Hello! And my situation

Malo · Post by **Malo** » Tue Oct 30, 2012 9:07 am

Hi all,
I think I'm in an ok position financially, but I'm having a bit of trouble working out how to make it better. I'd appreciate the advice of the people on this forum.
LIFE STORY

I am British, single, aged 40 and am employed by a large organisation that I really believe in. I also love my job which is well-paid (c£100k a year) and I have no reason to believe that my particular position is threatened. However, my organisation is going through some difficult times which makes the future hard to predict and makes me look nervously at the exit door. I also find my job pretty stressful and that can make me quite anxious at times.
I've always been a passionate musician and continue to do this professionally in my spare time, which brings in a further c£5k a year. I would love to do more of this, though given my time away from the full-time professional music scene it would never bring in much more than double this a year, and maybe less.
FINANCIAL STORY

I first started living frugally around eight years ago. I don't have a car and I don't have children - so I've been able to save around 75-80% of my take-home salary for this whole period. I began by paying off my mortgage, and for the last three years have been paying into a personal pension and into both taxfree and taxable savings (when I hit the limit). I also have a very healthy pension from my employer, though I do not want to rely on it in case the difficulties make it go kaput.
Financial summary:
- No debts

- House wholly owned

- Emergency fund: £10k

- Accessible savings: £150k

- Personal pension pot, accessible in 15 years: £140k

- Employer's pension, accessible in 20 years: £30k per year, index-linked - but see caveat above

- Monthly outgoings - with no luxuries: £900

- Redundancy pay-out in normal circumstances would be c£120k lump sum after tax, but in extremis I suppose this might not be forthcoming
THOUGHTS AND QUESTIONS

While I see how the work situation develops, I'm not sure how to continue my investing. Should I ignore the personal pension for now and focus on the immediately accessible savings, so I'm ready for anything? Though that would mean I miss out on some tax relief.
How much should I save in each pot before I can feel secure? I'd hate to rely on savings that just brought in £900 a month, as I have a bit of weakness for technology, and I'm a cautious person at heart. I would also probably spend more if not in work - more evenings out, more meals.
How can I build the courage to leave permanent full-time work (whether in my current company or another one) when my friends and family are all building successful and highly-paid careers, and moving into lovely houses? How have others done this?
And - even more philosophically - if I do leave off full-time work in a few years, what does it feel like? I've been used to full-time work for 20 years. I might hate it!
While I sort my thinking out, I'd be grateful for any perspectives from those who have been through this journey. Apologies too if these don't really seem like problems (compared to real problems!), but I'd appreciate any pointers.
Thanks in advance,
Malo

aussierogue · Post by **aussierogue** » Tue Oct 30, 2012 10:00 am

Hi
this is not too dissimlar to my story except i am married with two kids.
When in doubt just keep saving at such a great rate. Its an amazing achievment to see ones bank balance got up (in your case) 5-6,000 pounds per month...
And yes forget the pension - no tax savings are worth the trade off of waiting 25 years to touch the stuff...
You are in no rush so hang in there but the bigger buffer you have the less shit you have to take. Eventually (now even) Leave the job and do what you love...play music - teach music, open a music shop, make coffee, open a coffee shop, live frugally, live simply and your friends and family will admire you....even if they dont show it.
And guess what - if you hate it go back to what you were doing before.
Good luck (and keep saving at such a great rate it will give you amazing freedom in years to come - i was saving AUD 8-9k per month during most of my 30's)

Sclass · Post by **Sclass** » Tue Oct 30, 2012 3:26 pm

Welcome and congratulations on being able to save such a big chunk of income. That takes a lot of self restraint. You asked several tough questions.
I'll try to address

How to build the courage to leave...when others are building up careers.
You've certainly made it pretty far dancing to the beat of your own drum. This is just an extension of what you've been doing. Part of ERE is acknowledging you're not racing with anyone. By being hyper frugal you've already shown you don't have to keep up.
I bailed out of my job a few months ago and my friends and family thought I was throwing away my future and income. True to some extent. I threw it away because the income was like a stream of dope laced nutrient into my arm. It killed me as much as it made me grow. It got pretty clear I didn't want the careers and accompanying lives my friends and family lead. They can keep it. Once you have control of the finances the rest is ego. You've apparently been able to control that already.
Be yourself. Run your own race. It's all part of your plan already.
I miss the intellectual challenge of my work. But the torment of the job was overwhelming and I'm glad to take a little boredom in exchange for the blood pressure rise. You'll have some free time to fill but that shouldn't be a worry. It is a luxury.
@aussierougue The bigger the buffer the less shit you have to take..., love the way you said it, that will be my mantra today.

George the original one · Tue Oct 30, 2012 4:02 pm

Cutting to the chase: your current musical income is nearly half of your bare-bones expenses. Doubling that with more gigs will nearly cover your expenses. If your investment acumen is average or better, then 150k should safely generate 375/mo without dipping into capital (3% withdrawl rate).
You could cut the cord today if you were adventurous. You're not... so, save another 50k-80k and then cut the cord.

bigchrisb · Post by **bigchrisb** » Wed Oct 31, 2012 3:47 am

I'm 10 years younger, but in a somewhat similar situation - net worth of about $840k, total earnings of ~$250k/year, investment income that covers my lifestyle, and maintaining a savings rate over a full year of 75-80%. Theoretically, it might be possible for me to pull the pin on working now.
However, my concerns and reasons for not doing so thus far have been:

- I still enjoy my work, so I can't see a great reason to stop just yet.

- I feel that I'm on a fairly good thing at the moment, so while I could theoretically stop working now, each year I keep on adds significantly to the amount of fat in my retirement budget. I feel that if I left and decided to rejoin the workforce in 10-20 years, I would be unlikely to be on a similar income.

- I'm not yet decided about kids. I don't have any, but my I feel that my reserves would be a bit tight at the moment if I chose to have kids in future.

- I don't know what I would find fulfilling on a full time basis aside from work.
Between those, I figure that I'll keep working for now, unless:

- I stop enjoying my work

- I come up with an alternative to work that is more fulfilling

- I end up being forced to leave my work (low risk, as I'm a key shareholder in the company - company insolvency would be a more likely scenario)

Christopherjart · Post by **Christopherjart** » Wed Oct 31, 2012 5:35 am

if you love your job and you don't even know what you'd do retired, then you probably shouldn't retire.

Malo · Post by **Malo** » Wed Oct 31, 2012 7:14 pm

Hi all,
Thank you for such helpful and thoughtful responses, and in particular for the support for the path I've chosen. It's curious how lonely it can feel when you're doing something so obviously right!
@aussierogue: Thanks for the investing advice. I run a Permanent Portfolio in the pension - I now need to convert my taxable non-pension to the same allocation and build that up as you suggest.
@george: Handily that build-up should exactly happen with the 50-80k uplift that you suggest.
@sclass: You're so right about the drug-like quality of regular, substantial income. It'll be a struggle to give that up. However, (@christopher) I do love the intellectual challenge of my job and you're right that I should keep doing that while I can. There may just come a point where the stress and the difficulty outweigh that enjoyment. I want to be ready for that moment.
I'm going to tattoo this somewhere obvious because it's so inspirational: the bigger buffer you have the less shit you have to take.
Thanks again and keep the feedback coming! I'll keep updating this thread as my situation evolves.

Christopherjart · Post by **Christopherjart** » Wed Oct 31, 2012 8:07 pm

eventually things will change or you'll decide on what you want to do and you'll be ready.