Wednesday, February 07, 2007
This is a post I have been planning to make for quite a while. The delay in doing so, perhaps symptomatic of the reasons for making it.
In modern jargon K and I are doing a bit of what might be termed 'downsizing'. A financial advisor might describe some aspects of it as 'retirement planning'.
Neither of those terms sits comfortably with me. I don't see it as some sort of retreat from modern life, nor is it about plotting a comfortable descent to the grave.
Rather I see it a life plan. One which structures our priorities in a manner that will give us quality time with E - and any kids to come - whilst ensuring we are not shackled to the grindstone until our twilight years.
Last week K left her job, having handed her notice in soon after the New Year. We are a single income household for the foreseeable future.
This was not a spur-of-the-moment decision, though the timing is more rapid than we had previously planned.
She will be devoting more time to bringing up E, and simultaneously removing the burden from my parents. My dad's episode at Christmas a reminder that we sometimes place unfair expectations on them - which they would never dream of refusing to meet.
K and I have never been the most ostentatious of spenders. I can recall numerous occasions when my gadget and car oriented techie workmates have teased me for my unwillingness to splurge on the latest must-have item.
I was called 'tight' long before I took up Limit Hold 'Em.
Yet we can hardly be counted as frugal either. We've got a nice house; two cars - albeit very much from the sensible range; and we do like to travel and have fun.
Thus our plans are more a formalisation, or evolution, of our existing lifestyle, rather than some sudden Damascene conversion to a new lifestyle.
Work-to-live, not live-to-work, has always been my approach.
Coupled to a pragmatic grasp of how finances work, I have generally been relatively cautious with debt - avoiding running up big credit card bills, whilst accepting the inevitability of the mortgage payments.
This attitude no doubt influences my conservative approach to bankroll management.
We now find ourselves in the position that the mortgage is the sole remaining debt on our balance sheet, and as I said previously, killing it off is financial goal number one.
Progress has already been made in that area, and I expect more to follow later this year. All of which has laid the foundations for K's early withdrawal from the workplace.
Whenever friends or family seek financial advice from me, I tell them that reducing debts in order of expense should take priority over investment.
While shares may go up or down, the bank will always expect their payment at the start of the month.
Investment returns are uncertain; interest charges are certain. I continue to maintain that philosophy.
So far, no real change then. Where the life plan comes in is in setting more definitive long-term goals.
One area that has attracted much attention in the financial press recently is the pensions crisis.
As people live longer, birth rates decline, final salary pension schemes disappear, and a culture of instant gratification and cheap credit overpowers more traditional values such as moderation and saving, the nation is heading towards an economy where people will carry their debts far beyond traditional pensionable ages.
Working into your seventies will be the norm, rather than the exception. Already the government has set in motion the raising of retirement ages in the UK, and this trend will certainly spread across the rest of the old economies of Europe and the US.
That is NOT my plan.
I've always been somewhat of a contrarian when it comes to financial planning. When others were fleeing the stock market as it languished in the lower 3000s, I plunged in with a big lump sum contribution to my pension. I saw it as a chance to make my money work harder over the next thirty years.
Now as many of my fellow citizens resign themselves to an extra ten or fifteen years of work, to pay for their current excesses, I am again aspiring in the opposite direction.
While K looks after family business, I have set myself a target of transitioning out of my current lucrative but time-consuming and unfulfilling job within roughly ten years.
The aim being to replace it with some as yet undefined work that will be less stressful and time-consuming, whilst paying whatever bills remain.
To put things in context, I recently turned 36, and the broad-brush plan looks something like:
- mortgage cleared by 40
- current job ended by 45
- part-time by 50
- effectively retired by 55
All of which does sound awfully like a terribly dull retirement plan at first glance.
Where I see it differing is that what we are aiming for is to reduce our fixed and non-negotiable outgoings rapidly, to give us more freedom to expend as we see fit in the future.
It also gives us the freedom to make more time for ourselves. As a contract worker I am very much a slave to the demands of the current customer.
We are not plotting a comfortable path towards the grave; we are planning on enjoying life to the full.
I want to be in a position where deciding to spend a long weekend in Barcelona or Rome is something we can do on a whim, not something that necessitates three months advance planning.
Where attending school sports days, and the like, is a given - not a big ask.
All of which means surrendering a few frills and luxuries now, in the expectation of more rewarding pleasures a few years down the line.
In the more immediate term, I'm also making some other changes for the better.
Over the last year I've been aware that my health and fitness isn't all it should be.
For the first time since I was a teenager I've moved up a waist size. Much as I was never any good at sports, I was generally active until the last few years. Whether it be hacking shins on a 5-a-side court, shifting some weights in the gym, or even just walking to work.
I'd hate to be too infirm to enjoy my kids growing up. There are things I didn't do when I was young that I'd like to learn with them. Skiing for one!
I'd love to take them to interesting places. K and I honeymooned in Africa, and went on safari. That was an incredible experience that I'd love to share with them.
South America and the Far East are still on our list of places to visit. They aren't trips I'd inflict on a toddler but it would be great to take them when they are old enough to appreciate the experience.
While I don't ever see myself existing on salad and lentils, I will be making a more conscious effort to eat healthily, and I'll be aiming to get more value from my gym membership - presently my most wasteful investment.
K is already well ahead of me on this path, so hopefully her success will spur me on.
From a psychological perspective, discussing the above with K, and even writing up this post, has made me feel more content than I have for quite a while.
I'm happy that I've regained a sense of purpose in life, and can see some rewards coming from the pressure I've put myself under over the past ten years.
At one point I presumed my career would be a gradual progression through the ranks of some firm to the point where I was a manager or executive.
That isn't going to happen now. I'm happy pursuing my narrower motivations as a contractor without becoming embroiled in the office politics of promotion and empire building.
This realisation is relatively recent, and if I'd been told that ten years ago I wouldn't have believed it. People change. We adapt to circumstances, and get on with things.
My first serious job application was to the RAF. I wanted to fly fast jets.
I passed the aptitude tests, and failed the medical due to dodgy eyesight. So I've undergone a fairly dramatic switch of career ambition already.
All of which means I've managed to knock off over a thousand words with barely a mention of poker. Which is as it should be.
I don't see poker as playing a great part in these plans. Rest assured that is not the career change I have in mind!
Which isn't to say there won't come a point where any surplus winnings are reinvested towards the life plan.
For now I still see my aim as building bankroll to let me play higher, but I suspect there will come a time that the sums get so large, and the quality of opposition improves, to the point where I feel uncomfortable playing any higher and will be happy to cream off any excess profits for reinvestment elsewhere.
Wouldn't it be nice to buy some boring high yield ISA shares, or raise the deposit on an investment property, from some steadily accumulated poker winnings?
Though there would have to be one hell of a property crash before my winnings equated to 15% of a house!
For now I think that's enough of my manifesto for a happy life.
K and I won't be changing our names to Tom and Barbara; our eggs will still come from the supermarket; but hopefully there will be fun and rewarding times ahead.