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Good books to help you stay the course to Financial Independence – and beyond

A lonely FI traveller nears his final destination.

It’s been nearly three years since I last talked about financial independence (FI). I’ve been keeping my head down because The Investor threatened to send the boys round to give me a lesson in volatility if I missed another Monevator: The Book deadline.

I was three years into a ten-year FI journey and feeling the pain. The launch party excitement lay in the past. The reality had become an endless trudge through mental Siberia.

Much has changed

I passed the halfway point on my calendar in 2018. I passed the halfway point on the spreadsheet in 2017.

Now I’m three-quarters done. That changes a man.

The FI dream feels real. The way ahead looks like a downward glide. Is it me, or are those milestones spaced a little closer together now?

I can report that:

The mechanics work. The rest is down to the human.

Nothing succeeds like success

Now I can sense freedom on the wind, I’m as happy as a Bisto Kid floating on gravy.

I’ve stopped worrying about the process. Frugal living is not a chore anymore. Mrs Accumulator and I have absorbed it into our systems like friendly bacteria.

But we’ve also lowered our optimisation guns. We weren’t going to last ten years – much less the rest of our lives – if we pinched every penny.

We planned on a £20,000 per year FI income back in 2013, when we first tried on our FIRE suits.

That amounts to £22,515 in 2018 according to the Bank Of England’s inflation calculator.

But we’re banking on £25,000 per year now. We’ve loosened our belts a notch to allow for a slightly fatter FIRE.

Playing with the numbers

We got another boost through ongoing financial education. The original plan called for a stash of £666,000 to declare FI at a 3% SWR (Sustainable Withdrawal Rate).

The standard 4% rule was and is too risky. But there are techniques to help you manage a higher SWR without inviting disaster.

It’s not a free lunch. They may mean you have to cut spending during rocky periods. You will have to run a more flexible and challenging deaccumulation strategy. I’ll go into more detail in future posts but the pioneering book Living Off Your Money shows you one way to go about it.

The knowledge upgrade means I think a 4% SWR should work for us. Especially as I previously left the State Pension out of our plan. As my free bus pass draws ever closer, it’s probably time to stop overlooking what is likely to be our most reliable source of future income.

Here’s the maths:

Divide £25,000 FI income by 4% SWR
Our stash requirement = £625,000

So that explains how those milestones moved closer together. I converted them to kilometres part way through!

I haven’t spent all my time cooking the books. We originally aimed for a 67% savings rate. We’ve actually nudged over 70% every year, bar a 60% blow-out in 2015.

This. Is. Doable.

Snag party

Our savings have mostly gone into pensions. Problematic!

Our 40s are waning and at this rate we will be theoretically FI – but marooned from our assets for a few years. Diverting new funds to go into ISAs will bridge the gap but also muller our savings rate, so we could still be half a decade from journey’s end at this point.

I’m also finding time to peel back more onion layers from my neuroticism.

What if FI isn’t for me? What if it’s a mirage? What if I find a new laundry list of things to be unhappy about? Except this time they won’t be external problems like getting up on a Monday – rather a bestiary of personal demons like loss of purpose, identity and structure.

The upside of FI is that I’m less worried about a financial deluge sweeping us away. We can’t defend against every risk but at least these days we live in a house on stilts.

The downside is that now I’ve freed up that brainspace, it’s as if I’ve nipped down to the anxiety exchange to see what other troubles are available.

I think the answer here is working on one’s self. The great thing about the FI journey is that it causes you to reexamine everything about your life.

I’ve mostly been trying to find out what really matters to me through books.

Here’s a few I’ve found helpful.

Being a better version of yourself

Man’s Search For Meaning – Viktor Frankl
An incredible book on how to live. Frankl’s insights are powered by his experience as a psychiatrist and Holocaust survivor.

The Road To Character – David Brooks
Case studies of inspiring figures who lived before the Age of Celebrity. Brooks’ thesis is that even the ‘greats’ are not the finished article out of the box. We can become better versions of ourselves as we learn to give more of ourselves.

Meditations – Marcus Aurelius
Wisdom from the most powerful man in the world – in 161AD. The Roman Emperor’s insight stands the test of time nearly 2,000 years later.

Hope for the future

Healthy At 100John Robbins
Why old age doesn’t have to mean decrepitude. Inspiring lessons from the Blue Zones: remote communities that seemingly enjoy better health than the West, and whose members often live vigorous, purposeful lives well into their 90s or even 100s.

The Better Angels Of Our NatureSteven Pinker
The case against the ‘World is going to hell in a handcart’ brigade.

The Righteous MindJonathan Haidt
Why does our society seem so hopelessly split? Can we heal the divisions and build greater tolerance for those who disagree with us?

Staying on course

MidlifeKieran Setiya
Combating the midlife blues.

The AntidoteOliver Burkeman
Ya, boo to ‘don’t worry, be happy’ positive thinking. Embrace uncertainty and insecurity with this secular mash-up of Buddhism and Stoicism.

Status AnxietyAlain de Botton
Advice on resisting the dessert trolley of consumerism.

If this reading list is anything to go by, we’ve known the secret of flourishing for two thousand years. It’s just we’re spectacularly ill-adapted to acting on it.

I’m working on rewiring myself as best I can. I’d love to know if you are too.

Take it steady,

The Accumulator

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{ 70 comments… add one }
  • 51 Brod March 14, 2019, 6:37 pm

    And of course there’s no alcohol in THAT budget

  • 52 The Accumulator March 14, 2019, 7:34 pm

    Love reading everyone’s stories about their individual approaches to downshifting. So many ways to skin the cat! Thank you all

  • 53 The Accumulator March 14, 2019, 7:53 pm

    @ Playing with fire – I think I’m measuring the right thing. See what you think:

    £12,500 personal allowance + 25% tax-free using UFPLS means any individual can withdraw £16,666 a year tax-free from a SIPP.

    Multiply that by 25 = £416,650 in stash per person to support a 4% SWR.

    Or multiply by 33.333 = £555,527 in stash per person to support a 3% SWR.

    So saving into SIPPs gross of salary maxes tax relief and we’re not yet in a place where we’d expect to pay tax on the other side. State Pension notwithstanding.

    ISAs at best fill up with savings from income taxed at 32% including National Insurance. That mullers our saving rate if you’re calculating your savings rate including tax – which I do.

    I don’t think a savings rate need include a utility function that tells me I need ISA savings to bridge the gap to my pension. I know I need ’em, but progress will be slower than with the SIPPs.

    I like your idea about using a mortgage credit line. That’s got me thinking!

  • 54 Deltrotter March 15, 2019, 8:38 am

    Best thread on the site imo. Thanks everyone.

    And the book list is great!

  • 55 MrOptimistic March 15, 2019, 10:24 am

    Re books. The Gulag Archipelago I thought poor: came out at the height of fame, rambling and needs editing. In the First Circle and One Day in the Life of….were much better and were the basis of the author’s reputation. Then there is Crime and Punishment by Dostoyevsky which I thought great as a teenager but never been back.
    One thing that might be an issue is that footwear choices aren’t really a factor in any of the plots so you will get no lifestyle guidance there.

  • 56 MrOptimistic March 15, 2019, 10:46 am

    @TA. Hmm. Assuming UFPLS is still around and no rules change and the basic rate of tax stays where it is, and that we stay sober and aim for a 3% withdrawal rate, and forego further pension contributions in the face of MPAA.
    First, for 40% tax payers the saving on investment is 42%, cf 32% for 20% taxpayers isn’t it ( this just for completeness)?
    If you want to get to around £25k pa to sustain your frugal lifestyle ambitions and have no separate capital buffer to cover shocks and big ticket outlays then you need about an additional £10k of net income.
    You are too young to factor in the circa £8k gross from the state pension, that comes later but still only adds around £6k needing £10k gross to get to £25k. So that adds 33x£2k = say £70k to the pot.
    Setting aside the state pension as providing a floor, you need another £10k pa so that adds £330k gross, or who knows what net, to the treasure chest.
    At least that’s the way I am judging things for myself so interested if I am being too conservative.
    Thanks for the posts.

  • 57 Factor March 15, 2019, 1:48 pm

    @TA #39 – “Why do you find the 4% of 1 star reviews more compelling than the 87% of 4-5 star reviews?”

    Management by exception, aka if it ain’t broke etc, is my life m.0.

  • 58 Brod March 15, 2019, 2:29 pm

    @The Accumulator – re: remortgage credit line.

    They do exist and they’re free!

    Simply get an off-set mortgage and put everything you borrow in the off-setting Savings Account. Voila! A lovely credit line on which you pay no interest. Pay the mortgage from that account and you have a slowly reducing slush fund for that Aston Martin!!! (I’m on the right side, right?)

    It’s what we have.

    Just be careful not to go to close to the edge and trigger a repayment event.

    Oh, and you’re insulated against interest rates too as you should only be paying interest on a very small fraction of your mortgage. We can off-set up to 99.9% in the savings account or something before we’re forced to repay it all.

  • 59 Playing with Fire March 16, 2019, 9:14 am

    Re #53.

    I was concerned about pension tax based on taking £25k out a year, but didn’t know whether that was out of one person’s tax allowance or two. (Also whether there are two 40%+ taxpayers?) Taking £25k out of one person’s pension would be enough to get me weighting the pension contributions.

    I’m trying to get a mortgage on a mortgage-free house… it’s harder than I thought. Banks have a lot of questions about what I’m doing with the money and investing so that I can quit my job wouldn’t go down well. Scottish Widows seem to be a good fit, but won’t do an IO or offset. The assumption seems to be that I’m going to remortgage, spend the money on hookers and blow and then sue the bank for irresponsible lending, urgh.

  • 60 Matthew March 16, 2019, 11:42 am

    @playing with fire – you could get an equity release mortgage, or sell and buy something else, maybe with a short gap to avoid the same questions.

    Or you could rack up debt on 0% credit cards and then remortgage to clear them

    You may even be able to remortgage to clear a margin loan, perhaps, but that’s more iffy

    They seem happier if you spend the money on decorations, holidays, weddings, etc than invest, even though investing is more responsible than spending, I suppose they fear you’re going to day trade on margin

  • 61 Sara March 16, 2019, 12:31 pm

    Golly, people get very passionate about not reading certain books don’t they?
    Personally I really enjoyed Pinker’s “Enlightenment Now” followed by “Factfulness”.
    Frankl has been on the TBR pile for a very long time (must read it). I liked The Antidote too – a sceptical self-help book.
    I’ll add the others to the interesting list – all I need is that FI so I have time to read them!

  • 62 The Accumulator March 16, 2019, 12:54 pm

    @ MrOptimistic – I’m not sure I’m following you correctly, but I’ve had a go:

    I think you’re saying you want £25K net income per year for one person, assuming 3% withdrawal rate. But to cover the unforeseen you’d be more comfortable with £35K. My calculation of that is:

    £12.5K (personal allowance) x 1 = £12,500 (so far so good!)

    £12.5K (net income) x 1.25 = £15,625 (gross income taxed at 20%)

    Minimum income required = £28,125

    £28,125 x 33.333 (@ 3% SWR) = £937,490 FI target.

    State Pension = back-up.

    But then there’s the extra £10K p.a. in back-up funds needed to seal the deal, or £12.5K gross.

    Income required is now £40,625

    £40,625 x 33.333 (@ 3% SWR) = £1,354,153 FI target.

    Strewth, the extra £10K net increases the target by over 44%.

    OK, but an extra £10K net gives you massive flexibility if you can actually live on £25K and the State Pension will ride to the rescue in later life. So let’s say that enables you to choose a 4% SWR.

    £40,625 x 25 (@ 4% SWR) = £1,015,625 FI target.

    This target is only 8% higher than the £25K one but takes into account the benefits of a more flexible plan.

    Another way of looking at it, is you can withdraw £25K per year at a 3%SWR, safe in the knowledge that you’ve got a £78K emergency fund to handle shocks. And the State Pension still to come.

    My apologies if I’ve got the wrong end of the stick, which I acknowledge I may well have.

  • 63 The Accumulator March 16, 2019, 1:12 pm

    Does anyone know a good way of calculating the impact of the State Pension on stash required to FI?

    I have kind of assumed I’d need to divide FI into two parts. Part 1: Stash to fund life before State Pension at SWR matching that time period. For example, if FI is achieved 20 years before State Pension age, and a 20-year SWR is 6% then:

    £25K x 16.666 (@ 6% SWR for 20 years) = £416,650

    Part 2: Stash to fund life after State Pension at SWR matching that time period. For example, £25K – £17K (two full State Pensions) = £8K x 33.333 (@ 3% SWR for 30 years) = £266,664.

    Total FI stash required = £683,314

    I don’t know if that’s the right way to do it, I guess there’s a better way but I haven’t researched it. Does anyone know?

    BTW, I made up the 6% SWR over 20 years for the purpose of the example. I’ll check properly some time.

  • 64 vanguardfan March 16, 2019, 1:33 pm

    @TA
    I think what you have described is but one nuance of real retirement planning as opposed to finger in the air targets for stashes earlier on in the accumulation phase.
    For example, in my case, which is not unique, we have:
    one DB pension arriving at 60, one DB pension arriving at 65, two state pensions arriving at 67. Plus unknown amounts of earned income. And of course that’s before you even consider trends in spending – all the evidence suggests that spending declines with age.
    I think some kind of cash flow modelling is really required, but haven’t looked into the tools available or the assumptions they use (I think generally they use a steady % increase to model investment returns which is clearly wrong).
    What I tend to do for a simple back of the envelope calculation is just add up the spending requirements minus the known income streams, ignoring the effect of inflation and hence assuming that investment growth is zero in real terms.

  • 65 MrOptimistic March 16, 2019, 5:29 pm

    @TA, cheers I’ll have to think about this! One point, if state pension is a significant factor, need to check that things still work post first death.

    I always look at net income as that can be matched to spend, but I get net and gross mixed up from time to time.

    As I retire in 11 weeks time it is a bit academic to me in terms of targets but useful for judging what I can safely take from the DC pot. I suspect I am being overly cautious with this and with my asset allocation. I will take the 25% tax free lump sum which throws more emphasis on asset allocation. One reason is to protect against future rule changes re UFPLS, the other to simplify filling in tax returns.
    I also have dividends reinvested and not a handy extra as some seem to assume.
    Can’t see anything wrong with your approach to state pension but perhaps just count on one to give margin and protect against rule changes.
    Anyway, thanks for this post. Look forward to the book. Hope your proof reading is good :).

  • 66 Playing with Fire March 17, 2019, 9:00 am

    @matthew
    Equity release minimum age is 55, so no good.
    Remortgaging for credit card debt or margin loan has the potential to tank credit rating so you’d struggle to get a mainstream mortgage. I could get a mortgage with one of those shitty predatory places and look to remortgage soon after but there are high fees and I don’t want to give them the business.
    Moving would work but takes a lot of energy and is expensive – surely it shouldn’t be that hard.

  • 67 We There Yet? April 15, 2019, 3:17 pm

    Hi all, been reading the site for around a year and thanks to all for the information (it helps me to realise I’m not the only ‘weird one’ wanting to step out of the mouse wheel!) I FIRE’d at 50, when I realised I could actually stop work if I wanted too and perhaps try it out. I’m now 54 and still trying it out….On the theme of yearly spend; I keep track all of my spend on bank downloads into a spread sheet each week. I own my own house and no longer have mortgage, or rent, and if it helps am a single male in the UK. If I keep an eye on spend it’s c £18k pa. if I’m lax it’s nearer £20k, I do have some nice vehicular toys etc and not quite a hermit (yet). I’m basically setting my next 30 years…ahem, spend based on the recommendations in Mr Mc Clungs: Living Off Your Money with a starting pot of c £650k (not including the ‘house asset’!). I use a self constructed spread sheet which takes account of straight line investment performance (3.5% which I can vary for modelling) swr and inflation with later addition of the state pension. Of course the big variable is future returns esp with CAPE high and potential government policy changes over this horizon. As for the staying on course ‘well-being’ wise, although I did work in a high pressure but well paying job, I had previously taken extended (up to a year) breaks in the past as a practice for FIRE, and ultimately my recommendation to anyone would be that to keep the brain active, I think it helps to be a ‘hobby type’ person or perhaps to go part time at first. I also think it’s a lot easier if your a more single-minded (dare I say introverted) type who hasn’t fallen for the keeping up with the Joneses commercialism and enjoys collecting things (ie money). I hope this info helps anyone else when constructing their own personal plan.

  • 68 The Accumulator April 16, 2019, 5:47 pm

    Thanks for dropping by We There Yet? Sounds like you’re having a whale of a time and I’m glad to hear your trial period is going well 😉

  • 69 Nick August 8, 2019, 2:25 pm

    Really interesting to see this discussion pop up as I’m having quite a few struggles. As @Rhino mentions I’ve managed to shortcut my thinking to ‘being FI’ before actually getting there. I probably have at least 10years of work to reach that point on the balance sheet but I’m trying to put my mind in that place and answers questions such as, money no object, what would you do?

    I’ve noticed this and the arrival of my daughter have caused an existential crisis of sorts. My work pays and can be interesting at times but I don’t get a sense of purpose from it, I also dont enjoy it a lot of the time but I know I need intellectual challenge.

    Currently in a phase of rumination on the purpose piece for several months and not resulting in good things. Those that have been there and done it, what would they advise for enjoyment/fun in work?

    Regarding a sense of purpose in my work, is this chasing a carrot attached to a moving vehicle?

    It’s strange I’ve normally been so settled and confident in my approach but this seems to have knocked me for six and I’m unable to resolve.

    Any advice from those of greater wisdom?

  • 70 We There Yet? August 8, 2019, 5:47 pm

    Hi Nick
    Not sure if any of this will help but here goes and forgive me if I have slightly missed your point but this is how I rationalise the problem in my thought process.
    Unless ones parents were/are extremely wealthy we are programmed from the day we are born to believe that going to work defines who, and what we are until we eventually get old retire and do ‘retired things’. This fundamental ingrained belief structure within ourselves, and within society, is an extremely difficult mental straightjacket to escape from and one that I still struggle with.

    What does this mental struggle feel like? Well it’s hard to describe but here are a few thoughts;
    Negative thoughts: I should be more productive, I am wasting time, I’m not supporting society, I am no longer a economic unit. Positive; I can do as I please, my time is now my own, all the options are mine, I still pay my taxes. Mmm.. opposing thoughts, a psychiatrist dream..
    My approach to help resolve this ‘problem’ was to gradually reduce work whilst still preparing to FIRE (an acronym that I also dislike!) with periods of up to 1 year off which helped me to understand how it ‘felt’ I did this over a protracted period of time (roughly over 10 years; I worked freelance) Perhaps this is being FI before I got there?? I also kicked off a few start-ups to gain more flexibility with some success but its bloody hard work to create success and it became well, too much like 24/7 work not FI!
    My solution after FI? I now I take the approach of mentally classing myself as someone who no longer works but could still ‘work’ if I wanted to. (disregarding the fact that I’d want so much flexibility that no one would want to employ me)… A glorious self-delusion that works for me until I too hopefully finally resolve this internal struggle (…come in and please lie on the couch sir..).

    But prepare yourself. People still meet me, judge me (I don’t yet look old enough to be ‘retired’) judge me by ‘what I do for a living’. Then say; ‘your lucky’. But then their not interested how its achieved, or how they could also do it. Some even get hostile. I think this is because FIRE impinges on that fundamental ingrained human belief structure and essentially it ‘does not compute’ to the majority.
    Sorry this comment is a little protracted but as TA recognised in the post it’s an important non-monetary part of FI that is often overlooked, and does indeed mean you will need ‘rewire yourself’ as well as your finances to be successful. Hope I helped!
    WTY

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