t afford that’ rows with a spouse. Or wonder what you’ve become when, instead of enjoying a night out with mates, you’re regretting the impact on your savings rate.
Will you be a joyless husk after a few more years of this?
The most important lesson I learned was to ease up a little.
I did charge hard at the mortgage. I’m not saying I’d have risked scurvy to pay it off quicker, but I didn’t spare the horses.
However I knew I had to pace myself better through the rest of the financial independence marathon.
- Good food is important to us, so let’s not skimp on that.
- But home-cooking proved better than restaurants any day.
- Go out with your mates and colleagues to the pub, but feel free to say ‘no’ sometimes.
- Also, everyone loves a summer evening in a park with a few cans and a frisbee.
- Paying up for quality makes complete sense for items that form the backbone of daily life. Computers, bikes, and comfy mattresses come to mind for me.
Never forget the value of things that cost little but mean a lot:
- Connecting with an old friend.
- Helping someone, even a stranger.
- A walk with family.
- Reading a book.
- Playing a game.
- Being silly.
Remembering the things for which I’m thankful helps, too.
“I’ll never get there!”
The middle section of FIRE is deadly.
After you’ve laid down your plans. After you’ve poured money into a cheap global tracker. When there’s nothing to do but rinse and repeat.
FOR YEARS!
You gotta gamify your brain because, without positive feedback, it’s gonna look for trouble:
- The plan’s not working. Quick! Change it!
- Why aren’t I FI ALREADY?
- I can’t go on like this.
I found two good ways to combat this.
Identify with your cause
It’s much easier to keep the faith if it’s part of who you are.
Yes, I am advising you to self-indoctrinate. You can brew your own personal FI Kool-Aid by making a:
Private commitment – Reveal your plans to a small circle of confidants that you don’t want to lose the respect of.
Public commitment – Find your community then nail your colours to the mast. Knowing I’d have to answer to the Monevator Massive has helped keep me on track.
A blog is mucho work though, so if you’re not feeling the TikTok alternative, you can cry “Freedom!” via FIRE-friendly communities such as:
- The FIRE UK subreddit
- Money Mustache Forum
- Early Retirement.org
- The Early Retirement Extreme Forum
- Your local FIRE Facebook Group
Make it part of your secret identity. Everyone’s got a hidden talent. The sort of thing we’re supposed to confess at some hideous dinner party, just after dessert and before the wife-swapping.
Being on your way to millionaire next door status is massively satisfying the next time some blowhard is banging on about their boat or is getting Glencarry Glenross on your ass: “I drive an $80,000 BMW, that’s my name!”
Milestone tracking
The second technique mitigates the financial independence journey being featureless like a trek through the Sahara. You can create a strong sense of progress by inventing your own milestones. Lots of them.
Here’s some examples:
- Recording your monthly or quarterly savings feats.
- Tallying your annual and semi-annual progress.
- How many months or years could you take off work if you reimagine your FU wealth2 as an emergency fund?
- How long would it last if you went part-time?
- Is your pot enough to live on in old age if you throw in a State Pension and compound interest?
- Is it enough to support your significant other if you did get knocked down by the proverbial bus?
- Can your savings to-date cover life’s essentials if not the luxuries?
Reward yourself by dancing a secret victory jig every time you pass a milestone. Dream up as many as you can. That way there’s always a moment to look forward to, along with the next holiday, the next date night, or whatever it is you treat yourself with.
Living in the moment is a nice trick but it’s hope that keeps us going.
Losing your job
The nightmare financial independence scenario is suffering a major drop in income with little hope of securing employment at the same level ever again.
You may not fear this. But if you work in a declining/hollowed-out industry, or a one-horse-town, or an occupation where ageism is rife, then it’s a clear and present danger.
Achieving financial independence now becomes a race against time.
The question is do you go all-in on your job in an effort to keep it? Doing so, you could raise your skill levels. Or over-deliver such that they’d be insane to fire you, for instance.
Promotion and pay rises could follow.
Or burnout and irreparable damage to health and relationships.
Even then, you could fall victim to politics or your function being outsourced to Narnia or wherever. (Those fawns will do anything for money.)
Alternatively, you can hedge your bets with a side-hustle that delivers instant extra cash and potential second career optionality.
I chose to pursue two very different side-hustles.
One I could do when brain-dead. It didn’t matter how knackered I was, I could always put an hour or two into it, and so make a few quid for the FU fund. It wasn’t fun, it wasn’t leading anywhere, but it wasn’t demanding either. A fair exchange.
The second side-hustle was an enjoyable outlet for talents no longer required on my main career path. That side-hustle is Monevator.
I’m pretty sure all my Monevator research could help me to transition to a new career in financial planning, in the event that I needed to. But I decided staying put was simpler and less risky.
Still, a side-hustle that blooms into a second career may revitalise you to the point that you hit financial independence, but no longer want to retire.
Or it can provide you with enough structure to help you adapt to your new life of leisure.
(Monevator is a disastrous time-sink from a hourly wage p-o-v. Do I regret it? Not one bit).
Stock market fail
This dread comes in two varieties.
Scenario one. You’re all-in on equities. A rapid market run-up puts you on the brink of financial independence but your eyes are dazzled by pound signs and hopes for more, more, more!
The market promptly bombs 30-50%. As a result it takes years to recover and your morale is shattered.
Do not be fooled. This can happen to anyone. Don’t believe the 100% equities hype. The Fed may not always be on your side.
Accordingly, a good few years before you make your financial independence target, put at least 40% of your portfolio into high-quality government bonds. They won’t earn much these days, but they will preserve your capital.
The exception is if you really don’t need your money (you’re never gonna retire) or your savings rate is super high (so you don’t really need the stock market to do the heavy lifting).
Scenario two. The market flatlines. It doesn’t blow up but it moves sideways during the years you’re stretching for financial independence.
This is just bad luck. I hope it doesn’t happen to you. If it does then know the stock market doesn’t need to do much of the work if you can get your savings rate high enough.
At a 70% savings rate, you can hit financial independence in ten years even if the stock market returns just 1% a year.
That’s one year longer than it would take you at the historic stock market average of 5% per year3.
The same returns create a difference of six months if you can push your savings rate to 75%.
Fighting your own demons
Hopefully your financial independence demons are infrequent guests, but we wouldn’t be human if they didn’t dine on our brains every so often.
I hope this post gives you some fresh meat with which to distract them.
I’ve made it to the other side, finally. But if you’re still wandering around the financial independence wilderness then take heart.
It does get easier and one day you will be flying.
Take it steady,
The Accumulator
If you can learn to love the job you do or find one that you can love, you’ve already won – people seem to persue FI purely to get the confidence to change jobs. If you love your job, retirement stops mattering
And I find there’s a limit on my wife’s spending desires and definitely my own, saving won’t be hard if there’s nothing you really want to buy. People make it seen like if you don’t spend you’re missing out, but to me a new car is like a new screwdriver, a holiday is nice to some degree but hassle, there’s only so many takeaway Chinese and pizzas you’re going to want, having too many sweets rots your teeth, etc
Also I think we enjoy the now better being relaxed about our future security, you couldn’t enjoy blowing the lot of you’re worrying about the off chance of living
Experience tells me that just as important as The Will is a “lasting power of attorney”, actually you may need two (both types). Not to be morbid but when you are diagnosed with something dire, ensure everyone knows about your preference for a DNR (or otherwise).
Good reminders.
Another great article, thank you.
I’ve been following this site for the best part of a decade now and it has definitely made a positive impact on my financial life.
Over the years I have swung from being an extreme saver to letting go a bit more and enjoying a bit of what I have and feeling guilty to then going back to saving mode. My personality type is a bit glass half empty, rear view mirror type where I often look back at the past and wonder what if I had done this or that. I have to snap myself out of it and look at where it did go well and what I did do right. Although this type of personality can be quite draining I would put it down to one of the reasons I have been relatively successful (although I have made many mistakes in all aspects of life). Tramp angst, fear, anxiety whatever you want to call it can be a very powerful monevator. I just need to focus way more on the positives and the simple things in life which bring the most pleasure. There are plenty of reasons to smile if you take a moment to stop and look around. Anyway, enough about me, I’ll save the juicy bits for my autobiography!
So once again, thank you for the many nice motivating articles over the years!
Also investing is a hobby that many people don’t understand and assume you’re all business, not that i’d find watching reality tv or playing sports engaging, the main benefit of passive investing I suppose is that it pushes you to find more traditional hobbies. Many of us though just enjoy talking and this subject is something we can talk about – the feeling of not being alone
Another great read, thanks again to you and @TI for the ongoing work and insights.
Two years into trying to put around 30% away (which has increased to 50%+ recently, mainly due to lockdown), I go through peaks and troughs of ‘am I doing the right thing?’, which usually come around to ‘yes’ as the answer, although I think, when things return to ‘normal’, I will ease up a little for pub trips, cheap trips away etc – balance is important I think. I’ve got the travel bug out of the way a couple of years ago (for a while, at least – pandemics notwithstanding, of course), and the main goal for FI for me is to remove myself from restructuring and bullsh*t in a work capacity and to have more time/flexibility for part-time work, look after (future) kids/family, take a lower-paid career in something like outdoor education. I’m currently going through my third restructure in five years, trying to keep my head down and get with it (the job is changing but not at ‘risk’, per se) but nevertheless brings discontent, reduced motivation and unhappiness, but is also the source of remembering the bigger picture (both in terms of FI and how lucky I am compared to others) and the long term aim.
Keep going everyone!
That was a really enjoyable article to read, thanks for this. I can really relate to much of this. I think the part about losing joy is very close to heart. I have always tried to tread the line carefully so that I am not depriving myself from joy and experiences and of course material things themselves which can and do provide their own joy and experiences. I won’t be returning my iPad or PS5 anytime soon…
Originally when I first learnt about FI and set aim towards it, I was thinking £250,000 would cut it at 4% to retire at 35 (£833 a month – mortgage free home included). I was being far too frugal for my own joys sake and I was being in my eyes a little naive back then. I also started a job working for the NHS a few years ago which I now really enjoy which was a stark contract to my previous employment. I have therefore since changed my approach somewhat:
– Aiming for Base FI of £250,000 at 35 – so called Project 2235 (on track – just over a year to go)
– Aiming for FI and not necessarily FIRE
– Aiming for a £600k FI pot at minimum by 50 (£2k a month – TAX Free ISA)
– Using NHS Pension and State pension as an insurance policy for things you mention in the article for use at 68+ (£24k)
The time from now until 50 is vast I hope and will not go quick. I therefore need to make sure I enjoy myself and have some more money available for travel, doing my house up etc and buying things that really do bring me joy. I certainly won’t be rocking up to work in a sports car, Apple Watch with titanium strap, gold chains, designer clothes etc. It’s just not what I want. On the other hand though, buying gifts for people, going abroad, multiple weekend trips away in the UK, buying a new car now and is something I greatly value. This is why I plan to drop my investments per month from £1500 to £750 ish once I get to £250k to give me £9k a year extra for big expenses (much of this will initially go on a house renovation indoors).
I also now aim to work until 50 so that I have an insurance policy and the safety net of my pensions if all goes wrong…what if the stock market disappears? :O. I can’t see that happening at all but it just makes me feel a little bit safer none the less. The other reasons are that I actually feel a bit odd stopping working at 35 compared to how I did before, I’d rather work a little longer especially since I enjoy my job (currently anyway). The last and main reason is that £833 is just cutting it too close to the bone and for me doesn’t give me enough for big expenses funding post FI, if I aim for £2k then at least I can still go on holidays, buy things and to make myself feel better about not draining all my money at the 4% SWR, take less money during big crashes as there will be room for flex.
I hope I haven’t gone on for too long there. Apologies for rambling :D. I think that the above things you mention though highlights the things I also think about and probably most of us for that matter. I’m trying to get around them as best I can to live for now and to live for later at the same time.
I think one final thing that is also worth mentioning that could change things a lot is a divorce. This is a difficult one…
Thanks for reading
TFJ
@ Grant – I recognise a lot of those traits in myself – dwelling on past mistakes, and using negative emotions as a motivator. Negative emotions can be enormously powerful when channelled well and, as for the former, we’re stuck with it aren’t we? But, once you recognise the habit, you can snap yourself out of it whenever needs be. I think personality characteristics are only a problem when you don’t realise they’re a problem.
@ Chiny – great point about power of attorneys. Yes, just as important as a will. Need to update the article to include those.
@ JDW – definitely sounds like you’re doing the right thing. I feel your pain with the continual restructures. It’s absolutely gruelling to have to keep going through that.
@TheFIJourney – I hear you on divorce! I was originally planning to include that one and then thought the last thing anyone needs is marriage advice from the Monevator crew.
Thanks for this great article TA!
On ‘milestones to track,’ I like tracking how the annual contributions to portfolio compare to some measure of the expected return for a year (I use the annualised rolling accumulated yield of the portfolio multiplied by the current portfolio valuation).
I think it is useful to track this because it is when they become comparable that you really start experiencing the snowball effect. That’s when you enter the exponential regime. In Covid speak: that is the point where R gets larger than 1. As you know, before this point, your portfolio growth is dominated by your contributions and market movements do not affect you so much. It is also after this point that your asset allocation starts playing a much more important role.
I also like comparing this measure of annual expected return to my annual expenses. I chart that with a horizontal line for the annual expenses and another for the annual contributions. In my case, the former is below the latter as I roughly contribute 60% of my income and spend 40%. It is only recently that I crossed the annual contributions straight line. But I observed a significant regime change even before crossing this threashold: since the time the annual portfolio returns approached the same magnitude of my annual contributions.
@TA – great article.
I reckon I’m FI, but with equity valuations it’ll be a leap. I think I was incredibly lucky as I got to a lean-ish FI in 10 years or so, helped by a 100% equity portfolio, a few years IT contracting, being out of the market when the 2008 crash happened as I was changing SIPP provider and the bonus Brexit gave me to my international portfolio. I reckon a 50/30/10/10 Portfolio of equities/intermediate international bonds/gold/cash will see me there.
No win on the Premium Bonds this month… Oh well, roll on March!
Being FI is a wonderful achievement but the journey is important too. Our choice, once mortgage free, was not to push on to FI but to jack in our corporate life and head off to Japan for a year. I worked full time but earnt a fraction of my previous salary, though it matched our total outgoings almost exactly and I did not have to dip into our savings to subsidise our trip.
We were both out of UK employment for a little less than two years, and back in the UK my first job paid a fair bit less than the job I had quit. Had we not gone on our little adventure we would probably be truly FI within two to three years. Instead we are lean-ish FI and shall have to make up the difference with more time at work.
I knew that going away would involve a financial hit as your 40’s are peak earnings years, but our belief was that going then would almost certainly be more fun than going five years later. It still feels like the right decision.
If my work takes a tumble and the acronym switches to Forced Into Retiring Early, it maybe revealed in hindsight that I made a huge financial mistake but only time will tell.
“There’s a small ego-hit to take but this was the right move for me.”
Same here. I took a 20% gross pay cut when I moved into my current job.
Yes, I know, cry me a river, but I had run the numbers, I new I had at least another 6 years left to go till FI (acquiring a partner moved my goal post a little bit further out).
I was fed up with my job, and I knew I had two options – go for a 50% pay rise by moving to yet another American outfit where they’d eat my soul for breakfast or take a pay cut and go work somewhere nice.
When you factor in the income tax and non-cash benefits, it’s really not so bad. Ok, the first option would have cut my total time in employment by about a year, perhaps a little more, but that still leaves you with 5 years, and I just didn’t think I could last 5 years at that place.
So I ceased being a profit centre and became a cost centre. The first bonus at the new place was a shock to the system, and the annual pay rise I got, my previous shop gives such payrises to people they are trying to manage out (aka save on contractual severance). One adjusts though.
The wear and tear of mental health is something Grauniad readers choose to overlook when they spit and sputter about the City’s bonuses.
I’d wonder what sort of compensation they’d deem appropriate for spending their days trying to stay human somewhere where half of the team under you are almost at a breaking point and the other half are going for your job, which the little fucks mistakenly think they can do, and they go about it in insultingly amateurish and fucked up ways, and you can’t even blame them, because it’s either up or out. People are our greatest resource, my ass. 🙂
Another great article . I need some help having followed this site for the last 5 years . It’s taught me a lot but I can’t get my head round high quality government bonds at 40%. If say for example I am aiming for a pot of £1m and taking out safe rate of 3%. Why would a strategy of £150k in cash and the rest in equities not be safer and produce more over long run . I would have 5 years of safety net albeit very low returns but would allow me to increase equity . I get over time the cash element will increase but wondered whether anyone had modelled this . Are bonds as good buffer as they have historically been and can someone tell me the name of high quality bonds so I can research returns ?
I could easily turn into a joyless husk!, especially as my new reading topic is minimalism I find I am now of the mindset that I could talk myself out of ever buying anything ever again 🙂 ….. oh the waste that has gone before!
When the markets are on the up I have to stop myself from checking my numbers every day, on the way down I check once and then I don’t check again until I see news that the markets have rebounded (self preservation)……I am no poster child for how to navigate the fi journey!
In terms of milestones I have a target which I aim to reach @ the end of each year – I would be gutted if I didn’t hit it (last 3 years I have but am convinced that was an absolute fluke given the markets)
Interim milestones are different…..a 50 marker hit (ie 150k) gets me a bunch of roses from Asda, a 100 marker a take away curry meal. I also visualise….£100k that’s a bed sit, £150k that’s a flat etc.
As for managing risk I have only a global equity tracker and a global bond fund…..happy with equities side of things ….is this the right bond fund….I don’t know just thought I’d take JL Collins advice but am I wrong?
Lesley,
The bonds in the portfolio aren’t meant to act like cash (I.e. be spent when the stock market is down). The modern portfolio theory is based on the correlation, whereby bonds are meant to have a negative correlation with equities (they don’t really at the moment, but that’s down to the monetary policy). Cash has no real upside, only downside due to inflation. Bonds have more of an upside.
A good place to start would be Portfolio Charts (.com, I think), you can google him. He goes into a lot of detail in his site.
I started tracking how many months I could survive without a job. It has racked up, but not their yet. It is sadly addictive to sit and stare at that spreadsheet though nothing much changes. However, I have realised I could take a massive pay cut and still be OK. That gives so many options, though the status is hard to give up.
The secret I think was to apply the spend one salary save one salary strategy. Firstly one can lose their job and you can survive indefinitely which gives a lot of comfort. Then saving 50%+ (as you spend to the lower salary) starts knocking the months off. I almost dare not say it, but the only real test to this strategy is kids if one salary moves part time.
Hosimpson,
Nice to read that you chose a pay cut to work somewhere nice instead of taking the pay rise to work at a more stressful place.
Personally, I’m an Air Traffic Controller working at a busy area center (at least it was before 2020) and a lot of people assume it is one of the most stressful jobs out there. To be perfectly honest the actual ATC work is mostly calm, routine and rewarding. What I find the most stressful is all the office politics, the back stabbing, the people that are looking to become supervisors and management at the first opportunity. Once said individuals rise up the ladder they look down on you and won’t have your back when you need it the most.
I’m perfectly happy to remain just a mere foot soldier for my entire career. It’s surprising how few do.
I’m sure it’s the same in many lines of work where the most stressful part is not the actual job or work, it is (some of) the people around you.
Having said all of the above I must say that I also have some excellent colleagues and supervisors. It’s just unfortunate that office politics infiltrates every organisation.
Another great article. Some of the pitfalls of life mentioned have rung true for me a few times but I’ve learnt things from each setback.
Legs being taken from under me job wise a few times meant having to learn, adapt, change and budget. Work stress from one job led to a mental health issue and was promptly thrown out with the trash which was really hard to deal with at the time but I recovered and learnt to know my pressure points, to say no occasionally and have an appreciation for the little things which has made me happier in the long run. It did me a favour in the long run as I’d probably be in a worst state today. I have my health, my wife & kids which makes me richer in other ways.
I’m also a lot more pragmatic than I used to be. Made redundant at Xmas last year, my old boss smiled as he told me he had planned the timing for Christmas knowing I had kids, I don’t know why but I felt sad for him for being so cold and lacking in compassion. Anyway, karma spun it’s charm and the only other guy who knew our role left shortly afterwards and the smug boss is now under pressure to sort out the mess. I heard the news from an old work colleague and feel very fortunate to be just starting a new job so quickly somewhere else especially at my age. The only kicker is I’ve had to go back to the bottom again pay wise but hey you can’t have everything!
I started investing only recently and I’m too far down the road to become FI but I applaud anyone who makes it. It’s the harder road less travelled so well done to all who reach their FI goal or even get close.
I came across this site by accident some time back, it has given me so much in the the form of straight forward information, helpful comments, good common sense, humour and has given me a little more financial confidence.
I hope my and other readers appreciation provides some form of compensation and comfort for all the hard work you guys put into this site. Also many thanks to all who contribute as it wouldn’t be the same without you.
I’m coming up to 7 years on the FIRE path, over halfway, with maybe 4 or 5 years to go.
In that time, I admit that maintaining focus has not always been easy, I have to work at it, to keep myself motivated, else I could slip into laziness and procrastination, traits which blighted my youth.
In real life, this journey has been a long and lonely one so I’m very grateful for blogs like this one and the readers in this community who provide support and encouragement.
Many on their FIRE journeys are couples, there aren’t so many singletons like me, and at some point after lockdown, I may be back on the dating merry-go-round – do I bring up savings rates and pension size on the first or second date?
Hosimpson
Thanks so much for the reply just read the site you recommended it’s excellent and now get it . I hadn’t quite appreciated the impact market volatility had in the SWR and the role bonds play in reducing this . The portfolio recommendation is excellent although I do keep coming back to thinking in drawdown the vanguard life strategy 60/40 is just the easiest way to go
@weenie – danger that someone will either try to share in your fire without earning it by guilt tripping that you should retire together or that they’ll be jealous that you retire before while they continue to work – but in my opinion it’s be right for each person to reap what they sow themselves – and even if you retire before them then you’d still be paying your share of bills. I find the ideal solution is a fake office you can go to for your own investing company, kitted out with xbox, pizza deliveries, etc.
Of course though children and housework and eating each others food in the fridge blur the line of what is earned by whom
One of the best things I found to track was “Fundedness”, i.e. assets divided by liabilities. This is good to track because as time passes your liabilities should probably reduce [the so-called Pink Floyd effect ie “one day closer to death” from Time, DSOM, 1973] and your assets should grow. A Fundedness of 100% being the minimum target.
Save early, save often kids! https://www.collaborativefund.com/blog/the-freakishly-strong-base/
As you’ve indicated, FI is a spectrum not a single destination. There’s I no longer have any debts FI, there’s I can survive a year without a job FI, I can cover my electricity bill with just the return on my investments forever, my side hustle earns enough to pay for a meal out each month etc. All to be celebrated – even if only with yourself along the way. Some of these can come surprisingly quickly and regularly.
Meditation, exercise, nature, giving, challenges and friends/family are all great ways to help slay the demons along the way. Happy money has turned to be a little suspect in presentation of the science, but it’s still my favourite read on how to spend money to maximise satisfaction and contentment.
Great post. I am exactly in this middle portion of the journey, about 35% done and 65% still to go. I’ve been progressing quickly, but it’s definitely a long-haul journey. Inventing loads of milestones is my favourite strategy – every 5% can be celebrated. Also, I’ve split up my goal into pieces of £10. I need X pieces of £10 to succeed, so every time I save £10, I am one piece closer to FI.
With regards to the ‘death’ portion, I try to mitigate this risk by doing some of the things I’d like to do once FI now. So, for example I would like to do lots of fiction writing. But instead of waiting for 10 years, I am writing for 10-15 minutes every day now. It’s not as much as it would be if I had all day, but it means that I can start to achieve some post-FI goals immediately. If I drop dead before FI, at least I’ve worked on my passion projects. Plus I can see if the things I imagine myself doing in RE are really the things I actually enjoy.
Matthew,
It’s an interesting concept, for one of the partners to be financially independent when the other is not. I’m sure I’ve heard it before more than once, hence there must be quite a few people who agree with you.
For me though it somehow appears irreconcilable with being a family.
My fiancé can’t help very much with our FI plans – other than by being sensible with money, refraining from running up gambling debts, etc. 😉 but it never crossed my mind that I could retire by myself. Since the start of the relationship I took it as read – we’ll be retiring together, and if I need to work longer to get there, then that’s the price of me being happy in my personal life.
I wonder though perhaps your partner likes their job or works part time? Or maybe you have some non-social interests like writing and such. You could, in theory, pursue these interests while your partner was at work.
Still, if your partner became unable to work, wouldn’t your FI fund all of a sudden become the family FI fund? When you look at it that way, having a significant other who must work for money is just an off-balance sheet liability, in financial terms. There once was a company called Enron who had a lot of those.
@ Tom, Joyless and Al Cam – thank you for sharing those milestone markers – all interesting ways of bringing the journey to life.
@ Joyless (great name, btw) – you’re on the right lines if it’s a global bond fund that’s either entirely in high quality government bonds or total bond market with a high proportion of government bonds. If you’re a UK investor then look out for a global bond fund that’s hedged to the £. These two pieces may be helpful:
https://monevator.com/what-is-the-minimal-risk-asset/
https://monevator.com/how-to-estimate-your-risk-tolerance/
@ Bill – good for you! I was not brave enough to do the same.
@ Hoisimpson – “another American outfit where they’d eat my soul for breakfast” Someone close to me works at a place like this, so this really resonated with me. The money is great, but every time they tell me about what it’s like I just want to say, “Run!”
@ Weenie – “do I bring up savings rates and pension size on the first or second date?” Haha. You cut to the chase! I say, first date! No point messing around with time-wasters.
@ Kat – Great tactics. Especially like your regret minimisation ideas.
@ Lesley – you might find these interesting on bonds vs cash:
https://monevator.com/cash-versus-bonds/
https://monevator.com/bond-prices/
https://monevator.com/how-to-protect-your-portfolio-in-a-crisis/
@ G – more nice milestone visuals – thank you for those.
On the subject of partners, my plan is really our plan. We’re going to work for another 2 years while living on my salary so she can build up her pension/ISA to about £150k. That’ll also boost my Civil Service pension by £1200p.a. or so. On retirement, I intend to run down my pension to zero over 40 years leaving her pension and ISA to compound, a small widow’s pension and whatever is left of mine.
When we pull the trigger, my wife will only have about 15 years of NI contributions so will probably need to work to cover those off because even the measly £9,000 State Pension is worth £200,000 or so in capital. That means earning over £9000 a year. Not too onerous. A few half days a week teaching Spanish, maths or Python or R. Or if the markets are kind over the next decade (unlikely, I suspect), maybe not.
So looking at it as a family is more natural and makes it easier. Whether the FIRE Stasi will accept me as FIRE or not, I really don’t care.
@hosimpson – reality is somewhere between, on one hand you have to acknowledge if one person went along more of the journey or made more sacrifices before meeting, but also acknowledge unpaid work that they do like childcare. I found that buying a house together 50/50 with money that was all mine was one way of gradually increasing the sharing – make minimum payments into the mortgage so if the relationship fails then my lost equity scales with how long we’ve been together.
It is also sensible to top up your partner’s pension to make use of what allowances they have and since when they’re old they cannot work, if we die they need income. It also means that as time goes on we become more invested in each other as life partners
So if the relationship is good, they get looked after
If it fails, you’re relatively safe
@Weenie @TA – actually, shouldn’t you be demanding to see their FI plan and documented progress? What about risk mitigation? No freeloaders!
Agreed. They need to be able to recite the Trinity Study to me on a moonlit night. Whisper sweet SWRs in my ear. Goldiggers are a constant menace in this game.
Interesting to read of partner considerations. In the ‘Magic Number’ post a week or two ago, targets of say £600k or £1m were mentioned but were these an individual or joint target? I’m still not sure.
I’ve been lurking here for many years and Monevator has very much helped define my investment approach – thank you so much. Another big help, although I hated it when introduced, was the loss child benefit if you earn over £50k rule. With three children, I felt forced into making extra pension contributions.
Things were ticking along nicely until redundancy came my way. It was a decent job with some great colleagues but not a job I wanted to stay in a day longer than necessary – too far from home and too stressful. I was, and remain, quite a distance from FI (three children slows things down!) but had packed a decent amount into that pension which left Mrs Carlos very much behind.
I now work part time, close to home – I earn a lot less but life is far better. Mrs C is now the higher earner and has the child benefit ‘problem’. If things continue as they are, it will take about six years for our pension/ISA investments to be about equal. Obviously it depends on your relative earning power but having similar sized pots at FI/retirement seems sensible to me. We’re getting there largely by accident but seem on a decent path.
Mrs C is far from clueless but doesn’t share my level of interest – the investing is very much outsourced to me. I will occasionally announce a milestone that seems significant. She’ll humour me by listening for a minute or two and takes comfort that things seem under control but the milestones are really for my benefit. It’s quite a solitary business. Monevator and the like are a big help to keep me on track.
I used to joke with friends that I maintained my graduate student lifestyle in order to dissuade gold diggers.
Of course, like much else I lifted that wisdom from Buffett’s righthand man, Charlie Munger:
https://medium.com/the-mission/the-dropout-and-one-of-the-greatest-comebacks-ever-1a241803cac
Of course any money-motivated would-be partner prospecting in oligarch-littered London who somehow alighted on me for gold-digging purposes ought to be ruled out for ineptitude and/or a lack of ambition. 😉
@Brod:
Re “…. so will probably need to work to cover those off ”
Suggest you look up voluntary NI contributions. Class II (self-employed) are still IMO exceptionally good value; class III are not terrible either.
A question to those whose partners have little interest in investing and such.
What are the practicalities and logistics around using their ISA / pension allowance? Do you, say, open a SIPP / ISA in their name and just use a different email address to register? Can you even fund an account with a debit card that belongs to someone who’s not an official account holder? Or do you transfer the money into their / joint account, give them a list of tickers and get them to fund the account and purchase the investments as a practice run? Any other tips?
@TA:
I like Fundedness (as explained at #21 above) because most months you will see progress being made – albeit rather slowly initially. Also, when the market takes a dive, you get a pretty instant view of the potential impact to you in terms of potential slippage in terms of time/dates.
It’s a good point about gold diggers, need an article with how to structure your pre-nup and how to structure your finances so no divorce lawyer will ever find your stash…..
@hosimpson – I would just top up their workplace pension, within limits – that way they have authorisation to access it and no choices are needed. My wife doesn’t want me opening anything “risky” in her name or our sons name, as if it’s risky, although I’m sure my son when he’s older will come on baird
If allowances are a problem then lifetime isas might be a good option, but they are still manual
Or let the partner hold the emergency cash, while we invest, they could pay down the mortgage if they want as a pseudo bond investment
@Al Cam – good point, thanks. She’s a couple of years missing when the oil market crashed and she was made redundant, so could look to purchase those. And of course NI is very likely to be self-employed NI contributions.
But an extra £9k into the family pot would never go amiss anyways 😉
I’ve not come across a platform who insists on debit payments being made in the account holder’s name.
Regarding partners. We have combined finances and I don’t recognise a concept of individual FI within a partnership, it makes no sense to me. All the spending and savings are jointly managed after all. Of course there could be a point where you could manage on one income if you chose to. (I guess some partnerships are like this anyway, but I find that a bit alien too, unless there is a need for fulltime childcare).
However, RE is for us an individual decision. I am much keener and much closer to complete retirement. Partner not really interested. I am working on it, but I also respect autonomy and am quite prepared to go it alone for a while. I am not sure I’d be happy retiring if the option wasn’t also available to my partner, that doesn’t sit well.
Practically speaking I am the person who manages all the investments etc. I distribute them as equally as possible within the constraints of allowances and access to different pension benefits. I generally fund my partner’s accounts by borrowing their debit card (shhh) and I know all the passwords etc (having set up the accounts). Sometimes they may have to be coached through a phone call…! It works for us. They can of course access anything at any time, there are no secrets, it’s just a practical arrangement. Anything that can be joint is (not taxable investment accounts as it complicates CGT calculations too much).
@ Vanguardfan – “Sometimes they may have to be coached through a phone call…!” Absolutely love this. I thought I was the only one!
Re: debit cards. I used to jump through this hoop but it turns out they’ll take the money from anyone. Even me.
@ TA thanks for the feedback re funds – that’s two ticks in the box for me then- great
@ Weenie I always think it’s best to show up being who you are – rip that plaster off, ask for that financial cv and fingers crossed you get the Trinity Study whisper 🙂
@ hosimpson – when I can’t remember how to use the ps5 to play a dvd and my partner starts giving me ‘the talk’ ….cue a bright white light, staring into space, forgetting immediately. The solution I have discovered is a simple instruction written down on an index card left on top of the ps5. So a possible suggestion might be…..invest in the simplest way possible, which can be accessed in the simplest way possible and leave clear 1, 2, 3 instructions where your partner knows where to find them?
@ Carlos I think they were joint – if it helps my target is £500k for 1 person – my partner will retire a long time after me due to age differences – and it will feel great!
@hosimpson – on the platform we use you can link accounts so on my log in I can manage my wife’s SIPP/ISA and make investments which is all very convenient. I can’t withdraw anything unless I log in as her. There is a high level of trust between us and she just leaves me to it. She’s on board with the general investment strategy and they send her an email whenever I do anything. Dividend emails trigger occasional excitement along the lines of her asking “Can I retire yet?” and me replying “No, it was £14.52”
Like Vanguardfan, our finances are very much combined and we think of it all as one big pot with a common goal.
I’ve always earned a lot more than my other half and done most of the investing/financial planning, and saving. Or so I thought.
I’ve been working towards independence (I think we are there) and possibly retiring early-ish (although I’m 56, so it won’t be that early…), and I’ve done all the planning, assuming it was for both of us, on the basis of my savings, DB pension and our combined state pension. Turns out the stuff he was doing both before we met, and after, adds several 100k’s worth in US dollars to our joint total. Time in the market is a marvellous thing…
Having spent most of my career in private firms that sound very like hosimpson’s summary, I thought I’d need to retire ASAP to stay sane. But after I was let go a few years ago i found a new job regulating what I used to advise. Less well paid of course, but much more pleasant (and when you add in the civil service pension, not that much worse paid…). I’m now trying to decide how much longer to give them… other half still enjoys his job and is a couple of years younger than I am, so I might just retire on my own timetable, and see what he decides to do. The only concern I have is that I’d rather travel with him than alone
@Brod:
RE “… when the oil market crashed”
There are time limits (nominally 6 tax years I seem to recall) re back-filling historical gaps. AFAICT, going forwards there are no additional constraints.
@Brod:
This might help you, albeit is for the 2019/20 tax year:
https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/gwymg-1b-topping-up-state-pension-2019-interactive.pdf
@hosimpson, my wife doesn’t have the patience to follow blogs like this and decide what to do with money. But she wants me to convince her every time my proposed approaches are good.
So she was happy with strategies such as, running up to her early retirement a couple of years ago putting all her tax-liable income into the company DC scheme, then at retirement going through the hoops of getting it transferred into a SIPP which allowed drawdown. And me putting her annual ISA allowance into LifeStrategy, which I do on her behalf (I doubt she could lay hands on her log-on in a hurry, though she does read the emails).
On the other hand she is a handy reality check for enjoying rather than hoarding our assets during retirement. When Covid permits.
Yet again a great article which really hits home for me so many of the points you have covered.
One of my drivers in my desire for Fire was I knew I had a sell by date and I would be eventually be paid off in yet another bank restructure. You know you are heading to those buffers at speed and you had better be ready. Anytime you are over 50 the red dot is on you. Fortunately I saw it and worked it in my favour. We all saw the previous generations being terminated and leaving with the optional Iron Mountain box. And yet my colleagues seemed completely oblivious to the impending termination and now a struggling to find other opportunities which pay anything like they had been getting. There is something inbuilt where we cannot see the inevitable and think it will never happen to them. But it does as all careers eventually end in failure.
I found that it was a race to FI before the grim HR reaper struck. So that was stressful but that stress continues. I have won the game though years of Aldi shopping, avoiding Range Rovers and toning down my life. However the stress is still there as I now have to manage my finances for potentially the next 30/40 years.
I remember by Dad would always give me a death list every time he went on some exotic holiday as to where his Will was and where he was invested etc. This was at the time a sensible precaution however it was slightly shocking at the same time. I copy my wife into my spread sheets so she has at least half a chance of understanding the finances. From reading the article which has prompted me I will add a tab for simple ‘cat on mat’ instructions. Otherwise within days of my demise she will start to have cash flow problems.
I did the Will piece before I finished work however I should have done it a lot lot earlier but it gets difficult when you have children below 18 at the time. That is my excuse but it was not really good enough. Just as my colleagues could not see redundancy I could not see my death so did nothing.
Some very good readers comments have been made. I am with Lesley’s approach with equities at 90% and cash 10%. In recent days I have increased the amount of cash as I fear the market when it increases as it has in recent months. Again this is the stress of managing your portfolio and ultimately your future standard of life.
@Jonathan Mk1 #49 “….. I should have done it a lot lot earlier …..”,
Yes indeed!
I have long since ceased to be surprised at the extent to which otherwise sensible people seem to have a blind spot where the need for making a Will is concerned, and I’ll wager that this failure to take action encompasses a proportion of Monevatorites too. Is it ignorance, or indolence?
Yes, there are rules in place governing the lack of a Will (intestacy), but their consequences need to be fully understood, plus who knows for example that these rules may differ for those living in England and Wales, those living in Scotland and those living in Northern Ireland. Crucially, in the absence of a Will the application of the rules of intestacy may produce a result that is contrary to what the deceased person would have wanted.
For anyone who isn’t up to speed, I strongly recommend a read through this link – https://www.gov.uk/inherits-someone-dies-without-will
@Jonathan Mk1 – “Anytime you are over 50 the red dot is on you.” That’s a great way of putting it. I think Felix Dennis wrote a book including a section on how ‘talent gets too expensive.’ As I recall it, an ex-Dennis employee took them to a tribunal and cited the book as evidence of age discrimination.
“I copy my wife into my spread sheets so she has at least half a chance of understanding the finances.” I do this! Tends to prompt a mix of bewilderment and derision 😉
@ Nebilon – That must have been a wonderful surprise! Were you both unaware of how much the other had done? Can only imagine the full-beam smiles when you finally did the joint tally.
My wife and I have 100% joint finances. I’m an additional rate tax payer and she does not work. My income pays both of our pensions, ISAs and GIA accounts in addition to all other expenses. She has no interest in money and other than semi-annually asking how much is in her accounts, expresses little to no interest. We both have access to all accounts, I log in at least weekly but I doubt she does ever, despite getting the buy order and dividend emails.
Because she doesn’t work, FIRE is a me thing. She passively supports the idea but as she doesn’t work it’s an alien concept to her.
I do the earning and the money stuff. She does kids, families and pets. We each play to our strengths and we generally bumble along in the right direction.
Life could be worse!
Another old-skool whine from the YOLO crowd:
‘but you could get hit by a bus tomorrow’ – correct response being – you have met loads of people throughout your life ? ‘well yes’ – have any of them been hit by a bus ‘…erm, well no but …’ – ‘ well I was brought on Darth Vader giving sound road crossing advice when I was 6’ so do you think that’s going to happen to me ? ‘erm, erm ….’ 😉
There are always bad things that can happen in a plan. But without a plan you will never get to FI.