How to REALLY Retire at 40!

The UK’s Channel 4 recently aired a TV programme called ‘How to Retire at 40’. Ju and I were on the show, for a very brief moment (thankfully I was only on for a second or two, as I’m the least photogenic man on the planet). The producers also included sections from a few other relatively young (less than 50) financially independent folks.

The subject of the show, as you might imagine, was of great interest to me and I was fascinated to see how they’d present such a complex and counter-cultural subject. In the end I can’t say I was impressed, sigh. Yep, it was great that a national channel had a stab at the topic, but the result left much room for improvement, and here’s why…

For Starters, Forget Retiring!

Being TV, they had to use a catchy title. I understand this. But what the show was really about, or should have been, was early financial independence (FI), not retiring early. That, in my humble opinion, is what most people are interested in. That’s what I’m interested in, since I’m not retired, I just don’t have to work, but I will as and when I want to – there’s a critical difference.

Outsourcing, automation, recession, downsizing: all of these things used to get my heart in palpitations. How many other people live in fear of losing their job, not because they love it, but mainly because they need the money? How much anxiety does this cause, with knock-on effects to their lives and families? Imagine being free of this stress, or at least reducing it by having some money which would keep flowing if your job disappeared? How much better could your life be as a result?

With financial independence you have money coming in from investments, steadily and to a degree predictably, even if you lose your job, or opt to try out a different career. That, I believe, is what interests the majority of people, that freedom and control, not the idea of ending work completely. Financial independence doesn’t mean never working again: it means having options, taking back personal control over your life.

They Missed the Carrot

In a world of carrots and sticks, the show was more of a stick, beating about at folks, going on about how hard it would be to get free, rather than the carrot of how truly wonderful it could be once you got there.

Getting financially independent is, undoubtedly, hard. There is no escaping this fact. To get there, you have to change, to adapt, to get better at managing and understanding money, to overcome the fears and insecurities associated with swimming against such a strong tide of opinion. And in order to do that, you’re going to need something pulling you along. Something strong, like Geoff Capes (showing my age there, ahem). If you don’t have that pull, you’re not going to be able to quit work until you’re at least 55.

Your carrot will be something deeply personal, but the show could have shone the light more on green-topped orange vegetables like these:

  1. The option to spend more time with spouse, children or parents.
  2. The reduced-risk ability to try a new career, something which you’re passionate about.
  3. The chance to go back to college and study a new field.
  4. The ability to volunteer your time to a charity you find meaningful.
  5. The option to travel the globe.

They Didn’t Actually Explain How to ‘Retire Early’

A show called ‘How to retire at 40’ really ought to explain how to retire at 40, you reckon? They got Barney in (who crafts out quality posts at theescapeartist.me, and hit FI at 43, with 3 kids and a 6 bed house, and seriously knows what he’s on about), sat him down and as soon as he started to talk numbers, cut him off! The muppets, arrghhhhh!!!

This is how almost everyone gets financially independent before they get access to their pensions; this is all the show had to say, it would have taken a couple of minutes:

  1. Spend less than you earn. The less you spend (and the more you earn), the faster you’ll hit FI. Obvious perhaps, but this is a huge area in itself. Frugality and being thrifty used to be things which were valued in our country, but these days are laughed at. Ignoring that laughter is no easy thing.
  2. Learn how to invest. For most people this will mean looking into things like being a private landlord and/or buying funds of shares and bonds. Investing might not be in your blood, it certainly wasn’t in mine, but I’ve seen it written that learning to invest is no harder than learning to drive a car, which I’d agree with.
  3. Invest. Start small and build up as you get hands-on experience. You need to build your confidence. You don’t need save up the entire deposit for a buy to let for example, you could start with much smaller amounts in low cost index funds such as those provided by Vanguard.

That’s it. Just keep going and it’s nigh-on inevitable you’ll get financially independent sooner rather than later. When your investments value 25 times your yearly outgoings, you’ll have enough income to mean you no longer have to work. So if you spend £20k a year, you need about £500k in investments.

Where did the 25 come from? Simply this: the fact UK rental property and share funds can be reasonably expected, over a period of several decades, to give you back 4% of their overall value per year in rent, dividends and capital value increases (and that’s taking into account inflation) – that’s where your £20k to live on comes from, without you eating away at the £500k you’ve invested. There’s an excellent blog post about it here, using share funds as an example: Mr Money Mustache’s Shockingly Simple Maths.

Forget Getting Rich Quickly!

Thankfully the producers steered clear of folks who’d been hit with a no-effort windfall: lottery, inheritance from a distant relative, stumbling over a bag of gold etc. They couldn’t resist finding someone who’d kicked off a rapidly successful business though – a lady selling nut butters who was turning over a gazillion quid in her first year or some such. All power to her, massively impressive stuff, but this is why it was wrong to include her story:

  1. How many of us are entrepreneurs versus how many of us have some excess income from a job? Almost none of us have the magic, instant success ideas, while many of us can save money from our monthly pay if we tried hard enough. I wasted years trying to think a genius business idea up, when the answer wasn’t nut butter (for me), it was to simply save and invest what we already had coming in.
  2. Even if you have a huge income, it doesn’t translate to becoming financially independent. Nut butter lady could be blowing every penny on Ferrari’s and a mansion in Knightsbridge for all we know (I suspect she wasn’t, she looked clued-up to me).

Forget Gambling!

As far as I can tell, the producers of the show didn’t engage any experts to peer review what the hell they were on about. They brought in Barney and interviewed him (Barney, I would say, is an FI ninja), then ignored most of what he said. If they’d spoken with someone who knew what they were on about, they wouldn’t have included a section on two blokes who’d pooled resources to buy a house. Why would they? All these guys had done was gambled.

Buying a house to live in isn’t an investment. The blokes on the show were, as far as I could tell, hoping the property would go up in value in between them buying and selling it. That’s speculation, also known as gambling, it’s not investing, unless you REALLY know what you’re doing, which almost no-one does. There’s a possibility the housing market could take a long-term dip, and if they were heavily mortgaged and needed to sell for any reason, they could lose all of their money. That’s not going to get them financially independent any time soon, and a pretty terrible example to use in a show like this.

The Answer My Friend, Is Out There, Blowing in the Wind, and for free!

If you’re interested in financial independence or early retirement, the answers are already out there to guide you through how it’s done. Folks who have done it in their 30’s or 40’s, with or without children, have created high quality, engaging content to explain how they did it, and how you can do it. You just need to read it, absorb it and work hard at it. Here are a few of my favourite, totally free, financial independence websites :

Or if you want to read, for free, how we reached FI, then just download our ebook – Funding Freedom.

In Summary

In reality, financial independence is much like losing weight. There are no easy wins. You can try buying an ab-trainer, sticking on little electronic pads and listening to the Rocky theme tune, but unless you burn more calories than you eat, you ain’t getting thinner. If you want to get ‘financially fit’, you must avoid wasting money on stuff which doesn’t ultimately make you content.

The Channel 4 show wasn’t great, but has perhaps kicked the ball and got some momentum going in the opposite direction to the current ARRGGGHHHH!!! You won’t retire until you’re AT LEAST 70 media crow. The opportunity is there for someone (not me, I’d kill the subject dead within 5 minutes on the telly) to pick up the gauntlet and create a quality, interesting, challenging and accurate TV show about the real routes into and through financial independence.

Cheers, Jay

14 thoughts on “How to REALLY Retire at 40!

  • July 13, 2017 at 2:28 pm
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    Jason,

    A good read and as ever clear and concise, now we are back in the position of looking to go back to work. The oddity that we know we really don’t have to is weird.

    Our desire for some more Africa trips and perhaps Oz and NZ drives us to choose to work and hopefully enjoy it.

    Reading your stuff reminds us why we are doing what we are doing. Less is more thanks for your enthusiasm and fun.

    David and Karen

    Reply
    • July 14, 2017 at 6:06 pm
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      Hi David, the weird sensation you are experiencing sounds like the Remarkable Realisation of Freedom, enjoy! Good luck with with the job search guys, Jay

      Reply
  • July 13, 2017 at 2:45 pm
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    Good post J. We thought the programme was a little thin as well. Couldn’t really see why they included the guys buying the flat either.

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  • July 13, 2017 at 3:45 pm
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    Thanks so much for going on the show and telling your story (albeit very briefly). I’m on the journey and it was useful to have a (UK) example of what it can look like on the other side. Your lifestyle seems to fit you perfectly.

    I thought it was particularly telling that their “survey” at the end suggested that the majority of people thought that saving was the way to financial freedom rather than the riskier approaches. Although, I’m inherently suspicious of any survey with a 67/33% split – it sounds rather like they asked three people in a pub to me.

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  • July 13, 2017 at 7:08 pm
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    Nice article, we were quite disappointed with the programme as we had high expectations. We keep forgetting these are not aimed at us minorities but at the masses and the focus is on entertainment not information.

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  • July 13, 2017 at 8:24 pm
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    Told you your blog had far better info than the show .

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  • July 13, 2017 at 8:41 pm
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    Nicely put Jason, I was ranting by the end of the programme for the same reasons you gave. It had the air of a poorly researched, couldn’t care less production and I suspect put off many more people than it would have encouraged. What we really need is for you two to produce your own show & tell it like it really could be.

    Enjoy your travels.

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    • July 14, 2017 at 6:04 pm
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      Haha! No chance Nick! No matter how bad a job C4 made of it, I’d have made a worse one! It needs, if anyone dare, a mixture of TV production skills, skilful editing and expert, hands-on knowledge. There are better folks for it. Hope you’re well mate, cheers, Jay

      Reply
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  • July 15, 2017 at 10:46 am
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    Great summary, good to know the idea of hard work, frugality and investing is key, defo not speculation.

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  • July 15, 2017 at 3:48 pm
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    Another disappointed viewer here.

    As you say, the programme could have just spread the message of ‘Spend less than you earn, Learn how to invest and Invest’ and perhaps used some numbers/graphs to illustrate.

    BTW, the ex-accountant chap talking about saving 50% of your income was/is The Escape Artist. Shame his few minutes of fame didn’t last longer.

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  • July 21, 2017 at 8:57 am
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    If you have a defined benefit pension scheme it may be worth considering transferring out. At least get a free calculation of its value. You get a free calculation each year. I’ve had a calculation form my deferred pension with a large energy supplier and it’s 42 times the presently deferred value which is rather startling. Depending on your circumstances it may be worth taking the money and putting it in your own SIPP. Of course it will depend no your overall financial situation and what financial legacy you want to leave to any dependents – if you have any. As usual this does not constitute financial advice and DYOR (Do your own research).

    Reply
    • July 22, 2017 at 1:49 pm
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      Thanks David, part of our pension is in final salary so I will look into the transfer value. I will do my own research of course, thanks for the heads up, the multiple you’ve been offered seems very high to me. Cheers, Jay

      Reply
  • July 22, 2017 at 10:49 pm
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    “financial independence is much like losing weight. There are no easy wins. You can try buying an ab-trainer, sticking on little electronic pads and listening to the Rocky theme tune, but unless you burn more calories than you eat, you ain’t getting thinner.”

    Quality summary there Jay…love it

    Reply

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