In God We Trust

What do estate agents, used car salesmen and fund managers have in common? Quite a lot, clearly, and none of it complimentary, but the thing that strikes me is their tendency to advertise and stick a picture of themselves onto it as if this is supposed to make us trust them more. We’re always treated to a picture of Neil Woodford in any article talking about him, even those recent ones where he’s trying to explain why his funds are going down the toilet. No doubt we could attach a speech balloon to all of them, stating “I’m in for the long term.”

If there’s one thing that’s lacking in the financial industry it’s this key word, “Trust”. Which is ironic, given the whole monetary system totally relies on it. As it says on the dollar bill “In God We Trust”, in lieu of anybody more credible being available. Even before 2008 there were very few of us who innocently handed over money to the big investment companies safe in the knowledge that they’d do their best with them instead of gambling them in the giant casino that the stock market so obviously is. But what choice do we have? Hand them to real estate agents instead? Which, actually, was exactly what millions of us did, and still do, as a preferred alternative.

I often wonder what people who aren’t interested in finance – i.e 99% of the population – think of the financial industry? Before I decided to take charge of my own investments, I really thought that stocks and shares was rocket science (and bear in mind I studied economics for a year at University). I still think that there’s a desperate desire to make out that investing IS actually rocket science, and that your average hedge fund manager is considerably more intelligent than you, despite mountains of evidence to the contrary. Even within the independent financial blogs I read, I sometimes have a sense that there is an underlying hope (need, almost) that, actually, investing is quite a complex system with underlying patterns and trends that can be analysed, understood and, if you have the right balance of smarts, predicted. What a joke. Who can predict the future of anything? It’s a massive gambling system, pure and simple, with as many wideboys, touts, crooks and charlatans involved as you’d find at your average night at the dogs. If not more.

So what can you do, given this situation? I invest a very small amount of my own cash into Zopa in the hope that they’d be an alternative to the financial establishment, but do I trust them with the cash? Well, no more than the next institution I don’t suppose, and possibly even less. I mean, who are they lending my money to? I have no idea what their lending criteria is, how it is tracked, monitored, measured, none of it. I have to let them get on with it and hope for the best, but at least I went into this relationship with my eyes open. If I get no return on my money, or even a loss on it, I see it as a conscious choice I made. I did it because I wanted to encourage a challenger to the status quo of the financial system and, if they buggered it up, there was at least some awareness that this could happen. This isn’t  “trust”, but it isn’t doubting suspicion either.

Needless to say, I have very few managed funds due to my belief that I can’t really trust a guy with a bonus riding on his performance to manage my money with my best intentions at heart. In this context, I kind of trust computers and index funds more, I suppose, a supposition which, when I think hard about it, should send me gibbering into the street. Trust computers? Am I serious? So nix that too on the Trust Index.

I do trust my mattress when I’m lying on top of it, but the real fact of inflation makes this option unattractive as somewhere to put my savings. Government bonds seem similar at the moment although a cynic like myself should also condemn this option as farcical. Trust the government?

It seems that I’m left with one option when it comes to money: trust myself. If I accept that, then when I’m doling my cash out to Fidelity, Zopa, Alliance Trust, Standard Life, whoever, well, I warned myself, didn’t I? I took on the responsibility of making a decision and had to trust myself that I’d done enough learning to make the call. At the very least, there’s a good measure of satisfaction in being able to say that, whatever way the ball bounces.


Old Age Doesn’t Come Itself

I read the other week that a baby born in Britain today can expect to live beyond 81 years of age. In Japan, it’s 83 and scientists there have proposed that people between the age of 65 and 75 should no longer be considered “elderly”.

Good news, I suppose, although the cynic in me sees government think tanks all over this wondering how they can use it to push the state pension out to 75. It wouldn’t surprise me in the least though to think that in fifty years’ time, it’ll have reached 90 – if it exists at all at that point.

All the more reason to plan for a long retirement and, as I’ve mentioned before, there’s not a day goes by where I don’t say a wee prayer of thanks to whatever inspired me to start really saving for the future when I turned thirty and, even more, signing up to a Defined Benefit pension when I started work at 23 when I didn’t even understand what that was.

As ever these days, I’ve been doing some work on my pension projections and wondering (a) how long I should plan for and (b) how I should phase income as the years progress. It’s a bit disconcerting doing this, as one of the first questions to be faced is your lifespan – should I plan to see 85, or 90? Do I even want to consider the quality of life at 95, when I might have to retitle my blog Death, Death, Death, Death? Then the second question is what kind of life will I be leading if I do see 85, or 90, or longer?

One rule of thumb I thought about was that if everyone defines “old age” as beginning twenty years from your current age, then I should want to maintain my current lifestyle, and expenditure, until I’m 73. At least for this snapshot projection – I realise I can’t extend that rule indefinitely as the years pass by. It seems to me, however, that there’s just no way I’ll be spending as much at age 73 as I do now.

But, as I project forward through the years, wouldn’t a sensible thing to do with the saving on the mortgage be to bank it instead for health provision? We have friends in their late sixties who have top notch medical insurance (and boy have they been thankful for it recently, following a couple of serious scares and operations.) Their joint policy costs them a cool thousand pounds a month. Okay, that’s maybe top end, but I mentioned recently that some root canal work I had last year cost me the best part of a grand. If there’s one thing I’d like to take into old age, apart from my marbles, it’s my teeth. My mate is currently getting a tooth implant and is not looking for any change out of almost two thousand pounds. He feels it’s worth it though and I suspect he might be right. I think if there’s one thing I asked my parents that they really wish they didn’t have in old age the answer would be “Dentures”.

Health is a touchy subject, especially in Britain. The press is always harping on about the state of the NHS and, through personal connections including my 77 year old mum, I can attest to most of what is written. The social care side of our current system must be breathtakingly expensive – my mum receives three healthcare worker visits per day, seven days per week. What’s the cost of that?

Then I remember my dad, who suffered from Parkinson’s and was on 22 tablets a day for the illness and its complications. Not to mention the physiotherapy, the visits to hospital and GP, the call-outs for the community nurse. All this was paid for by the state. The only thing that wasn’t was my mum, acting as his carer at the time, although I think even she eventually applied and received an allowance for that too.

The costs of funding the NHS are inconceivable at the moment and downright terrifying when you think of the future. You just have to visit a general hospital to understand the challenges we face. Once you’ve negotiated your way past the smokers in the carpark, start counting – how many people do you see that are overweight? (I generally don’t count my reflection in the window.) Is it two out of three? How many are over sixty? Is it eight out of ten? More than that? The system we have just cannot cope, and you can only feel that it isn’t going to get better without a radical cultural change toward what the NHS is supposed to provide, regardless of how much money is thrown at it. How long will “cultural change” take? Two or three decades, maybe, if we start today. In the meantime, if you can, perhaps you better start putting some money aside to look after yourself for the times when the NHS can’t or wont.

“Old age is not for wimps”, someone once said, and the scary thing is that for the many of us who see it, that could be an understatement. Maybe I’m being negative, but of course, pondering my doddering old age in the future doesn’t get me down – as it’s simply not going to happen to me, is it? I’m going to be that sky-diving, bungee-jumping pensioner you read about who’s about to head off to trek across the Andes. As are you.

But what’s the contingency, and who’s going to look after us,  if we’re not?

Going, going….


A podcast from the Mad Fientist about a Safe Withdrawal Rate got me thinking this week. Not so much about the maths behind it, or whether it is likely to work or not for me over the next thirty years, but thinking more about me over those thirty years instead.

You can’t take it with you, and as I head toward turning fifty four this year I increasingly wonder about how I will fare over the next thirty years? Because, in all probability, that’s about what I have left on this mortal coil.

We don’t do death very well in the Western world, so it’s quite difficult to focus on your own demise. Actually, I’ve read that it’s virtually impossible to imagine your own death in any meaningful way. Your mind can’t grasp it, and in a way the “4% rule” is a good example of this. If I read it right, and to make the maths simple, let’s say you have a million quid in a pension pot. If I withdraw £40k a year from that pot then, thirty years down the line, that million quid (allowing for inflation) will still be sitting there, pretty much untouched. It might even have grown. It might have dwindled slightly. Who knows for sure? But what I do know is that I doubt I’d have much need of a million quid at that age!

My feelings about this intensified at the end of the podcast where the interviewee, Michael Kitces, talks about “Lifestyle Creep” and lifestyle in general. He argues quite forcefully that you shouldn’t sweat the small stuff and, if you have your financial priorities right, then you’ve no need to worry about buying that Starbucks Mucho Latte or Big Mac (Large) for lunch, if that’s what you want. That sort of purchase just doesn’t matter in comparison to maxing out your mortgage with the first property you buy and then servicing the debt from your twenties onward. If you do that then you might not be able to afford a McDonalds for lunch in future.

Meanwhile, once you start living in a bigger house, buying a new car every three years, taking two or more holidays, hiring help for the gardening or cleaning and so on, it becomes very, very difficult to subsequently give those things up.

I can affirm the reality of this. Dispassionately I know I should downsize my property at some point for a multitude of good and financially advantageous reasons but, you know, I like the house I have, with spare rooms for guests or just to lounge around in. I like the garden, the spacious garage, the shed, the location and so on. Could I easily give them up? (Emphasis on the “easily”.)

The same could be said for cars. In my career, I’ve always had company cars that changed every two or three years. I’d really like to continue on with that, but does that really make sense? Financially, buying a new car every three years is jaw-droppingly dumb, but emotionally?

None of this internal debate matters if you’re loaded and are swimming in money through retirement, but it’s not hazarding a guess to think that most people will not be in that situation. If you ask me, it’s the middle classes that will be in for potentially the biggest shock. Talking to friends who work as pension advisors a 30k a year income is a desirable retirement income for many couples. This sits, however, very uneasily with the most popular middle class goal of retiring at 55. If I am calculating it correctly, and not allowing for any nifty tax manipulation, you’d need a £750k pot for that income on the 4% rule.

The Safe Withdrawal Rate is therefore quite a hard task master, especially if the point of it is to protect your capital and income generation.  But surely you have to ask yourself, as you head into your dotage, how much do you need?

For me, looking at retirement, this is one of the biggest puzzles I have – how much am I going to need to service my definition of “a comfortable retirement”? When I had my year out, I was quite amazed by how little I spent on a week to week basis versus what I used to spend when I was working. I feel that would almost certainly continue as I head into my sixties and beyond. I’m just not going to need as much money in my sixties as I did in my fifties, and I think that same rule will apply even more to my seventies and eighties (if I get there!) As each year goes by, the chances are that my annual budget will be shrinking.

(There’s a potentially big caveat here when it comes to health, because who knows how much you want to spend on that as you grow older?)

Assuming I stay relatively healthy though, the 4% rule seems either to assume that you’re going to live forever or that one of your goals in life is actually a goal for death, through leaving an inheritance. I can see the sense in it for early retirement, but traditional retirement at 65? Not so much


Spanish (and other) Practices

When I was in holiday in Krakow, we were with another couple, one Spanish, one Polish, who met and married in London. They’re quite far off retirement and were talking about how hard, financially, it is for them to live and work in the city. Saving for retirement is not top of their list of priorities.

“I envy my parents in Spain”, my mate stated, as we sat in some cellar bar. “They are on the state pension. Both were teachers. They retired in their early sixties and receive 1,800 euros a month each.”

I checked the beer I was drinking to see if the alcohol level was so high that it was affecting my hearing. Or was it affecting my arithmetic, because I was calculating that at around 22 grand a year in Sterling, at current exchange rates. Net. Each. That couldn’t be right.

“You mean 1,800 euros between them, surely”, I said, before adding “which will soon stop once you aren’t getting £8 billion in subsidy every year from the UK!” (well, I thought it was funny.)

“No, no, no. That is 1,800 euros a month. EACH. It is a good arrangement.”

I was trying to get my head around this when his wife joined in. “It’s a good arrangement when you consider the average salary in Poland is 350 euros a month. So their pension is almost six times what the average Polish worker earns.”

“That can’t be right either”, I said. “That must be 350 euros a week”.

“No, no”, she tutted. “It is 350 euros a month.”

I decided, as in all pub arguments, to go into Google for a quick search to see who was pulling my leg. Seemingly neither of them were. The state pension level in Spain is over twenty grand a year. Greece isn’t far behind, and Sweden is actually ahead of this amount.

Average monthly salary is a bit more difficult, but the Wikipedia page I checked states the average monthly salary in Poland to be around 750 euros a month – but that’s in the “enterprise” sector. My Spanish friend had actually challenged his wife’s number at the time, and she had replied that her number was correct, if you took into account all wages, not just cities like Krakow. (There is quite a bit of evident wealth in Krakow, which was why I was also struggling to believe her assertion.) Either way, however, it’s a pretty low number.

Now, this blog post could go off in a variety of ways, but the way it’s not going is any further in the direction of Brexit. It was quite a shock to me, however, to have two friends whose families are experiencing two totally different financial worlds within the European Union. Obviously I’m “aware” that different countries within Europe have different standards of living, but talking to people who have a real, live experience of it is a different thing entirely. It must throw up some challenges – for starters, you can guess which half of the couple is sending money home to their parents every month, and which one isn’t.

It’s all very complicated, so much so that I’m not even sure what the point of this blog entry is. Originally I was going to muse over the size of the British state pension and whether or not it’s enough in comparison to Spain’s, but that’s a pretty puerile exercise. And anyway,  I don’t have any of the other factors that might play a part In the argument – I’ve no idea what the Spanish tax system is, nor welfare system, nor National Insurance system (if they have one). As for comparing the average wage in Poland with that of the UK, really, what can you say?

Writing this post, however, has brought home to me just how astonishingly rich Britain is in the grand scheme of things. Okay, that wealth isn’t distributed fairly throughout the country and we could do a lot better at spreading it around, but that’s a massive debate that I hardly even have the energy to consider. Spread it around where, for a start? In Britain? Poland? Africa? It reminds me of the Mr Money Moustache post about how lucky we are to live the way we do and why we should stop and think about that sometimes. It might help put our “retirement dreams” into perspective.




Holiday in Siberia

Isn’t it a shame that now we have an opportunity to travel almost anywhere in the world, increasingly when we get there it’s just the same world as the one we left? I’m just back from a four day break in Krakow which, as far as European cities go, I suspected might be a bit different from the usual modern metropolitan experience that sees a McDonalds and an Starbucks on every corner. Please note that I’m not saying that I “hoped” Krakow was a bit different from every other city across the world in that respect. I like my home comforts, and sometimes that includes a good dose of globally branded outlets and hotels. But I did hope that Poland had retained an old world charm that corporations hadn’t fully snuffed out yet. Well, “yes and no” was the answer.

In terms of differences, I liked using the Zloty and my “cabbage rolls stuffed with rice and mince in a tomato sauce” was more satisfying in a number of ways than a Big Mac, although I knew this wouldn’t be the case every day. The centre of town was picturesque for sure, but it was bordered by McDonalds, Costa Coffees, United Colours of Benetton and the like. The underground bar and cafe scene was a bit different, but I suppressed a groan at hearing Coldplay playing over the speakers in the Black Gallery and what, exactly, were Polish pubs doing selling Grolsch and Heineken anyway? Their own beer is far superior. 

I liked the old Jewish Quarter in the city where, thankfully, Starbucks hadn’t arrived. Yet. But on the other hand the old coffeeshop/bookshop concepts felt just like that: concepts. Coldplay were absent, but only because they hadn’t ousted Dylan.

What has this got to do with early retirement I hear you ask? Well, at the top of the list of a lot of early retirees is the desire to travel and see a bit more of the world. To be fair, I’m noticing a couple of bloggers are acknowledging that this ain’t necessarily so, and that whatever it is they’re looking for might not be found on a Goan beach, the Australian outback or upon an old Patagonian Express. These travellers tend to be more the “long haulers” in terms of both time and distance, however, and I’m thinking more about those that are planning fewer, shorter breaks nearer to home. That weekend in Gothenburg or Pisa perhaps, taken on the ultra cheap Easyjet and Ryanair tickets on a Tuesday afternoon and maybe returning early Saturday morning on a half empty flight? Snaffling up some cheap hotel deals when the weekenders are missing and the businessmen are in the Hiltons and Marriotts?

Ha! Easyjet and Ryanair don’t do half empty flights, or not for long anyway. Bums on seats is what they’re about and they’d rather not fly at all as put up with three quarter full ‘planes. The probability is that you’ll be going City breaks on a full flight or you won’t be going at all.

Meanwhile the hotels are at a similar game. Occupancy is what they want and they’ll drop their drawers on price to get it. I booked my hotel through about four months ago and our friends, booking two weeks ago, got in for almost half the price we paid and were upgraded to a suite! Of course they risked not getting in at all, but luck and the algorithms were on their side. Either way the hotel is doing what it has to do: sell rooms. That’s ALL their rooms, every last one, and the internet helps shift them on a global scale. We think sites like Trivago are there to benefit us, and that’s true, but I’m beginning to suspect they benefit the hotels more. York has about three mid-budget hotels being built as I write, so the projected demand is clearly there. And increasingly full ‘planes arrive from across Europe to fill them up.

If Krakow is anything to go by, the future of city breaks in Europe is going to guarantee one thing: everywhere is going to be mobbed full of fifty and sixty something tourists. (And, of course, millennials). That includes your continental breakfast where you’ll be queuing with ten other grey-heads for a coffee out of an increasingly exhausted machine.

Krakow was unbelievably busy with tourists, but I travelled via Edinburgh which made the former town look like a dust bowl. I know it’s The Fringe, but ye Gods, doesn’t it portend badly when millions flock to the city desperate to find some “experience” that they hope will brighten their Tuesday? The Fringe is shit, take it from me. Not that I’ve ever been, by the way, I just find the whole concept to be shit. If I saw one “comedy” poster with a smart arse quip about Trump, I saw ten. Every comic sported a beard, including the women, and I wondered why they bother advertising with a big picture of themselves? Is their appearance one of their stronger jokes?

As for the theatre types, they are worse than corporates. They strut about Edinburgh wearing their backstage passes around their necks like they’re something to be proud of while the newly under-unemployed arts degree graduates wear “Road Crew” T shirts with the same smug expression I sported at their age when I wore a “Solidarnosc” one. But at least I wasn’t yapping down an iphone as I strutted the streets. Honestly, I couldn’t get out the place fast enough.

You might not have guessed it, but I did enjoy my weekend break. This, however, was because I felt I was learning lessons and building my mental retirement database, helping to shape my post-work dreams into more focus. Frequent city breaks abroad, I feel, have dropped down the priority list and I’m thinking more about farther flung and more isolated places. I’m going to be heading far from the madd(en)ing crowd, where the streets really have no name and the biggest brands are those that are burnt on a cow’s arse.

Siberia, anyone?

Willfull Ignorance

I was listening to a podcast from MoneyBox called the Death of Retirement the other day with a growing sense of annoyance and, possibly, outrage. There were a variety of reasons for this, most of them boiling down to ignorance, most of it my own.

For a start, the podcast kicked off with a panel of “experts” interviewing a “millennial” who was in her early twenties and was looking for some advice on pensions, as she suspected she wasn’t saving enough into her plan at the moment.

“How much do you currently contribute?”, asked the kindly host.

“Well, I looked at my last wage slip and I’m putting in nine pounds a month”.

“FFS!!! Are you raving mad!!!???”, screamed the host. “You’re heading for abject poverty!”

Oh sorry, that wasn’t the host screaming. It was me. You see, the host and panel, in a fantastically polite and paternal BBC fashion, were far too sensitive and non-judgemental to make any such uncontrolled outbursts. Instead, they gradually tiptoed toward the suggestion that maybe, possibly, depending on her circumstances and an uncertain future, this might not be enough.

“Do you know what your employer is contributing?”, gently prompted the host.

“Well, unless it’s about five hundred quid a month I’m totally screwed”, joked the young girl. No, sorry, that was me again, and I wasn’t joking.

When it comes to this stuff I think I’m in a state of willful ignorance, because I kind of assume that, by now, surely, 99% of the country are aware of the financial catastrophe that old age is going to bring with it and are taking steps to avoid it? Okay, maybe not 99%, but 75% must be?

Alas, a quick Google search on “What is the size of the UK average Pension Pot?”, pours cold water on this notion. It’s currently sitting at 50k, according to the This Is Money website. (Pause to remind myself that this is the TOTAL POT and not what it’s going to give as an income every year). A 50k pension pot currently pays an annual annuity of about £2,500 a year.

I’ll admit, I find this frightening, but then I do live a rather gilded financial life. Many people have to survive on incomes of around £10,000 a year so, if you combine a 50k pension pot with the state pension, then you’re heading for that amount. Plus (I believe) there are other government support mechanisms available to supplement this income, such as housing benefit.

This is a good thing, I think. I want to live in a society that provides a social security net for all, providing everyone is contributing in a fair manner. (I did try to expand on what I would define as “fair” in this context, but that turned into a bit of a rant that included dreaded words like “Brexit” and “NHS”.)

So, setting a lot of political issues aside, I see “fair” as being a bit of “give and take”. You put something in as does your employer and the government. That’s pretty much what we have at the moment. It’s not a perfect system but it’s better than nothing. The key, for me, is the first part of the sentence, “YOU put something in.” Part of the reason why a lot of people are heading for a State Pension and very little else is because they failed on that first step – they put nothing in.

The BBC seemed easily enough to find young people who are still bridling against the notion that they need to contribute to a pension. “I just don’t trust pensions”, says one. Another “Just can’t afford it”, and objects to the fact that her employer can decide where her pension money goes. Against this, perhaps the young millennial putting away nine pounds a month is to be congratulated –  at least she’s doing something!

How can this situation be changed? Well, if you listen to this series of podcasts, it seems that enrolment of employees in company pension schemes has been a success. There clearly needs to me more of this kind of thing. But, for me, the pensions “industry” has to become much simpler, transparent and fair. And it needs to have the same attraction that investing in property has. It should be publicised as being just as safe and just as beneficial as having a roof over your head. But, at a nine quid a month contribution to a pension, the roof will be falling in as opposed to holding up.



As I settle into my fifties, counting my cash, it’s comforting to find myself in the fortunate position of thinking that, financially, I should be pretty set. I look at my personal pensions, investments and tell myself to relax, it looks sorted. Even if we go through another 2008 and everything drops by 40%, I’ll probably survive.

That’s the upside, sitting warming my hands by this financial fireside. But there’s a downside. I’m stuck! Okay, I can survive a 40% decrease in my pile in any given year, I suppose, but I’ll probably NEVER see a 40% upside over that year in those same funds. Why? Because to get that return, I’d have to risk a sizeable element of my funds to get it. And risk is not something I want to entertain when it comes to the money I’ve amassed to date.

I find this quite sad, in a way. I think I’m thinking this way at the moment because I’m reading “Shoe Dog”, the autobiography of Phil Knight, the founder of Nike. His story of building the company up from nothing is exciting, dramatic and full of life. It feels like he never had a dull moment, although his early days of building the business were mostly full of stress, flirting with bankruptcy, dealing with corrupt suppliers, ruthless competitors and even more ruthless banks. He risked everything to build his company, and now – he’s worth over $28 billion dollars – he’s sitting on the rewards.

In my current job, I’m dealing with quite a few start-ups and spend a bit of time with the “entrepreneurs” behind them. Generally speaking, they’re a colourful bunch who are driven to get things done. There’s always a way for them to continue to move forward, get what they want and they’re prepared to put their money where their mouth is. They have to. Most of their money goes into their business and not many of them are living flash lives – as neither did Phil Knight for decades either. I don’t envy them the stress of what they’re trying to achieve, but I do envy their willingness to take the risk.

I don’t know too much about their personal circumstances – have they a pile of cash sitting somewhere they can fall back on? Do they have a pension? Is their partner a secret millionaire? Are they secure in the knowledge of a big inheritance eventually coming their way? It’s possible, but even if this was the case, why not live a cushy life instead of throwing bundles of cash at something that has a damn good chance of ending in misery?

Now, in my fifties, I wonder if I’ll ever know that excitement that I feel must be involved in throwing yourself into trying to build a business? In my career, I chose the corporate life and can’t knock it for the relative security it gave me, and the perks I enjoyed too. And I often asked myself just what kind of business I’d have to build to pay me the kind of benefits I eventually enjoyed in that role? It would have to have been pretty damn successful, I know that.

Over my career I used to think and chat about having the chance to build my own business, but latterly I used to qualify this dream by stating I’d loved to have had the chance to “build my own really successful business!”  There was no guarantee of that, which makes all the difference. I have two personal friends who pretty much ruined their lives trying to realise their own dreams on their own terms. Phil Knight is a winner, I suppose, so it’s their histories we read about and envy. Real life for the rest of us is often very different and it was partly the “real life” that I saw that helped keep me where I was.

I have the option, of course, of scooping some money out of my savings and plunging it into a new venture that, potentially, could pay me millions in ten years’ time. Or at least will give me an interest and side income in my next shot at “retirement”. After all, the brilliant podcast, “How I Built This” showcases loads of people who have done just that, often with a lot less than big bucks to start with. I don’t have to risk a massive amount – the first “How I Built This” interviews the first female billionaire business woman who, I think, started with an idea and five thousand dollars she’d saved. The rest was hard work, more hard work and a bit of luck.

So, that whelk stall down the front of Scarborough could be in for a new owner soon.


Vested Interests

Homer Simpson once asked himself, “Kill my boss? Dare I live out the American Dream?” That particular dream is not exclusively American, of course, but generally, and unfortunately, it’s the boss who’s funding our dreams one way or another. Even if you’re self-employed, the customer is the boss, and I know many small businessmen who’d love nothing more than to nuke their customer base.

I remember reading Paul Allen of Microsoft telling of one of the major problems he and Bill Gates encountered as their company began to really take off. In order to attract the best software engineers, they’d offered potentially incredible share option packages to lure employees to rainy Seattle from sunny California. In addition, to make these options even more attractive, they gave them a relatively short time frame to mature to a point where they would become the employees’ property and could be sold on the market. In American parlance, when an employee gained their shares, they’d be “vested”.

Allen and Gates became concerned that when the first big tranche of options they’d given out became tradable, many of their key employees would become multi-millionaires overnight. Perhaps they’d all leave and retire? How could they continue to retain them?

Soon, however, they had an almost bigger problem when their employees started cashing in their options. These key people didn’t leave or retire. They became a different type of employee. Allen turned up to a meeting once to meet an engineer wearing a T Shirt stating “F*** You, I’m Fully Vested”. The message couldn’t have been clearer.

This may well be where the phrase “F*** you money” originated from. As far as I remember, Microsoft started firing any employee demonstrating what they saw as this “Couldn’t care less what you think” attitude. It was a real problem and probably still is. When you don’t need the money, do you need the boss and his crummy opinions?

Biting the hand that feeds you can become an option as you near your FIRE goals. In retrospect, I was affected by it in my own employment but it had a slightly different effect on me because it’s such a gradual process and, psychologically, I never fully believed it (probably because, unfortunately, I wasn’t made a multi-millionaire overnight.) I’d admit, however, that as the salary became less of a life support for me at work, I became more cantankerous, more prepared to say what I really thought in meetings and more critical of how things were – or how I perceived them to be – in the office. In retrospect, I think I made it quite obvious that I didn’t need, or want, to be there and that, as I’ve blogged before, is the quickest route out the office.

Most of us will take years to reach a position where we can walk out of a job and never look back, but increasingly as we stick to our saving strategies we will be approaching that point. This brings about a “So near, and yet maybe so far” frustration, because our calculations are based on an uncertain future which might mean we DO need to work a little bit longer. There’s a line that we hope to cross, but as we near it the line becomes a lot more fuzzy and indistinct. Worse, we are relying on our employer to give that line a more solid definition. You begin to spend time wondering how you could negotiate a severance package to sweep you over, and that is a dangerous road to travel. Your mind morphs over from doing a good job to focusing on what a good job it would be not to have to work. You become increasingly unsettled and discontented and it begins to show. You don’t wear a T Shirt, but you start to focus on when you can buy one.

This “Should I stay or should I go now?” question promotes the  “Just one more year” promise that you make to yourself when you feel that you could probably retire today, but begin to feel that maybe a further twelve salary cheques will provide a financial buffer to seal the deal. The buffer, however, is more likely to be in your head as opposed to the bank. Really, if a year is going to make that much of a difference then you don’t have enough to make the move, regardless of the money in your bank. Something else is holding you back.

These are things to bear in mind as you work toward your FIRE goals. The journey will be easier if you continue to appreciate the people other than yourself who are enabling it – your customers, your workmates, your employer. This would be an appropriate point for me to thank all my own previous employers for the help and money they gave me in realising my ambitions.

But you know what, I put a lot of that salary into index trackers, so *@*! ‘Em, because I’m fully (in)vested. 😉


Fund Mismanagement

Finally, one of my old investments came on line so that I can go in and check it at will. It was an endowment policy that I took out back in 1992 because, frankly, I didn’t know any better in those days.

Years later, when the scandal of mortgage mis-selling reached a peak, I discovered that the first full year of payments that I’d made into this endowment policy went straight to the agent who’d sold me it. I didn’t remember him mentioning that when he sold me the policy. I made a claim against this for compensation, but it was judged that not pointing out this fact in plain English wasn’t seen as illegal or dodgy practice and my claim was turned down. The agent could show that he’d done everything else right in terms of the sale, and I suppose he had. But he took the first £1,500 of my payments which, 25 years later at maybe a 5% return….oh, it’s too painful to work out!

As I clicked through to the website to have a look at my investment, however, I suddenly find nothing’s changed. So far, this year to date, I’ve been charged over £700 in fees for the “management” of this policy. Suddenly, the screen before me went red. Then I realised it wasn’t the screen, it was a red mist of rage descending on my brain. Frankly, if they’d charged me a tenth of that for their “management”, I’d still have questioned it. Fifteen minutes later I was on the ‘phone to them trying to discover if I cashed the policy right now, today, were there any charges, bonus forfeits or anything else that I needed to be aware of before I did so? The answer was “no”, so I asked for that in writing. Preferably in their blood. And then I cashed it, well aware that charges of one sort or another on this policy over twenty five years had cost me in excess of twenty grand.

Isn’t that scandalous? It makes me feel almost physically ill. I mean, what are they doing for this money? I even originally chose the damn funds that the investments was being split into so they didn’t even have an input into that. Not that they were probably allowed to. I can still remember as clear as day how the agent (I’m not sure if they were called IFAs in those days) “advised” me on picking funds for the endowment. He basically held open a magazine and started flicking through pages that listed literally hundreds of fund options. He’d highlighted a few of these with a yellow marker as some that he, personally, found of interest but, of course, the choice of where to put my money was absolutely mine. What did I think? Again, he personally would choose maybe three or four to split my monthly payments equally into, but the decision of how many was up to me. Sitting there, in his office, I was at a total loss – this was all beyond me, but I was far too proud to admit that to him, or my young wife sitting next to me. I picked three with absolutely no idea what I was doing, but hoped that I looked as if it did.

Actually the funds I picked were none too bad, but I had no idea of the charges they’d accrue. I still don’t. In a way, I don’t want to know the detail because I can’t turn the clock back and change anything now. I’ve lost twenty grand. I’m on the verge of tears writing it down.

At this point, I have to grudgingly admit that this firm were – now – making very clear what I was being charged on my investments. I can’t say this about the other financial providers I hold funds with. Why can’t I, very simply, go into a website , click on that “Global Special Situations” fund and see what I’ve been charged on it this year to date? And I mean all the charges, every last one, shown as a total figure? With a percentage next to it that I can then compare to similar funds?

And, you know, maybe I can do that. But if that’s so, then it’s not simple – either to do, or to understand. And I’m bloody interested in this stuff! What chance have other people who are “trusting” that their grandly named fund management company will be giving them a quality service for a fair price?

They say that the margin in the fund management industry is over forty percent. They’re probably creatively accounting like mad to make it that low.  I look at the City, the salaries and the bonus payments, the cosy self-congratulation about just how great they all are and it makes my blood boil. I’m paying for that, and so are you. Supposedly there’s change in the air with so much money now going to Index funds and government reports into excessive profits. Vanguard have also launched into the the UK with their lower cost model, and praise be to them. But until we get real transparency on fees, real healthy competition and a government more interested in consumers than a non-exec future seat on a City firms’ Board, change will continue at a glacial pace. After all, it’s been this way for a long time, and the customer’s yachts are still missing from the harbour.

My Tuppence Worth

The question of the week in the UK FIRE blogshphere is: Could Channel 4 have made a less effective TV show about “How to Retire at 40” if they’d tried? The answer is a resounding “NO!”

For me, the show didn’t get off to a great start. As a thick, Northern, Brexit-loving, neo-fascist who could hate gays, women and disabled people, I have to be reminded to celebrate diversity by my intellectual superiors at Channel 4 through their selection of presenters. Patronised? Moi? Surely not.

Putting aside my petty hatreds, the first couple of minutes of the show sounded promising.  The presenters announced that there was a growing amount of people interested in the concept of Financial Independence and Retiring Early in the UK and that they were going to explore the subject from a variety of angles. This seemed like a decent premise, and I felt a wee glow of pride in that I found the book “Early Retirement Extreme” back in 2010. “I’m a pioneer!”, I cheered, and then quickly warned myself not to become the FIRE equivalent of someone who claims that they were at the first Sex Pistol’s gig in 1976. It’s really not that big a deal.

The show quickly went downhill from there, and it soon became clear I wasn’t the intended audience and neither was any of the rest of the FIRE community. We wanted to see the elegance of the maths (which The Escape Artist made a heroic attempt at, no doubt, only to edited down to about thirty seconds of soundbites “You only need to save 75% of your income and you can retire in seven years!”) We wanted to see the heroes of FIRE, Jacob Fisker, Mr Money Moustache et al, and not some bloke selling potatoes who was happy to tell us what his profit was, but not his turnover, and young Pippa of Nut Butter fame, who was happy to tell us the turnover of her business, but not the profit. I held my breath to hear what Huw from Financially Free by Forty would say, but clearly the editor had decided his contribution was going to be his startling good looks alone.  As for Julie and Jason, whose blog I follow as they wander around Europe on permanent holiday, if they’d a point to make I must have missed it.

The following day at work, the couple of colleagues I’d nudged to tune in informed me that they’d squandered an hour of their lives on “utter crap”.  “What was it all about?” they asked, and I was at a loss to tell them. As I’ve tried to evidence on this blog, I’m no evangelist for Retiring Early but would like to see a rise in interest on Financial Independence. I had harboured quiet hopes that this show would at least spark some interesting debate on the subject, but judging by the complete lack of reaction following it in the national press I can’t help but feel an opportunity has been missed.

It’s easy to criticise and forget that while we in the FIRE community had this show planned as TV event of the week, the rest of the nation were immersed in the body-shaved car crash that is Love Island. We find this stuff incredibly interesting and appealing, but 99% of the rest of the population couldn’t give a toss about it. That’s what the producers were up against. But when the Mad Fientist can string together a bunch of immersive, informative and entertaining podcasts on FIRE and the people involved in it, is it beyond TV to produce something of a similar ilk? As it stands it seemed all they managed to do was annoy anyone interested in the subject while failing to interest anyone else. Bit of a shame really.