TUK020 wrote:If I can add a couple of points from my own experience:
Background: I stopped all paid work about 8 months ago, and had shifted down to a reduced hours (4 days a week) for the 18 months previous to that.
Reducing hours is a useful exercise, and brings home some interesting points.
I found my stress level overall was not so much correlated to the working hours, but more inversely correlated to the recovery time in between. Going from 5->4 days week work, increases your weekend by 50%.
At our stage in life, a very significant portion of your disposable income goes into savings for retirement. Reducing earnings but still keeping them at a level that covers your current expenditure - in effect stop saving extra - still builds your safety margin simply by postponing the point at which you draw savings/pension down.
The very progressive nature of our tax system means that the ratio of hours worked to net income is surprisingly non linear if you get anywhere close to either LTA on your pension assets, of withdrawal of personal allowances on your income. This was really brought home to me as I was trying to work out how to avoid a marginal tax rate of 2/3rds.
The right answer would have been to start drawing my pension and continue work 2 days a week and this would have kept my net income at the same level. Unfortunately this was incompatible with my role, so I bit the bullet, and stopped altogether.
Early days, but no regrets so far. Residual worry about what inflation is going to do to me.
Very interesting that we all share the same sort of concerns - fears if you are like me . I am about to take some similar steps. And I'm not sat here thinking it will work. However, my age and health are taking their toll and I feel now is the time to go on a four day week.
Before I go any further I realise this is a little off-topic but parts of it will come back on topic. Please bear with me.
Both Dod and IAAG are exceptional contributors to this community and they have both discussed how they look after their finances. Three weeks ago my SSD broke. I didn't realise that it contained my desktop memory. So my backups weren't of any help as I was just (without understanding it) backing up my HDD.
I've lost my "spreadsheet". I had information in there regarding pension projections. It can be replaced. The point I am making is not only did it allow me to know what I was spending it provided a form of emotional support for me. At any time I could look at the bigger picture and know how robust the family finances were, especially in case of "shock".
I've three figures locked into my head.
1. Essential costs per month - currently £1,600.00 month and my good lady's salary just covers these - a first line of financial defence
2. Essential cost per month plus a holiday and a glass of wine £2,200.00 - a second line of defence as I only need to earn £600/month to lift us to this standard of living - I don't have a set income but it's about £350/day.
3. As 2 above but paying £9K a year into our daughters JISA. £3,000.00 - a third line of defence as we can always resort to the essential only budget if life referee awards a penalty against us.
Assuming we retired tomorrow our wish would be to have a retirement income of £36/year. We want to continue to help our daughter financially after she is 18. Whilst it's a wish, it's an important wish for us. We can't retire tomorrow then I have 7 years to go before state pension age and my good lady has 12 years. We can't really rely on this income for some time then
Before Putin we did feel we could get somewhere towards 100% of our needs within the next four years. We're in equities. I'm guessing we may need to suck up another 2-3 years in work due to the invasion of Ukraine. As another "line of defence" against downside and "shock" I/we are looking to put double our needs into a pension pot. Then the next time Putin invades another country we can sleep at night and not have to massively reduce our standard of living. See 3 above.
I have managed to work out that at the same time as I drop to a 4 day week I should still maintain my annual income. My skills are in demand with the construction industry at the moment.
So a four day week it is. We have sufficient emergency cash to pay for option three above for about 30 months without any other form of income. That helps me partially. But as a "born worrier" I still need my spreadsheet and as IAAG says I/we just need to keep plugging away until the numbers say "time to retire me old".
AiY(D)