Inevitably at work, you will find situations where you end up in the pub with a number of your work colleagues (if you are lucky, you may even get a tab or expense account in play which makes it an even greater pleasure!). Hopefully these are at least some form of fun and you have something in common with your colleagues. It normally ends up talking about work, but when its someone’s leaving drinks, then plans for the future often come up, and occasionally, very occasionally, the money or finance discussion starts up. This happened to me when we went out for drinks a little while ago, with a large variation of ages represented in the group, and there were a couple of key items that came up, from two different perspectives. It was the similarity in the view of money however is what struck me – since when did it become a big thing to be proud of the amount of debt you have?! [Note: You may need to subscribe for that link but it is talking about Kanye West’s $35 million debt]. Whilst people in the UK seem to have an aversion to talking about wealth and money (I hold my hands up of being guilty of this as well – only a very few know roughly what I earn, never mind the exact amount), let alone any form of wealth – should we be? Surely being able to say you have £X,000 in a pension account should be something to be proud of? I’d certainly rather have an ISA producing me £1 a month than the latest Apple Watch, that’s for sure (especially watching people trying to use it to pay for a bus ride in London!).
Individual 1: They have fairly recently retired, and so enjoying their time out of the office – mostly doing things with friends “for free” – something that anyone can do even when working. Asked what the biggest transformation was going into retirement, the answer was the inevitable “cut in income”. What amazes me is that this doesn’t come as a surprise (before retirement they had mentioned the same), but that rather than try and do something about it, they just shrugged their shoulders and ignored it. It was just accepted that you have to take a pay cut in retirement, and so need to be prepared for it. Surely its better to try to not have a cut in income? If you knew this was coming why not try and scale back a little? Granted I don’t know if the individual still has a mortgage or not, or any more details of what they may get up to in their private life, but I for one don’t intend to take a cut in expenditure (i.e. my lifestyle) when I retire – if anything I want it to go up!
It never ceases to amaze me that people think that you don’t have an option but to take a pay cut when you stop working. If you know you will take a pay cut why not get used to it? Lets face it, when you retire you should have no need for a Starbucks (unless you need to rest those tired legs and put your walking stick somewhere, but there are plenty of free benches around the world…). It was a great reminder to me as to why I am tracking my spending and generated returns to make sure that the lifestyle I have in retirement will be, at worst, the same as I have now. Simple spreadsheets can give you all the predictions, and yet so many people seem to stick their head in the sand when it comes to money.
I really struggle to get my head around why people are happy to assume that they will have to take a massive drop in income when they retire – especially when they seem to know this is coming 40 years or so away! Maybe the human mind is not able to grasp that concept in general and it is us freaks in the FI community who can?
Individual 2: They were moving home – granted for a sensible reason (to be closer to work), but it was interesting to hear about the impact this would have – higher mortgage (although no idea the exact numbers, and didn’t ask, it could be £2 a month more or £500, I will never know!) and less outdoor space, and a smaller property. The interesting thing was the view that the bigger mortgage was required, “and you have to do it, don’t you”. Do you? Why? Who says so? I totally get the needing to be nearer work, but I honestly can’t see that there wasn’t somewhere cheaper that would have fulfilled what they were after. I think London can be seen as the exception as if you work in central London and want anything less than about an hours commute then its likely to be over £500k for something reasonable both in terms of a place to call home and a location – but that is my opinion 🙂 For me, I tried living outside of London and commuting it. Yes it saved me money – but 5 hours a day on the trains and tubes, no thank you. I lasted one month at that before I decided to move up to London.
Why is taking on a much bigger mortgage a badge of honour? You hear a lot about people buying McMansions (ok, partly guilty) and having more space than they “need”, but its finding what you need – for us, technically we could downsize. We won’t, and we will work longer for it, but we have the space we want. We lived in a 2 bedroom flat for some time, and it was just too small for what we wanted. Now we have a much better place – it’s still not what I would want from the bottom of my heart, but in London for that sort of pad, that may well even be out of reach of FvL!
Individual 3: This was probably a more eye opening one. They are a successful person within the company. Over beers one evening (I can’t remember now how we got onto the topic!) we had got onto the topic of retirement (the others around were somewhat older than I am – at a guess at least a decade or more). They were talking about having a dream of retiring by 50 when they started out, but then work, home expenses, kids all prevented this, and here they are still working. I managed to keep my mouth shut and nod along, not revealing that actually they could still have retired at 50 despite everything else. It seemed that once the “M” word happened then things went off the rails. I have no idea why, and they didn’t elaborate, but they are still working now a long way the other side of 50!
Since I first drafted this post, I was lucky enough to meet up with a group of friends we often go pub crawling with. To be clear – this isn’t a run as fast as you can and throw a pint down your throat type of pub crawl, but usually some really good ales, and some historic and interesting pubs or walks. With the amount of time we spend on the crawls (usually a good 12 hours), we tend to eat in the pubs as well, so it isn’t a cheap day but it is huge fun. Last time I had a long chat with the youngest member of the group who was having some challenges and we had a long chat about life in general. When we met up this time, it was clear that this message had sunk in and he has acted on it – he has really turned things around, thinking about setting up his own business and was generally much more “with it” and focused. I don’t know if this would have happened anyway, or if it was because we chatted and I wasn’t a family member or close family friend, I have no idea but it was a huge buzz to see their change. This time I dropped in the idea of savings 50% of every pay rise they get. Will they take that on board? I have no idea, they really are just at the start of their journey (still under 21, so some pubs are a bit of a struggle), but I will find out next time – I really hope they do!
Its always interesting to see what conversations come up when you are down the pub, and its interesting how fast you can clock who is clued up on their money, and who is the one blowing it. What about you – what do you ever cover off in discussions in the pub around money, if any? Or is it limited to who is getting the next round in?