One of my favourite financial journalists is Merryn Somerset Webb who writes the editorial for Money Week magazine. This week, she stated the following:
“It is hard wired into the UK financial brain, rightly or wrongly, that capital must not be spent – only income can be spent.”
She’s right, but I need to adjust this wiring. Although I’m not a big fan of being as transparent on my finances as some of my fellow bloggers seem to be – and I kind of admire them for it – I will make this admission: in order to retire early with the lifestyle I want, I need to pretty much burn up my capital reserves between now and 65. (At 65, a combination of a generous defined benefit pension scheme, my other half’s DB pensions and state pensions all kick in. I also think my expenditure will be way lower as I head into my late sixties. No more cocaine parties at that age.)
So, I’m looking at spending, over the next fifteen years, what some other people may call their “life savings”. Well, if they are “life savings” shouldn’t they be used to enjoy life? I’m heading off on holiday soon and am resisting trying to bite my lip over the money I’ll be spending. Shouldn’t I be sitting hoarding that cash as a protection against potential future penury? Accumulating the interest?
I heard Dave Ramsey on a podcast the other day advise a caller as to how to build his savings to a point that he’d accumulate over five million dollars in his bank. At that point, the caller would be 85 years old. Well, I hope he farging enjoys it at that age. He can buy a gold plated zimmer frame. More likely, as an American, he can continue handing it over to medical companies to manage his incontinence. I mean, come on, what exactly are we saving for? Repeat, You can’t take it with you. Yes, you can give it to your heir(s), but is that sensible for them, never mind you? My wife and I will inherit pretty much zero financially from our parents and so what? You could argue that this knowledge spurred us on to make a financially secure life for ourselves. Having our parents around was all the “reward” we needed from them. We’ve made our own way financially in life, and so should our offspring.
This financial bravado takes me only so far, all the same, because I AM as hard wired against spending my capital as much as the next miser. It’s hard to change the habits of a lifetime and, even when I don’t know exactly what I’m saving for, I still like to save! The pain of cashing in investments just to live from month to month is almost physical. As I push the heavily reluctant mouse to click “Sell” on the Fidelity web page, it takes a massive effort of will to do it. I hate the thought of doing this going forward on a monthly basis, I really hate it. In fact, I hate it so much, I spend a lot of retirement time figuring out how to go back to work and earn money! Even though, rationally and logically, I don’t think I actually need to. But my hard wiring seems to be a lot more hard wired than I thought.