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Laissez-FIRE

Posted By Frugalist On In Monevation | 5 Comments

Big picture, my approach to FIRE 1 [1] has followed all the usual principles:

But, contrary to my expectations, the further I get, the less certain I feel.

Initially, the strategy seemed clear. Multiply your expenses by 25 and then charge towards that target [2] as quickly as possible.

But at the same time as I worked towards that goal, life was happening. My expectations were changing. My priorities were adjusting. 

At one point it was all about finding exciting work that would stretch me and position me for the next promotion. Now I have children, and I get more enjoyment from playing with them at the weekend than jetting off to a conference.

These days I’m even less sure what my target even is. But I’m still making good progress towards financial freedom.

I’ve started calling this path Laissez-FIRE.

The background

I’ll save you the long history of my childhood.

The short version: I grew up with frugal parents and grandparents. I knew my way around a savings account [3], and how to avoid over-spending at the supermarket.

I tested these principles in the corporate world. My first job involved finding ways to slash spending in the wake of the 2008 financial crisis. It was every bit as grim as it sounds.

On the plus side, I was fortunate enough to come across the FIRE [4] movement in my twenties. At that point, I lived in a mortgaged flat with my girlfriend.

Fast forward a few years, and we’re married with kids. We now live in a mortgaged house – close enough to London to maintain our careers.

On paper, that’s not the set-up for a rapid advance to financial independence.

Investing the boring way

In the intervening years though, we’ve been stashing as much as we can into passive global equity funds in our ISAs.

At first, we could only afford £2,000 each year, but in recent years we’ve been able to max out the £20,000 ISA allowance.

We have both earned above-average salaries since graduating and have maintained mid-five-figure salaries over the years. And by my reckoning, we have directed more than 50% of our net earnings into either the mortgage or investments [5] for several years now.

Perhaps I should have made it to six-figures. But I was always the one who would leave the office when the work was done, rather than get stuck into someone else’s pet project after hours.

Not too many regrets there, in all honesty.

We’ve also taken advantage of employer pension schemes of varying quality, and transferred the investments out to SIPPs whenever we got the chance, gaining more control over our investments.

FIRE in the hold

I’ve been hoovering up FIRE blogs and articles for over a decade, so it seems like this is where I’m supposed to talk about my progress.

But I actually don’t know. I haven’t set any goals yet.

It’s about the journey, not the destination

A couple of things have repeatedly caught me out over the years.

I’ve discovered I’m an awful market timer. Just ask me about the Bitcoin I sold for the price of a Big Mac before most people had even heard of it.

At least I’ve learned my lesson there. All my investments are passive now!

Another is that – despite being a habitual planner – I either can’t or don’t account for all of the things that might crop up in life.

Everyday life decisions with big ramifications

After graduating, both of us had found work in London.

Now, I wasn’t too fussed about living on the tube map. But equally, commuting from Stoke for 8am starts in the centre of London didn’t seem like the smartest move.

We knew we were buying property in an expensive suburb, but that seemed a fair trade-off. Living close to the capital helped both of us to earn decent salaries. 

Eventually, I figured, we’d sell up and move to the North or the South West.

After all, property only seemed to go up in value. And once we sold up, that might give us enough to buy the next place outright.

I’d also calculated that having kids wouldn’t be financially ruinous. We were quite happy to scour charity shops and rely on hand-me-downs. Nursery would be expensive, but there were ways to mitigate [6] that.

Sounds good so far.

Where you live can be surprisingly sticky

Suddenly though, I’ve got a young kid in an ideal school that I fought tooth and nail to get them into. If I move to another county, all that hard work goes up in smoke.

Grandparents are visiting all the time, too, and the kids love seeing them.

Additionally, I’ve unexpectedly become a carer. Proximity to relatives and specialist hospitals is not just a convenience, it’s a central part of my life right now.

The upshot?

Having kids has actually been surprisingly cheap, in terms of day-to-day costs.

But with my plan to move to a cheaper area thwarted, I need to find a suitable house for the next decade or so. In one of the most expensive parts of the country.

Oops.

Children skew house prices

What I’d once though basic features of a family home, like a driveway and a garden you can kick a football in…around here those come with properties approaching seven figures.

And if I also wanted to guarantee my kids access to a top-performing secondary school in this area? Well, catchment area house prices are the ultimate middle-class stealth tax. I’d be straight into the £1m-plus house price bracket.

The point isn’t that we deserve sympathy or a high-performing school. I’ve accepted that I’ll bleed mortgage interest to stay near grandparents, maintain my caring commitments, and give my kids a potential better future.

Rather, it’s that I’ve often been caught out by things I didn’t anticipate.

When I originally scouted out suitable suburbs for our jobs, it never occurred to me that a few years later we’d have tied ourselves to the area we chose.

In turn, I had never expected to be debating the merits of £1m houses, or contemplating mortgage terms that could end beyond my ideal retirement age.

But here we are.

So is my whole FIRE plan scuppered?

Let’s talk numbers. Remember those ISAs I mentioned?

If we followed a 4% Safe Withdrawal Rate [7] and assume that our expenditure rises only with inflation, the ISAs could cover about 90% of expenditure – excluding the mortgage.

I don’t know if you found the 90% figure surprising, but I certainly did. I’d never actually checked until I decided to write about it.

As I said, I’ve not set any targets, or even thought about them. But plugging away [8] and cost-averaging [9] into index funds gathers steam over time.

Add the SIPPs on, and we’ll be in a good place in a couple of decades when we can (hopefully) access our pension cash.

The key achievement here is building resilience.

There’s enough in the ISAs to weather some time between jobs, and enough in the SIPPs for us to maintain our current spending when we reach retirement age [10].

You may be thinking this is about to pivot into a smug retirement post. But that would be ignoring those key words above: excluding the mortgage.

Yes, as good as things look, I’ve got a six-figure hole in my plan.

And it will probably get worse.

What’s next?

We have some fairly big choices to make.

The main one is deciding on the next house.

I’ve drawn a fairly tight oval in Rightmove of acceptable postcodes, taking into account everything from family to hospitals to secondary school catchment areas.

But even within that boundary, there’s a vast range of properties – from terraced shoeboxes to century-old semis with generous living spaces.

A FIRE purist might say buy the cheapest house you can, and retire as early as possible.

But I’m expecting to live in my next house for at least a decade, with children growing up. Right now, they might be happy with a tiny bed in the corner of a room and a teddy, but eventually they will need their own spaces to live and study. If we’re lucky, they’ll have some friends they want to invite over.

Finding a comfortable house for all of us could mean borrowing hundreds of thousands of pounds on top of my existing mortgage – and paying potentially six figures in interest costs alone.

I’m less worried about the interest than you might think, given that inflation will reduce the value [11] over time. But servicing it each month is still a strain.

Even with the perfect house, nothing is certain

Unless the UK magically fixes its housebuilding problems in the next ten years, when my kids reach 18, they’re unlikely to immediately rent their own properties to live in. Let alone buy.

So perhaps I’ll be moving at that point to find a place with an annexe – or as I’m told they’re now called, grad pads [12].

Or maybe I’ll be surprised again and find we are all so settled that even I’m opposed to relocating somewhere cheaper.

Eventually, once our children have their jobs sorted, we might be weighing up whether to raid the ISAs to see if the Bank of Mum and Dad [13] can help with house deposits.

The only conclusion I can draw is I don’t know what life will be like in ten years, let alone 20.

Some off-the-cuff principles of laissez-FIRE

I wouldn’t want to suggest that the laissez-FIRE approach is best for everyone.

If you’ve got a solid plan that you can stick to, more power to you.

However I’ll try to boil my personal principles down to some key pointers:

What does ‘Retire Early’ look like for me?

Some people will say their only goal is to retire completely, as fast as possible.

I used to feel like that.

Thankfully, I’m not completely burned out on my career yet. If anything, I see career flexibility as part of the plan.

I’m quite happy to try out different jobs and employers, to see what works for me and my lifestyle at the time. The job that suited me ten years ago wouldn’t suit me now, and I’m sure the same will be true in the 2030s.

I want a role that pays me enough to feel worthwhile, but doesn’t excessively drain my energy and mental health. To my mind, it’s madness to run myself into the ground just to build a bigger retirement pot.

In the long run, I’d like to emulate a friend’s ‘stick it’ retirement. As he puts it, he takes on various contracts and ad-hoc pieces of work, with sufficient money in his SIPP that when he finds himself disliking the work or the people, he can tell them where to stick it.

If my ISA swells, that might give me more scope to support my kids. It could give me more flexibility over when and where I move, and give me more freedom with work [16].

Or maybe my ‘stick it’ threshold will have fallen so low that I’ll barely be working at all!

The one thing I know for sure is that my situation will change again before I’m ready to retire.

I have no idea what I’ll do at that point.

But thanks to my laissez-FIRE habits so far, at least I’ll have options.

  1. That is, Financial Independence Retire Early.[↩ [17]]