Post Retirement Needs & Wants are Hard to Envision in Debt Slavery

Chatting to some colleagues, it seems that many have a hard time envisioning living on less that they currently earn. D’oh, what’s so surprising about that you might say? Well, some of these guys are serious savers. Some of them have kids that are soon to transit from being dependents to adults in their own right, some are already empty nesters.

The point is that many are already living on less than they earn, or their outgoings are about to fall. That’s the only way you get to save 🙂

And yet, sometimes discussing how much we’d need after leaving work, their default level is roughly 2/3 of what they currently earn, and few people seem to be able to conceive of living on less.

Now I’m no Jacob of ERE, but here are some of the reasons I will pay less when I stop work than I have done for most of my working life:

No mortgage. For twenty years housing has cost me about the equivalent of five grand in 2010 real terms. No more. Say I spend £1k a year on maintenance. That’s £6k less I need to earn a year (4k difference plus tax and NI)

No need for two cars. With more time I can be flexible, or use taxis, car-sharing systems, hire them if I really must. Saving about £1.5k in all the parasitic costs of owning a car and keeping it on the road. That’s say £2k a year less I have to earn.

No commuting costs. It is easy to end up paying thousands of pounds in commuting costs, and this is not just the cash, but the loss of time every working day. Say another £2k off. This applies less to me because I often bike to work and live closer than most colleagues.

That’s around £10k less that I’d need to earn simply by stopping working. Not having to earn the money to spend on something that’s not fun is always better than having to earn it and buy it. Having one car in the household is a big step up from no car. The second one is only a step up when it covers times where one won’t do.

The mortgage is an anomaly in that is has nothing to do with stopping work. It’s more to do with sucking up 20 years of not spending more than I earn. The house is something I now have, it saves me the need to pay rent, it isn’t inherently work-related.

These are costs saved, but there are other costs that can reduce. With more time, I can do things that previously I’d have had to pay other people to do. On my first house, I replaced the guttering myself. On this one I paid someone to do it because I didn’t have the time, but I could have done it myself and saved money.

All these are steps that move me a little bit out of the money economy. Doing something for yourself is usually cheaper than buying it, because to buy it you have to earn the money and pay tax on it. If I buy £100 worth of spuds from Tesco I have to earn £130 gross to do that. If I grow £100 worth of food from £3 of seeds, I only have to earn £4. I don’t pay tax on value I add myself where I consume it myself – or barter it with others.

There’s a balance here, we don’t have to go all American pioneer and aim for self-sufficiency. As a debt-slave you have to be largely in the money economy. You haven’t got time to to otherwise. As a financially independent individual, you can choose to be less in the money economy – reducing the amount of your effort creamed off as tax.

The money economy can do things for you that you just can’t easily do yourself – I don’t want to keep my own cows and you can’t grow coffee in the UK. You can’t make a PC at home. But let’s face it, you can grow far better tasting veg than money can buy from Tesco, and there are many other things you can do yourself.  If you have the time.

Holidays, a temporary respite from wage-slavery?

Some of the other things colleagues felt were non-negotiable needs were holidays. Some had plans to see all sorts of things on Grand Tours. Obviously they need money for that. Something that has changed over the years is that people pack a lot of expectations into their two week holiday in the sun, almost as if that is a compensation for the grimness of debt slavery. This is almost an addict’s logic – work is awful so I need my break. Needing a break is a symptom, not a solution. Some nutcases even borrow money to buy their holidays, WTF? The summer holiday has almost become totemic – even though some folk even get back to work more stressed than when they were in the office.

Holidays don’t have to be expensive, particularly if you are flexible when you travel. The young usually keep the cost of their holidays down of necessity, and the old do too, both these groups can usually take more time over their travel and aren’t tied to school holidays. Flexibility, and being open to roughing it every so often are the key.

After experiencing Stansted airport in 2007 I came to the conclusion that flying is just not an enjoyable experience for me. The bit in the air is okay, it’s the rest of the package that sucks.  Airports makes me want to kill my fellow humans and yell into their screaming kid’s ears to STFU when they scream into mine. That’s before I have even got off the ground. You get ripped off for the journey to the airport, ripped off to park your car, ripped off to eat or drink anything, hassled by half-wits in security. Why do people pay to do this? Just because the ad says pay £5 to get to the beach doesn’t mean this pain is worth enduring. You get nickel-and-dimed 20 times over in surcharges for the necessities to actually get to use your £5 ticket.

You can pay more to avoid the excesses of the so-called ‘low cost airlines’ but then you find yourself at the whim of striking air traffic controllers/baggage handlers/cabin crew. There are just so many single points of failure in the way of a good experience of air travel. Hopefully increasing fuel prices will drive up the cost of air travel and reduce numbers – I’d much rather fly every third year and have a good experience than twice a year with a rotten experience. About £200 return to Europe air tickets would get numbers down, and hopefully price some of the chavs out of the air too.

I don’t see what the attraction is in paying for this experience, so I haven’t set foot in an airport since then, other than for the occasional work trip. Once my time is my own, I will travel again, but slowly and overland, not in tubular cattle trucks.

So much for holidays. They’re a luxury, not a right, and you don’t get a right to them just because you have a crap job. Modern holidays seem to be almost the anathema of simple living, too. But they’re obviously really really important in some talismanic sense for an awful lot of people, so whoever’s doing the advertising spin must be doing something right.

Power and Heating are the exception

Of course, not everything reduces when you stop working. Heating and power are two obvious areas that will increase. I have hedged some of that with a wood stove and a chain saw and some contacts. Energy costs are a big hazard – my heat and power bill is £800 a year. It is low by UK standards because I have invested in some conservation but mostly because I have aggressively attacked electricity consumption using an Efergy power monitoring system and an appliance meter. That showed me, for instance, that scrapping my fridge-freezer and buying a new one would reach payback in one year, and that where possible I should use my 60W laptop rather than my 210W desktop PC. It is pretty obvious that energy costs are going to go up. You don’t have to be a peak oiler to see that.

The UK has become a net oil importer in recent yearsBritain has become a net importer of oil in recent years, and the aspiring middle classes of China and India are going to be bidding on the same world energy market as we are. Increasing demand running into a fixed supply usually means a price hike. Observe the effect on the price I have paid per kWh of electricity (the dips in Aug 06 and April 08 are artifacts due to the power company screwing up reading my meter, I have smoothed the curve with a 4-point moving average)

Variation in the price I pay per kWh of electricity

Test Your Retirement Budget While Still Working

It seems obvious to me – test out the retirement budget for a couple of years before you plan to retire, particularly if you aim to do it early. Obviously you still do have the inherent work-related costs like commuting, you can reduce the cost of lunch and coffee by taking a packed lunch, or simply qualify that in the budget too. A fantastic side-effect is that you will probably save more money which you might as well put towards retiring early – in my case some of my savings are going towards paying my way in the years before drawing my pension. If you hate having less money more than you hate working, well, the answer is obvious – work longer, at least you will know why!

I don’t find this, and indeed I am saddened by how little extra quality of life I bought with what was a pretty wanton spending on trinkets and gewgaws. There are some things I bought which I still enjoy and treasure – my Canon SLR lenses for both long bird shots and wide-aperture macro shots. I’ve even sold some pictures. I’ll be pushing up daisies before I get to the break-even point, but it’s fun.  My Hi-Fi – one of the key components bought with six month’s salary saved from my very first job, and most of it over 15 years old.

What runs through the Stuff I treasure and use is that it usually was decent quality, it lasts years, and it has low running costs, and often has been serving me well for years.  It often has multiple uses. I also bought a lot of ephemeral junk too, suckered by consumerism, though at least I didn’t get into debt to buy it.

What I found is that Ivan Illich was right when he said

I believe that a desirable future depends on our deliberately choosing a life of action over a life of consumption, on our engendering a lifestyle which will enable us to be spontaneous, independent, yet related to each other, rather than maintaining a lifestyle which only allows to make and unmake, produce and consume – a style of life which is merely a way station on the road to the depletion and pollution of the environment. The future depends more upon our choice of institutions which support a life of action than on our developing new ideologies and technologies. (1973, Tools for Conviviality)

Illich spotted that it is usually our relations with others, not what we have, that lends colour to life – conviviality, who matters more than what, once a certain level of needs is met. He was thinking of it more in the design of society rather than the individual case, indeed it is surprising how much of that early 197os thinking has some resonance to now.

Early in one’s working life the focus usually is on Stuff, because you start with nothing. RetiredSyd seems to make a similar observation that you get more bang for your buck on Stuff when you’re younger. What’s notable about some of those early purchases is that they can be in service for a lifetime – my pots and pans, my hifi, for instance. One big piece of Stuff is the house. Common wisdom has it that you should always stretch yourself when buying a house, on the principle that your leveraged asset is not marked to market and house prices always go up in the long run. I would differ – I live in a house which is cheaper than many of my colleagues on comparable earnings, but I also bought my house outright earlier in life than they will, even after some setbacks. Once you own your house, early retirement becomes much more attractive. In normal times, you could just as well get an investment portfolio that underwrites your rent, but there is an atavistic urge that makes owning the physical entity so much more reassuring than glowing figures on the screen, for me anyway.

So it is that there comes to a curious paradox – towards the end of your working life, hopefully when you are at the peak of your earning power, you can find you have less need for money, and stuff it into savings. You can get trapped on the hamster wheel like some of my colleagues, or you can rationally look at your wants and needs, qualify them, and perhaps get a better quality of life. There’s more to life than work.