I sat down to write a year-end post. For bloggers this is largely a masturbatory exercise. An indulgence performed alone for their own self-gratification, as unlike any other week of the year, their audiences are away living life and enjoying the company of loved ones.
These posts tend to be formulaic. Reflections on milestones achieved. Excuses found for those that were not. “Mistakes were made”, “lessons were learned”, “what gets measured gets managed”. Then immediately forgetting all those lessons to list out unlikely new year’s resolutions. Eat less. Exercise more. Fix finances. Stop making excuses.
But today the words would not come.
I was thoroughly jetlagged, having completed a 30+ hour travel odyssey to return to London. 21 hours in economy class, developing patience and humility. Multiple layovers, totalling 11 hours spent idly people-watching.
Wondering who lives on the wild side, consuming sushi or oysters moments before a long-haul flight?
Guessing which bored captive consumers would succumb to buying overpriced tat sold in airports?
Marvelling at the lack of systemic thinking that leads to the purchase of duty-free liquor or perfume at one airport, only to predictably having it confiscated for violating the 100ml of liquids carry-on rule at the next security theatre checkpoint.
Puzzling at the sheer arbitrary randomness of those security arrangements.
Passports checked multiple times. Or not at all.
Bags emptied of liquids and screens. Pockets emptied of everything. Or not at all.
Coats off. Jumpers off. Belts off. Shoes off. Or not at all.
The prettier the passenger, the more frequent and thorough the searches. Perky DDs attracting more unwanted official attention than the dreaded boarding pass marked “SSSS”. Travelling while being an old white guy for the win.
The flights themselves were mostly uneventful.
Seatback screens promising on-demand entertainment. Once a technological marvel. Today complained about for offering a poorer range than Netflix or Spotify.
Onboard wifi, making consumers contactable anywhere around the globe. A more recent innovation. Today complained about for charging a premium price for a suboptimal service. Starlink to the rescue? I suspect it won’t be long.
In-seat charging points for all those who opted to Bring-Your-Own-Device. An unscientific visual survey conducted while roaming the plane suggested almost half of the passengers opted to do this. Hinting at a future where onboard entertainment becomes a premium opt-in.
Yet still the passengers complained. Hedonic adaptation never sleeps.
Bring-Your-Own-Device was a recurring theme throughout my vacation. Two weeks abroad and I hadn’t used cash once. All purchases made using fee-free credit cards offering wholesale FX rates. Mostly via ApplePay, using my UK mobile phone. Expensive money changers and cheap domestic SIM cards experiencing the same fate as traveller’s cheques: available, but no longer required.
Reducing complexity. Removing friction. Lower fees. Fewer moving parts. Welcome changes all.
An unwelcome change since I had last visited was the widespread adoption of payment surcharges. Once upon a time, there had been pricing certainty. Transaction costs came out of the merchant’s profit margin, already baked into advertised prices. Today, merchants add on those costs at the point of sale in the form of a surcharge. Debit cards incurred 0.5%. Credit cards up to 1.5%. In theory, the fees could be avoided by paying cash. In reality, since the pandemic, many stores don’t accept cash.
More transparent? Perhaps.
Creating complexity and introducing friction? Certainly.
Did the advertised prices drop as the fees moved from baked-in to added-on? Of course not!
I had thoroughly enjoyed the break. Winter sun. Christmas barbecues. A glorious assortment of summer, sea, and road trips. A reset of perspective and priorities. The rare chance to chat with people who knew me before we all became the role-playing, mask-wearing adults we all are now.
One old friend, a term I can now use both figuratively and literally, runs a successful freight business. Happily spending his days driving across the country, shuttling goods from point A to point B. As much or as little work as he desires. Revelling in the stress-free nature of his existence, just him and the road. Clearing £10,000 a month after tax.
He had chosen a different path, the bumpy ride of entrepreneurship. Leasing rigs while I had been studying for university exams. Scraping together every spare cent to buy a heavily mortgaged worst house in the best suburb while I had been backpacking around Europe.
Today he owns a small fleet of rigs and trailers. Employing half a dozen drivers. He is mortgage-free, still the proud owner of that worst house in a suburb where land values are worth more than most people have in their pension pots at retirement. Fending off unsolicited offers from property developers every week.
He offered a refreshing change in perspective from the C-suite bullies, FinTech shysters, and ego driven Masters of the Universe from the City I encounter on a daily basis.
Talking about goals and outcomes. Not in the ritualistic annual frenzy of budgeting and planning that typifies the approach of most corporates and more than a few bloggers. Rather in the refreshingly simple approach of a man with little education, but a lot of hard-won common sense.
His approach had been to work out what he wanted, in a tangible form. Things that could be bought or made, not woo-woo hopes and dreams. The former is the enabler. The latter is the outcome.
In his case, that had been a short targeted list.
- He wanted to live in a nice neighbourhood. Have his kids grow up surrounded by smart successful people. To be free of financial pressures by owning his home outright, before the inescapable realities of age and automation meant he could no longer earn a living.
- He wanted to be his own boss. Set his own hours. Control his own destiny. Sleep-in or work. Be present for those irreplaceable family moments, school plays and sports days and so on.
- He wanted to have the free cash flow necessary to be able to say yes to his children while they were children. Supporting their hopes and dreams. Have them believe anything was possible. Even if those things were expensive, like horse riding or go-karting.
Simple goals. Clear goals. Reasonable goals.
Next he asked himself what he needed to do now, today, to make each one a reality?
Decomposing the big picture down into a tangible sequence of ToDo list tasks. Little steps in the journey, that when successfully completed would slowly but surely make those desired outcomes a reality.
His ToDo list informs how he prioritised his time each day. If he wasn’t consciously taking the day off, what could he tangibly be doing to step closer to making those dreams a reality? No need to hustle or work until he dropped, just continue taking simple methodical steps in the right direction. This helped avoid apathy and time lost drifting, he didn’t need to think or decide, just follow the next step he had mapped out.
Planting the seeds for money trees now, so that by the time they were required in 5 or 10 or 50 years’ time they would have had sufficient time to compound and grow. Investing time with his loved ones while they were young, so that they would still want to spend time with him when he was old. Somebody they knew and liked, rather than a grumpy stranger who squandered their days battling goblins and trolls in a grim sounding land called “the office“.
He had no need for annual planning theatre or new year’s resolutions.
His ToDo list didn’t contain unactionable items like “read 26 books this year” or “earn £5,000 a month in passive income”.
Instead, it had items like “read 50 pages today” and “invest surplus cash on Friday”.
The thing I was most impressed by was his ability to link micro-level daily tasks back to the macro-level outcomes he desired.
Cognisant of why each one mattered, and how it helped.
Concurrently thinking at both the big picture strategy level and also down in the detail, ensuring focused attention and not wasted activity.
That is a superpower which few people in the corporate world possess. They could learn a thing or two from an old truck driver.
Along the way, he had developed a hobby as a nature photographer, specialising in landscapes, sunrises, and sunsets. A tangible activity he could explore and indulge while on the road. Helping to break up the monotony of a 12-hour drive across a desert or along a coastal highway.
He says he will publish a coffee table book containing his best work when he retires. A man needs to dream, to have something to focus on once his earlier hopes have been attained.
His ToDo list item? “Take 10 interesting photos during rest breaks today”.
I have little doubt we will see his work in bookstores one Christmas in just a few short years’ time!
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Donna 3 January 2023
Happy New Year! Family is hugely important for us all and one of the benefits of FI is to support our kids financially, perhaps in a way that we never were by our parents. I don’t know what is best though: let them struggle financially in their early 20s, the same way as we did to appreciate ‘the value of money’, or take that struggle away, so they can do what they want and not to have to compromise?
{in·deed·a·bly} 3 January 2023 — Post author
Thanks Donna. You raise an interesting question, that I too have wondered about.
We don’t learn to appreciate money if we have always had it.
We don’t learn to value money if we have never had to work for it.
There is an old Warren Buffett quote that goes something like “give your kids enough that they can afford to do anything, but not so much that they can afford to do nothing“. I think he is on the right track.
Where I landed was while young, I want my kids to have exposure to a wide variety of activities and ideas. Giving them a chance to try things on for size, learn what they like and loath, and make up their own minds about things.
As teenagers, I’ll pay for their education and extra-curricular activities, but they have to finance their own social lives and most of their own fun. I run a pay-for-service pocket money model, so if the chores aren’t done they experience an acute money drought.
I would love for them to have student jobs like I once did, though in London that does not appear to be a common or particularly viable path for reasons I don’t entirely understand. Paperboys here are professional adults. Supermarket shelf packers and fast food workers are adults who commute for 2+ hours each way each day on the bus. Building labourer jobs tend to be for adult migrant workers rather than local kids seeking extra cash. Gig economy jobs are rorts. Pub work might be an option when they are a bit older, but I am yet to figure out what options remain open to a 16 year old who is a full-time student.
As adults, I want them to start at zero, rather than underwater and anchored to a mortgage sized student debt. Affording a wider array of potential employment avenues, rather than automatically chasing the big money of management consulting, financial services, or IT contracting.
Time will tell whether the Bank of Mum and Dad is required to help with housing deposits. I am in the fortunate position to (probably) have more than I am likely to spend, which means they will inherit what is left anyway. Which makes the decision a question of timing rather than outcome.
How have you approached this for your family?
Donna 3 January 2023
I am supporting my children through university (i.e. there will be no student loan debt at all) and will also provide a sizeable size house deposit. I have made it out on my own, but had I had parental support, 1) I would not have had to struggle so much financially early on and develop a somewhat anxious attitude towards money as a result (hence the FI!) and 2) I would have lived in better areas and not put up with noisy inconsiderate neighbours. Both of which will have led to a better quality of life early in my career!
I try to provide what I did not have, as life is fragile and precious and suffering does not necessarily enhance one’s life experience or make one appreciate money more.
{in·deed·a·bly} 3 January 2023 — Post author
Sounds like a sensible approach to utilising generational wealth.
I hope your kids learn to appreciate all that you are doing for them, as you do for yours. I also hope they continue to pay forward those advantages to their own children, perpetuating the financial advantages provided by the ancestors.
Hari 7 January 2023
Well written and beautifully presented post as always….
Sometimes the World around us looks less….positive.
FI has been a huge enabler for me over the last 16 years, but primarily when I learned to stop striving for what I thought others close to me wanted but didn’t need.
fatbritabroad 7 January 2023
Helping your kids is an interesting question. I grew up with family that at least on paper could quite easily have helped but I was always taught to stand on my own two feet. I had very limited help when leaving home but equally was able to live rent free at home and save for my own deposit so I recognise that was help in another way.
Weirdly since retiring my father has become amazingly generous to the tune of a mid 5 figure sum of various things ( mostly short term loans I’d taken off him so I could pay him back out of investments which weren’t quite due yet which he ended up writing off unexpectedly )
These gifts have been lovely and I am forever grateful amd very privileged i recognise to get any help, but in terms of moving the needle the impact of this is minimal, certainly much less than it would have been earlier. I understand why he did this but as someone who has always been hard wired to be sensible it would have been far more useful at 18 or 20 than 40. This has informed my thinking both positively and negatively when it comes to my own child.
For.me I intend to save a decent 5 figure sum for.my daughter in her name. Enough that she will have to make aerious considerations on what to do with it not so muchthat she can go absolutely nuts. I think it’s important that people start to have their own money to make decisons with early on.
I will then start teaching her before she’s 18 about what it took to generate that sum and how I did it.
I will also agree to match £ for £ any of the money she uses for say education, house deposit , first sensible car etc. If she blows it I’ll make it clear she isn’t getting any more.
I have also put a very nominal amount in a pension from birth more for an education piece for her. I want her to see how a small amount grows over a long time period and get her thinking .
There’s no right or wrong on this but that’s my plan at present!
{in·deed·a·bly} 8 January 2023 — Post author
Thanks for sharing, fatbritabroad. It is great you have such a supportive family, and are paying that forward to your own daughter.
This part feels like it may need a bit more thought.
Are you saying that if she buys an insensible car then you won’t contribute towards her education or house deposit? Or is each item considered separately, applications to the bank of Mum and Dad for advances on her inheritance? For example, furthering her education is (probably) a good thing, even if she chose to drive to school and back in a Robin Reliant. At current property prices, there will likely to be a decade or more between first car and house deposit. Does a poor choice at age 16 close the door to future assistance?
There are no right or wrong answers, as every family is different. Food for thought.
Another question, are you saying if she manages to assemble a house deposit of £500,000 (in today’s money) that you will match that pound for pound? If you are 40 now and she is a toddler, then you’ll likely be comfortably retired by the time she calls in the matching promise. No ability to earn more. No time to recover. That kind of potentially generous assistance would need to feature as a line item in your own personal finance planning, “provision for future distributions to progeny“, and as such it should be excluded from your own withdrawal rate calculations or retirement projections of net worth available for you to live on, if you are to keep your promise. Of course, she may choose to become a card carrying member of “Generation Rent” or decide to live in a caravan on the outskirts of Belfast where properties can be had for the price of a happy meal!
Hari 8 January 2023
My solution to the house purchase for our daughter was to buy a flat with her and she rented out the spare bedroom on my behalf.
I acted as the mortgage bank, falling interest rates meant she kept her payment level and built up equity.
Her future husband bought into the flat and bought me out.
Subsequently they moved to a larger property and being used to ‘sharing’ the let out a couple of rooms on Airbnb.
I have enabled and she has made her own future, best of both worlds.
{in·deed·a·bly} 8 January 2023 — Post author
Thanks Hari. That’s a great approach that sounds like it worked out nicely. Well done!
south_bound 10 January 2023
From a regular reader but first-time commenter, thanks for putting together such insightful and thought-provoking posts.
I’ve been mulling over the question of supporting my young adult kids quite a lot recently, how to get the balance right between being helpful at a useful time in their path without giving them the temptation to coast idly through life. I’ll share these thoughts as an extension to this comment and would love and feedback you might have.
My current preference is to contribute a meaningful amount towards their first house purchase (or maybe allow them to buy outright) on condition that they contribute into a regular investment plan an amount equal to what they would have spent on mortgage repayment and interest. That way their ongoing efforts and motivation towards future financial wellbeing are being served. Given that my own retirement is based primarily on growth and income from my investment assets rather than spending down the capital itself, some of that growth would be lost to me and so we would need to structure it to allow me to dip into that pot if my own plans lack sufficient contingency.
I may also consider paying their rent before they get to buy their own property (assuming they eventually will) which would help them build up their deposit. Investment equal to this contribution would be part of the deal and investment growth might need to be accessible to me for the same reason as above, but probably unlikely unless a really long term situation.
Obviously would need to get buy-in from them, but hopefully it gives them a significant leg up in their 20/30s rather than waiting until 50/60s with nothing guaranteed. All based on a level of trust that we would all need to be comfortable with, what could go wrong?
{in·deed·a·bly} 10 January 2023 — Post author
Thanks for reading, south_bound, glad you’ve found some things to your liking.
My experience? Families are complicated, add in money and things get unpredictable quickly.
To illustrate, try putting yourself in the shoes of your offspring, then add a dose of paranoia.
Under your scenario, the Bank of Mum and Dad is making a very generous offer, on terms that on first glance are too good to refuse.
However, in doing so, you are strongly incentivising a particular financial path that may or not be aligned with the goals, preferences, and priorities of your child. Are you empowering them financially, or attempting to exert influence and control over some of their biggest life choices?
At second glance, the offer becomes less compelling due to the strings attached. You notionally offer them a gift, but in reality it is a loan due to your ability to call it in under circumstances entirely beyond their control.
At the time of the agreement, you suggest a case study involving your own financial hardship later in life. But does that mean the principal is similarly at risk should you simply disagree with their life choices? Living location. Life partner. Football team they support.
Suddenly that loan looks much less appealing. The deposit monies have a contingent liability. If they rely upon them to secure a mortgage on a property, and you then call in the loan, they suddenly have a serious financial problem. In the absence of other financial assets, they would be forced to sell or refinance to repay you. Potentially leaving them in financial distress or even homeless.
What about if they subsequently get divorced? Presumably your loan contract (you would need one in place for the call in provisions to be enforceable) would contain a protective clause that says something along the lines of the loan must be repaid in the event of relationship breakdown prior to any property settlement, to ensure your future ex-in-law doesn’t waltz off into the sunset with half (or more) your hard earned life savings.
Now you may be perceived as either betting against the marriage’s success, or imposing golden handcuffs on its continuation. Either of which is bound to ruffle feathers, start blood feuds, and cause no end of familial discord.
Now to be clear, I’m not saying any of this is what will happen, just that this is an alternative risk based perspective viewed through the eyes of the potential recipient.
For mine, this type of thing comes down to trust. You conclude with a similar thought.
If you trust them to do the right thing, then you give them the money with no strings attached, as an advance on their inheritance at a stage in their lives when it can actually make a difference. Then you trust that you have a good enough relationship with your children that they would be willing (and hopefully able) to step in to provide assistance should you one day need it.
But like they say on the airline safety demonstrations: fit your own mask before you try to help others. Don’t give away what you can’t afford to be without. At the end of your life, chances are your children will inherit what is left anyway, without the strings. So the outcome is the same, it is just a question of timing.
One other thought: how will your children ever learn to become financially functional adults if you’ve given them a free ride through life, such as paying their rent or buying them a house?
The value of money is learned through scarcity.
Prioritisation is learned by being able to afford anything, but not everything.
Managing of money is a skill that can only be learned by doing.
If we raise financial infants, we shouldn’t be disappointed when they make financial mistakes with our money once we are no longer around to do the thinking for them.
Making those kinds of mistakes while we are young and have nothing to lose costs little.
Learning those same lessons later in life, when the numbers are much larger, becomes infinitely more expensive. Just ask all those stereotypically broke former lottery winners, professional sporting stars, and celebrities!
south_bound 11 January 2023
Thanks for your more than detailed feedback giving me plenty to think about. Your last point on helping them become financially functional adults is particularly relevant and the balance I am hoping to achieve by supporting them enough but not too much.
weenie 8 January 2023
Hah, I’ll be setting my usual unactionable goals this year, including reading X number of books and earning X a month in income! In fact, many of my goals will probably be almost exactly the same as last year’s ones because I can’t focus on anything more complicated, to do so would be too much of a distraction. The ones I set actually mean something to me, even if they don’t to anyone else.
It would be nice to be in a position and frame of mind to be able to set a simple daily goal and be happy to achieve that, but my life’s not there, not yet anyway.
Happy New Year, by the way!
{in·deed·a·bly} 8 January 2023 — Post author
Thanks weenie. If your approach works for you, then keep at it!
The nice thing about my friend’s approach was for most of the time he didn’t have to think, he just followed the bouncing ball on to the next step. One foot in front of the other. To his simple mind, that made the outcome inevitable: arriving at journey’s end. The only variable was how long it took to get there.
That said, I must confess that I had to ask him what he did during those marathon driving stints if he was putting himself on autopilot and away from thinking. His answer? Listening to audio books. The narrator’s voice kept him company, and concentrating on the stories helped avoid him switching off.
pathways 14 January 2023
It’s that old adage, isn’t it? Why put off for tomorrow, what you can do today?
Interesting to read about the different aims and outcomes of your ‘old’ friends. I think my aims and outcomes have changed as I’ve aged. Not many people would plod through life with the same aims they had when they left school. Maybe the trouble with that is it sounds safe and boring…a bit like a low-cost tracker fund.
Imagine if Gandalf had never arrived on Bilbo Baggins doorstep. Bilbo would never have imagined he would see great mountains or dreamt of long-forgotten gold. Hobbit’s are a quiet simple folk, but never under-estimate their capacity to surprise.
Your freight business friend could yet change the course of his life. Imagine if, following his conversation with you, a seed was planted in his mind that he had missed out on some wild living and decided to sell everything and pursue some adventurous life-style.
{in·deed·a·bly} 14 January 2023 — Post author
Thanks pathways.
You make an excellent point about our hopes and dreams evolving over time. How many of us as adults still wish to be astronauts, ballerinas, fairy princesses, firefighters, or smackdown wrestlers as adults? Not many, I suspect… though all those jobs still secretly sound pretty cool!
Which leads to an seldom spoken truth about those seeking early retirement: that the spending patterns, lifestyles, and responsibilities we currently enjoy can only be naïvely projected forward 20/30/50 years as representing what we will desire then.
Imagine doing those projections while a backpacking teenager, or a carefree single twentysomething, only to discover the world looks infinitely different once we couple off and have kids.
Imagine again doing it as a thirtysomething with a “normal” that involves servicing a mortgage, paying nursery/school fees, and hoping for a lottery win to make the idea of retirement anything other than a distant and unrelatable fantasy.
Roll forward 20 years, when the mortgage is hopefully paid off and the kids have hopefully successfully launched into leading successful independent lives of their own. Life looks little like it did when the house was full, but bears little resemblance to the young person with the stamina, libido, and metabolism capable of happily coping with anything we set our minds to.
Many of my “old” friends (me included!) need to get out of their own way, aligning their lifestyles with their incomes, and their expectations with reality, in order to ease pressure and stand a chance of finding their happy.
My “old” truckdriver friend long ago figured that out, but having kids at a young age, he feels like he missed out on some of those experiences usually associated with those who are young broke and too stupid to know any better. He’s talked a couple of times about wanting to see some of the world, so perhaps when his knees and back are no longer up to unloading trailers full of freight he and his long suffering wife will obtain passports and go exploring. I wouldn’t bet against it.