In one of my first posts on this blog I outlined what our ultimate dream is and spoke briefly about steps to get there. This post is to discuss the ideas in a bit more detail and run through some of my own thoughts about early retirement.
The ultimate dream, for both me and my husband, is to retire fully at age 50. My husband is older than me, slightly, so it might change so that when I retire at age 50, my husband then will as well, even though he’s slightly older. I also want to retire to somewhere in the countryside, in a village in a cottage…I guess this is when we’ll reach financial independence, when our income/savings will last for our retirement.
Now, that quote (of myself) sums up our aims in a nutshell. But how do I intend to do it? How do we intend to succeed? After all, surely early retirement is a pipe dream of most people, unless they really enjoy their job, but rarely do people actually succeed in that goal. If we reach it, it means we’ll work 18 years less that expected to, which is a massive amount of time we get to enjoy at our leisure.
But, on the other side of that, it means that we’ll have to either have savings or income streams to cover for that 18 years. That’s 216 months, or 6,574 days. Put it like that, and it suddenly seems like a vast number that we have to support ourselves through. And, if we give ourselves the aim of age 50 to do it by, we only have 23 years to do it in. That’s 276 months, or 8,400 days. Yikes!
So, then, how do we determine a number of what we’ll need? We’ve worked out how long we have to go until that point, plus the amount of time we’ll need to support ourselves; this is assuming that when we hit 68 state pension (or whatever it is by then) will come into play and our own private pensions that we currently pay in to through our jobs.
We currently live a very comfortable lifestyle on our earnings. More than comfortable. And there are some variables that we wouldn’t have to include in our retirement spending. These include:
– mortgage – we’d aim to be mortgage free by this point (if no way before!)
– life insurance – we have this as protection against mortgage payments. If we have no mortgage to worry about, then we don’t really need this either.
– critical illness cover – again, this is another protection against mortgage payments.
– work related expenses – this includes business clothing for me, plus travel expenses of getting to work and back.
But, other expenses might increase, such as:
– food – once retired and at home for more meals, we’ll probably end up spending more on food as a whole.
– travel – as we’ll have more free time and are not constricted to so many weeks a year, I think travel will be high on our list.
– day trips – we live in a beautiful part of the UK and want to appreciate that more too.
– medical expenses – bound to happen at some point? Hopefully later rather than sooner.
So, let’s talk numbers. Specifics which give us something to aim for. I think that we could comfortably live on approximately £25,000 a year. This does take into account some inflation. This works out at £2,083 a month we would need to come into our account to achieve a comfortable-for-us standard of living. So, for 18 years of living and supporting ourselves, we’d need to save/invest £450,000 to achieve it. That’s a pretty scary figure. Gulp. I’ll be honest, that number there makes me doubt that we can achieve that at all. I mean, that’s not too far from half a million pounds. If we put that into savings we’d need to put away every month from now until we’re 50, that would equate to us saving £1,630 every month from now on. Now, at this moment in time, we don’t have our expenses low enough/our earnings high enough to achieve this. Nowhere near. So now what?
I’ve been researching lots of various options as to how to achieve early retirement. I read a lot of finance blogs and have done some research into various income streams that would help. But, the thing that diminishing every day I don’t start, is time. Time is our biggest enemy with this idea. But, something that will work in our favour over time is compound interest. So will dividend payments, if I decide to go down that route as one of our income streams (more on that at a later date!) as they would add up and also compound over time, due to reinvestment.
So there you have it. Now that I’ve written it down and shared our goal, the ultimate dream: early retirement edition, it means it has to come true! Right? It will be one of our biggest challenges, and even if we fall short in the end, I’m determined to give it our best shot. After all, what’s the point of an aim if it’s not going to be a challenge?
I’d love to hear your thoughts about early retirement! Are you aiming for this? What are your plans so that you’ll achieve it?
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