When Could Work Become Optional?
What does your life look like today, and what would you like it to look like in the future?
Perhaps you would like to work less, change career, start a business or spend several months each year travelling. You may want to retire completely, or simply know that you could walk away if work stopped being enjoyable.
This should be the starting point for financial planning. The next question is whether your money can make it possible.
This is the principle behind the FIRE movement, which stands for Financial Independence, Retire Early. It means building enough wealth or passive income to support your chosen lifestyle without relying on a salary.
Despite its name, FIRE does not have to mean retiring in your forties and never working again. The more valuable objective is often financial independence: reaching the point at which work becomes a choice rather than a necessity.
Financial planning should start with you
Too much financial planning begins with a standard set of assumptions about children, education costs, larger family homes and future inheritances. When these commitments do not form part of your life, they should not simply be crossed off a conventional template. Their absence creates different possibilities.
You may have fewer fixed future costs and greater freedom over where you live, travel and work. Property decisions might prioritise entertaining space, location, views or the ability to lock up and leave.
You may also have no automatic desire to preserve a substantial estate for the next generation. You might prefer to enjoy more of your wealth during your lifetime or eventually benefit wider family, friends or causes that matter to you.
These possibilities should shape the plan from the beginning. A financial plan should be designed around your life, not adapted from assumptions that were never relevant to you.
What would financial independence mean to you?
There is no standard version of FIRE because there is no standard version of a good life.
You might want to stop working completely, move into a less demanding role or have the confidence to walk away if work stopped being enjoyable. Financial independence could allow you to establish a business, relocate, travel more or reduce the number of days you work.
If you are planning as a couple, there may be two different ambitions. One partner may be ready to retire while the other still enjoys their career. You may want to retire together, both reduce your hours or take turns pursuing different goals.
Differences in age, income, pensions and existing wealth can create different timelines. A joint plan must recognise two individuals and ensure that each remains financially secure.
These conversations need to happen before investments or retirement dates are discussed. You cannot establish what your future will cost until you have decided what you want it to contain.
Creating income around the life you want
Financial independence does not have to depend on one large investment portfolio. Income could come from investments, property, a business interest, consultancy, royalties or another recurring source.
Property can play more than one role. You might own homes in different locations and move between them throughout the year. When you are not using one, it could potentially provide income through holiday lets, Airbnb or other short term rentals.
This income could meet ownership costs, fund part of your lifestyle and reduce withdrawals from investments. It should not automatically be treated as passive. Short term rentals involve management, maintenance, vacancies, regulation and tax, even when responsibilities are outsourced.
FIRE may happen gradually through remote work, reduced hours, consultancy, property income, investments and pensions. Even a modest recurring income could allow you to change your working life sooner and delay drawing on investments.
Mapping when work could become optional
FIRE is sometimes presented as a single investment target, but real lives are more complicated.
Your future will be shaped by spending, investments, pensions, property, recurring income, taxation and where you live. Expenditure will also change. You may spend more during the first years after work, while healthcare and support could become more important later.
Financial cash flow modelling, sometimes called money mapping, brings these elements together. It provides a visual projection of how your income, expenditure, assets and liabilities could develop throughout your lifetime. More importantly, it allows different versions of the future to be explored.
One of the most common issues is timing rather than total wealth. You may have enough overall, but too much may be held in pensions, property or a business to support the years before those assets become accessible.
The model can illustrate lower investment returns, higher inflation or a market fall near retirement, helping to identify the flexibility and security required.
Money mapping does not predict the future. It shows whether your ambitions appear affordable, highlights potential problems and demonstrates which decisions have the greatest effect.
In my experience, it does not always show that someone needs to save more or work longer. Some clients discover that they are likely to accumulate far more than they will ever spend. They may be able to make work optional sooner, enjoy more of their wealth now or do both.
For some, it may confirm that work remains necessary. For others, it may reveal that they could reduce their hours, change career or retire earlier. The plan can then evolve with their life and priorities.
What is your wealth ultimately for?
The amount you need will also depend on what you want your wealth to achieve. You might want to leave money to relatives, friends, godchildren or charities. You may prefer to help people during your lifetime or spend more while you are healthy enough to enjoy it.
Preserving most of your capital may require you to accumulate more and work longer. If you are comfortable using more of it during your lifetime, financial independence may be possible sooner or support a more generous lifestyle.
A sound plan must still consider longevity, inflation, healthcare, possible care costs and who could make decisions if you became unable to do so.
The purpose is not to spend recklessly. It is to avoid accumulating wealth indefinitely without deciding what that wealth is intended to achieve.
Before You Speak to Your Wealth Adviser: 10 Questions to Discuss First
In my experience, useful financial planning conversations do not begin with investments or products. They begin with the life you want your money to support. Before I create a financial cash flow plan for someone considering FIRE, these are the ten questions I would want them to think about:
- If you stopped working tomorrow, what would you actually want your life to look like?
- When and how would you like work to become optional? Would you stop completely, reduce your hours, work remotely or continue with work you enjoy? If you are planning as a couple, would you both want the change to happen at the same time?
- How much does your normal lifestyle cost each month?
- How much should be allowed each year for holidays, entertaining, replacing cars, property costs and other significant spending?
- What do you already have in cash, investments, pensions, property and business interests, and what debts remain?
- How much are you currently adding to your investments and pensions each year?
- What income could continue after your current employment changes or ends?
- How much of your existing wealth will be accessible when you want work to become optional?
- Which parts of your lifestyle are essential, and what could be adjusted if markets or circumstances changed?
- How much of your wealth do you want to enjoy during your lifetime, and what would you like to happen to anything left behind?
You do not need perfect answers or a restrictive budget. Reviewing twelve months of bank and credit card statements, then listing larger irregular expenses, will provide a realistic picture. Pension and investment valuations, property and business values, debts and existing income complete it.
As an adviser, I can then use that information to create a money map showing what your preferred lifestyle may cost, when work could become optional and whether enough money will be accessible at the right time. I can also test what happens if one person stops first, investment returns are lower than expected or spending changes.
That is far more useful than beginning with a generic retirement age or an arbitrary investment target. The financial plan should start with your life and show what needs to happen to make it affordable.
Disclosure
This article is for general information only and does not constitute personal financial, investment, tax or legal advice. The suitability of any strategy depends on individual circumstances and professional advice should be obtained where appropriate
