Darka wrote:
When retired, I aim to have a safety margin and a cash reserve as many here do, however I'm trying to work out how much other cash to keep.
I don't want to build too much, to be frank I'd rather spend it or invest some for inflation protection rather than have it sit in the bank.
So, my cash plans are:
- 1 Year Income Float (starts full and is refilled during the year from dividends/pensions - Live from this)
- 1 Year Spending Reserve (starts full in Premium bonds or similar - do not touch)
I'd be interested to hear what plans you have for your cash in retirement and how many "pots" you intend to have.
I'm currently working, and so I'm still formulating these kinds of ideas in all honesty, but having thought about this for a number of years on and off, then I can say that my own plans aren't too dissimilar to your own, but with a few tweaks in a few areas -
1. Income Float - more or less the same as you - I expect to have a 'full-year general expenditure account' worth of cash available, from which to fund my normal expenses, and into which any future dividends or pension would get paid, to then top-up that funding for future year's spending...
2. Spending Reserve - similar to you with regards to the Premium Bonds aspect, but most probably incorporating a larger reserve (2 or 3 years) and also incorporating some element of sporadic/bulk expenditures as well (car / kitchen, etc...)
One other thing I do want to touch on is that I do fully expect to be
overly-cautious on the above approach initially, with a hope that things might be able to be scaled back somewhat as longer-term confidence in the whole 'FIRE' project gains momentum - I'm quite content to plan for the worst, but hope for the best, and then tweak things going forward as circumstances allow...
If there's one single 'good thing' to come out of this whole COVID experience, it's that many of us are likely to have been forced to prove to ourselves just how much belt-tightening
can go on, even for what feels like a considerable length of time now, and yet still perhaps provide for a relatively good level of basic subsistence.
I was always interested in the background experiments actively run by our very own
Julian, from these boards, where he set himself a series of 'living-standard' tests, to
practically experience some medium-term situations of living under a number of varied funding-situations -
My starting point was what I called the "affluent student" level which was essentially a late 1970s (my era) university student living off a full government living allowance (those were the days!). In my day that allowed me to go out to the pub a few nights a week, a takeaway or cheap restaurant once a week but definitely having to think hard about twice a week, buying a few records etc. (Simpler times!).
My next step up was the "first proper/professional job" level (I started out as a software developer) which allowed more takeaways/going-out each week, one not extravagant holiday each year, running a cheap car, and a bit of disposable income on top which I mostly spent on gadgets, hi-fi & other geeky stuff (and I haven't changed much in the 40 years since!).
From there I did a couple more steps which are more difficult to characterise, they were actually discreet x-hundred pounds extra per month increments. At that point I'd stopped trying to associate them with stages in my real life which is what the first two were (and hence those first two steps were somewhat nostalgic because of the real life associations).https://www.lemonfool.co.uk/viewtopic.php?t=22652#p296234I think that's a great way to go about things, but do appreciate that such a commitment to those experiments will not be for everyone, of course.
What I'd say about the past 16 months or so, though, is that many of us are likely to have run at least
one of those experiments ourselves due to the enforced COVID situation, and we might at least be able to tell ourselves that such restricted situations are
workable to some degree, and to
some level of much-reduced funding, and use that information accordingly even if it's as a potential 'emergency back-stop', where we've at least
experienced it rather than it being just a potential academic exercise...
Every cloud...
Cheers,
Itsallaguess