enough

I recently posted my plan for Financial Independence, Retire Early to showcase that there is another way to live your life besides working for most of it. But there's actually something I should add to that, if I may. 

I mentioned the phrase "living expenses" a lot. When it comes to FIRE, determining what your living expenses truly are is crucial. To be considered Financially Independent, you should have roughly 25-times your current living expenses invested in the market. But bare in mind, the phrase "living expenses" doesn't necessarily mean "your current annual salary." You may be earning £40,000 but only actually need £20,000 to pay your bills and leave yourself enough left over to enjoy yourself. Remember, the idea of being financially free includes freedom from debt. So there's no car loan, credit card or even mortgage payments to concern yourself with. So be honest with yourself, with those debt payments aside, how much would it take for you to meet your living expenses?

For instance, the Need category of my NWL shows that I need to be bringing in £850 per month (or £10,300 per year) to meet by bare-bones essentials. But that's if I lost my job tomorrow. If I were to wave a magic wand to clear by mortgage debt and give myself the retirement pot I'd need to survive, amazingly I'd only need £480 per month (or £5,800 per year) to survive. Obviously it wouldn't be a lush retirement by any means, but I could feed myself, run the flat and afford myself a budget-friendly treat each week. 

I know myself what enough is for me today. Living frugally in a relatively cheap area of suburban Glasgow means I really don't need a lot of money to live a good, healthy life. If I really wanted to, I could use this £5,800 figure as a basis for my FIRE journey. Doing this would give me a Coasting FI figure of just £7,800, a Financial Flexibility figure of £72,500 and a Financial Independence figure of £145,000. In other words, the numbers would be massively reduced and so it would not take nearly as long to get there. It would be entirely possible for me to retire in my 30s with this figure invested by living a very frugal lifestyle.

However, this is not a lifestyle I want for myself. I enjoy living a frugal lifestyle today to allow me to make big savings gains quicker than would be possible without frugality. But retiring with a smaller amount would force me into a frugal lifestyle. It would force me to remain in a one-bed flat for the rest of my life as well as limiting the prospects of having a family. Plus, retiring in my 30s with just £145k invested would make me very conscious about even slight changes in the market. It's very possible that a violent enough drop in the market could serious-enough consequences to send me back to work.

So instead, I have based the figures of my FIRE plan on an annual take-home in retirement of £24,000 per year. This amount gives me more confidence in my ability to retire early and stay retired. Plus it allows me room in my budget to be able to run a bigger home in retirement and gives me more freedom to enjoy my money. Mortgage-free and with little requirement to travel, my outgoings would still be pretty low. Plus I'll have an after-tax income of £1,665 to play with each month, without the need to deduct a percentage to a pension fund or student loan. In other words, that's plenty. That's what enough looks like to me in retirement.

~ Aedan.