Gap years for grown ups

BackpackingWhy should kids have all the fun?

Lots of college students take a year off either before or after going to university.

And plenty of young professionals play their cards so they can take a year off to go travelling in their 20s or 30s.

Some couples with children even manage to take time out from Racing The Rat and have an overseas gap year for the entire family.  Which looks like fun but is, I’m guessing, a big ask to take young kids out of school and travel in far flung places.

I’ve just had what could be described as a gap year for grown ups (assuming I qualify for that label). OK, I have not yet been to a beach party in Thailand but I have been able to kick back, go to festivals, get fit and even do some travelling.

I have (mostly) managed to combine this with my domestic responsibilities. These have included cooking for the family (sometimes they even eat it without complaining!), teaching the children about compound interest, doing the school run and other wonderful and exotic experiences.

I have even learned how to do something called “cleaning”.  It turns out that you don’t have to be from Eastern Europe to do “cleaning”…anyone can learn it!   I try not to go overboard though….no point in wasting your entire life with it and cleaning out your own wallet.

The last couple of weeks have felt different in that I have been doing more financial coaching for people that have got in touch with me via this blog or been introduced to me by other clients.  Its almost felt at times like a serious job: I have been on trains and in London and I even left the house as early as 8am on one occasion! I know!

I’m still not a fan of that commuter train, but its been rewarding to do work that I truly enjoy and believe in…without any of the nonsense that comes with working in large organisations.

The great benefit of a gap year is that you get time to think.  And over the last year, I have come to realise that there are 2 big issues for most people with the full on extreme early retirement model:

1) It’s not easy for everyone to save up enough to never have to work again

2) After you have enough for financial independence, you still need something to do.

I appreciate that you may think this is obvious and may now be filing this post under “N” for No Shit, Sherlock.

But, to be fair, whilst I always knew these things intellectually that is not the same thing as knowing them emotionally as well. Often you only really know something when you have actually lived through it yourself.

I meet plenty of people that say they know that paying active fund management fees and a financial adviser makes no sense….but who then continue to do exactly that. They say things like:

Yeah Mr TEA, I agree that the financial services industry over-charges people…why should we pay for bankers bonuses and fund manager’s visits to strip clubs?

So far, so good.  But they then ruin it by saying something like:

OK, admittedly I still have my pension in Dogshit Asset Management’s Pavement Opportunities Fund….not quite sure what the % annual management charge is….hope its doing OK…I just haven’t quite got around to checking, what with things being busy at work etc etc.

These people may know intellectually that paying active management fees is usually a mug’s game, but if they haven’t got angry and moved their money, they haven’t really understood that they are being mugged.

For me, the test of whether I really understand something is whether I action it and live by it in my own life. As another example, its easy to say that to invest well we need to buy low and sell high.  But unless you actually then buy when prices are low and everyone is panicking during bear markets and sell when prices are high and everything looks rosy, then you haven’t really understood value investing.

So, getting back to my point about the 2 big challenges with full-on early retirement.

The first point is that the time it takes to get to early retirement is mainly a function of your savings rate.  If you can save 75% of your post tax income then it only takes 8 years to get to financial independence, starting from a zero net worth.  When I tell people this in coaching, they often look at me as if I’ve just said that I can use The Force or bend spoons with my mind.  But if you don’t believe me, check out the maths yourself using the FI-o-MeterTM.

The issue is that saving 75% of your post tax income is tough for most middle class people (and perhaps impossible for some lower paid workers?).

The Escape Artist does not claim to be average.  I had jobs in finance that paid more than the average salary.  My investment returns have been better than average.  And I’m a pretty frugal eco-mentalist so I managed to contain and reverse my lifestyle inflation.  I was also prepared to argue have a rational discussion with my wife that we should be saving 50+% (a lot of men are nervous of even discussing an Escape Plan with their significant other). All of which puts me in a minority.

But the mindset required for financial independence is even more important for average or below average earners.  When you are on the margins, the aggregation of marginal gains is vital.

So the stuff on this blog about frugality and not getting ripped off by the financial services industry is great for the high-earning middle classes but, I would argue, essential for ordinary people.

And everyone can and should create an escape fund which is enough to bridge them to a new career or starting a new business.  At the very minimum, every able bodied person should be able to fund a gap year in their 30s or 40s or 50s where they take time out – like a sabbatical – to think about what they want to do in the next phase of their life.

This brings me onto the second “problem” with financial independence. Which is that everyone needs something to do so afterwards.  It turns out that this is not really a problem at all. Its actually the simple answer to the first problem. If you can find something you truly enjoy and that pays you an income, then maybe you never need get to full financial independence.

Full financial independence is equivalent to a belt, braces and fully bespoke tailoring alteration for keeping your trousers up.  Its actually unnecessary for most people just to escape a job or a lifestyle that they don’t like.  Many would achieve some of the benefits of FI simply by working flexibly as an interim.

Take an example of someone currently earning £70,000 (about 2.5x the average salary in the UK).  For them to quit and spend £18,000 (which should be enough for a single person to live off mortgage free) a year inflation adjusted indefinitely, how much do they need to stash?

According to the 4% rule of thumb for a safe withdrawal rate, they need a mortgage free flat plus a pot of £450,000 (25x £18,000). But if we can change this to an assumption that they earn £10,000 a year net from a micro-business, interim roles or part time work after quitting their full time job, then now the amount required falls to £200,000.

Once we reach the UK state pension age and become entitled to up to £8,000 per year, the pot required falls further.  If that person can now earn at least say £5,000 in income plus up to £8,000 state pension, they only need a retirement investment pot of just £125,000.

I think everyone should be able to earn more than £5,000 a year part time whether its babysitting, cutting quiche, stacking shelves or driving a van (to give some examples of part time jobs that The Escape Artist has held down and enjoyed back in the day).

Now you may say that you are Executive VP of Silly Titles at Megacorp and that working part time at Tesco is not befitting of your position in society.  To which I say: OK dude, I get it…but now we are not talking about money, we are talking about status which is something different.

For anyone ground down by stress, targets, travel, office politics, compulsory social events and consequent hangovers, I can totally see the appeal of the idea of amassing a pot of money sufficient to never work again.

But having lived through that process and then having had a grown up gap year, your attitude to work is very different when you are well-rested, in good shape, have plenty of sleep etc etc.  It turns out that in those circumstances, having some work and some earned income after escaping is not only possible, it can be good for you and for your happiness.

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17 comments

  1. Don’t forget that to get the £8k a year State pension you’d need to pay NI for at least 35 years, which is more than the desired working lifetime of most FIers.

  2. This Cavafy poem describes what can happen if we defer living :

    At the noisy end of the café, head bent
    over the table, an old man sits alone,
    a newspaper in front of him.

    And in the miserable banality of old age
    he thinks how little he enjoyed the years
    when he had strength, eloquence, and looks.

    He knows he’s aged a lot: he sees it, feels it.
    Yet it seems he was young just yesterday.
    So brief an interval, so very brief.

    And he thinks of Prudence, how it fooled him,
    how he always believed—what madness—
    that cheat who said: “Tomorrow. You have plenty of time.”

    He remembers impulses bridled, the joy
    he sacrificed. Every chance he lost
    now mocks his senseless caution.

    But so much thinking, so much remembering
    makes the old man dizzy. He falls asleep,
    his head resting on the café table.

    Or, in one line from They Might Be Giants: ‘Now it’s over, I’m dead, and I haven’t done anything that I want. Or, I’m still alive and there’s nothing I want to’.

    It’s an avoidable fate, the more insidiously horrific for taking place while you are doing the thing you thought would save you.

    I’m converted: from 24.3.16 I’m on my gap year/trial run. I came late to FI, being 50, but now I have the idea and there’s no point hanging about. Don’t leave it so long yourselves.

    1. Thanks!…apparently the feedback from hospices is that people on their deathbed usually regret the things that they didn’t do (due to their timidity / fear / convention / whatever)…much more than the things they did.

      All the best with your gap year!

  3. You’re spot on with your observations. The emotional downside of Early Retirement hardly gets a look in. People just don’t want to hear it. If you moan that you’re lacking in fulfilment, people snap, “Well why and not go an drive a taxi, if you’re bored?” Or stack shelves in Tesco. But that’s not what we’re saying. Of course earning some side cash is easy. But what if you’re bored to weeping point three days into your new taxi driving career, especially when you don’t need the money for doing it?! Why bother with the hassle of trading on ebay, for a wee bit of cash that you don’t actually need? Early retirement is all about Mr Moustache positivity which, to be honest, I take with a big pinch of salt. He is working, and not just working, working at stuff he seems to really enjoy and finds fulfilment in – housebuilding. Jacob Fisker took a job where he could use his educational background, and therefore enjoys doing. Interestingly neither do this for free, although they could. It seems ironic that (for many of us) the key to enjoying early retirement seems to be to find some paid work that you really enjoy, have an element of control over, and find satisfaction in doing. So is that really “Early Retirement” at all?

    1. SHMD…thanks for the comment.

      Personally I prefer the phrase financial independence to early retirement. I think of myself as financially independent but not retired.

      This is partly because ER conjurs up images of golf and colostomy bags…neither of which I am that keen on 😉 But mainly because you can be financially independent and still work (even full time) if you are so inclined.

      I don’t criticise MMM because his blog is a fantastic gift to the world…but I think that he perhaps uses the phrase “Early Retirement” for its shock value (in the context of him “retiring” at 31) and to tease the consumer suckas…

  4. As a couple planning for early retirement and sitting here reading this post together over our morning coffees (we’re in the US), we (yes, both Will and Julie) are curious about the comment suggesting that “a lot of men are nervous of even discussing an Escape Plan with their significant other.”

    We’re not surprised per se since we have come across this sentiment in many FI blogs–in fact, too many to enumerate here. Instead, we’re wondering why it might be that women generally appear less interested in early retirement than their partners. Sure, there are some female PF bloggers and commenters, but the field is overwhelmingly populated with men (mostly from finance or engineering).

    While we could understand that wives who do not work might be concerned about the only source of income disappearing, it appears that many notable cases of men being more retirement-minded occur in couples with two earners (Mr. Money Mustache, Mad Fientist, Living a FI, etc.) where the woman is willing (and even eager) to continue working beyond the FIRE date of her partner.

    Any thoughts on this? We know we’re lucky to share this goal of FIRE as a couple, but we’re also interested in exploring this interesting issue (and have actually been meaning to write on this).

    Thanks much, as always, for your thoughtful post!

    1. Thanks for the comment Julie and Will

      Everyone is different but I know from my financial coaching that many couples have very different money blueprints. Money is the biggest source of arguments between long term couples.

      There are a lot of guys who allow themselves to get run down in the Prison Camp…they’ve let their health and their relationships slide….with their wife and also with their male friends. They are wary of talking with their wife about topics that seem scary.

      Women tend to be more balanced with better emotional intelligence and support networks than men. Guys tend to be more single-minded. This can be good or bad…but there is no doubt that you need to be somewhat single-minded to get to FI early.

      I sense that you guys are better aligned on this stuff than most!

  5. “But if we can change this to an assumption that they earn £10,000 a year net from a micro-business, interim roles or part time work after quitting their full time job, then now the amount required falls to £200,000.” Quite, and if you have young kids (as I do), with all the tax credits and benefits you can claim it’s very easy to earn this amount by doing a couple of days a week. After the amount of tax I’ve paid over the years, perhaps this is not quite so immoral as it sounds (?), I don’t know, but I’m seriously considering this as I’m close but not quite at full FI.

  6. “Those who know, but do not act, do not know.” Thanks for mentioning this. It’s taken over a year for my SO to get his funds out of 2.25% TER funds (five months of that his HSBC ‘wealth manager’ was deliberately putting up road blocks to prevent this) and to go to low-cost ETFs. He still has money in a French fund I call Cardigan Parmesan at 1.78%, but it returns well (those HSBC funds were actually losing money year after year and still he hesitated to change). Of course, the only way we’ve both gotten courage to invest in the stock market is because of the high returns… really hope we can hold the course when it inevitably tanks, because obviously we’ve bought high.
    Thanks for the Cavafy poem Noedig… Thanks for your blog TEA, really enjoy it. Part of our reaching FI required leaving London for the Bavarian countryside. I miss England ALL THE TIME. It’s great to be FI and to have peace of mind; it’s not great to miss living where you feel most at home, so I question this decision constantly. Even if we accumulate enough to get back — we will have missed living there in the here and now, when we are young, have a young family, and can enjoy it. Yes, I enjoy my family in the here and now. But I always wonder… what if?

  7. Survivor · · Reply

    Another excellent article, I fully agree with it in its entirety. I think the fact that a lot of people also don’t believe that FI is easier than they imagined, is not only because of the daily barrage of sales-related brainwashing, but because it would then require some patience.

    The powerful advertising industry has made a full frontal assault on delayed gratification for at least a couple of generations now, so whereas it was perceived as common-sense by our grandparents’ generation, I suspect the current one would see it more as needless masochism.

    A lot of the criticism of FI on the blogs against those who advocate it, is that it’s Ok for their sort because they have high-paying, middle-class jobs that ensure they have employment for as long as they want. But as you say, no matter what your situation, any improvement that increases your independence is absolutely worthwhile – when I was young, I worked the usual suspects of soul-sucking sh*t jobs. [waiter, shelf-stacker, janitor]

    I did it because I had to – believe me there was no pleasure in it [I’m not with the ”There’s dignity in any kind of work” brigade – for those who think that, then you can do it pal. Knock yourself out] & from that experience I know that for those struggling financially, relatively small differences in FaQ money can have disproportionally liberating effects.

    So my point is that as you say, it is at least as necessary for low earners to be frugal if there’s still any choice in the matter …..to try & get some traction on their finances & improvement in their overall situation, even if it seems pointlessly incremental at the time.

    As for whether you retire early or not if you have the luxury of that choice, I think that is going to be very related to character – I’m guessing that some some people just don’t have the creativity &/or imagination to keep themselves occupied. Others miss something totally different from the working environment, I know a guy who was very senior at KnobCorp & powerful, so battled to cope without an army of sycophants surrounding him every day with their worship of his genius & VIP status – it actually depressed him when he was cut off from that supply.

    On aligning your goals & principles with a spouse, it could be as simple as the fact that any relatively extreme position alienates most people, so on percentages alone, they’re unlikely to feel the same as you – particularly when it’s against what the herd is doing.

  8. Another great article, again on the same lines ive been thinking on recently myself.
    It is about financial freedom, feeling safe and secure, as opposed to not working anymore.
    I really do enjoy my buisness that ive built up as ive been self employed 30 years now.
    I may need some surgery at some point which would require 3 months recovery and i think if i can get 4 and half more years out of my work and my high savings rate then i may be ok to finish by 55. 3 months out of my buisness recovering from an op worries me as i may loose some clients but it proberbly wont matter as i may be financially free by then so any work from then on will be a bonus and my choosing and all that saving will be over.
    So as i dont intend to quit working completely but i have been wondering is there anything id like to do beyond 55?

  9. As someone who became FI over 12 years ago, but initially didn’t realise it, I offer the following thoughts.

    You need a lot less than you think to live a very good lifestyle. When you add up commuting costs, lunches, post work drinks and all those other little, and not so little, expenses that you incur as part of your daily ‘job’ routine, you will probably find they are quite a chunk of your income. Providing you have got rid of the big expenses (mortgage, car loans! or whatever) you need relatively little to lead a very ‘rich’ life.

    On your second point of knowing what to do, if you don’t know what you want to do in your own time, then all the more reason to seek financial independence. It means that you are content that other people decide how you are going to live your life. Basil Fawlty puts it best: https://www.youtube.com/watch?v=Lle9QD93kA0

    Having time which you didn’t have before enables you to do lots of wonderful things that you just can’t do even with the best paying job in the world. For example my wife and I ran a ski chalet for a season. Pay was abysmal, but we had a fantastic time and in the 5 months we were away we spent exactly the same amount on our fuel, food and heating – a big fat zero. We are still in touch with some of the people we met even though they were young enough to be our children. At the end of the season neither of us wanted to leave.

    I won’t go into details of our current lifestyle as I’ll just look like an arrogant twat, but I will say this. As we both had good jobs we have probably ‘lost’ over £2 million in earnings since we gave up our jobs. Given our time again would we regret our decision – not a chance.

    1. Simon makes a good point about how spending expenses would go down after retirement: “When you add up commuting costs, lunches, post work drinks and all those other little, and not so little, expenses that you incur as part of your daily ‘job’ routine, you will probably find they are quite a chunk of your income.”

      In our case though, our conversion to a “Mustachian” lifestyle (for those who know Mr. Money Mustache’s blog) might have foiled us on that score. Because we’ve gotten our commuting costs to almost non-existent, packed our dinner leftovers as work lunches (or work from home), skipped any post work festivities, haven’t purchased “professional” clothing for work in years (and never dry-clean), etc. we’re not sure we’ll be seeing ANY drop in our expenses once we retire!

      Instead, we will be doing more traveling, working on our home improvement more, etc. So, if anything, people like us might see increases in annual expenses. Yikes! Well, just as long as we are aware of all this and have realistic expectations…

  10. Nice one TEA,

    I am with Dawn on the “financial freedom, feeling safe and secure, as opposed to not working anymore” aspect, this is my approach to FIRE. As someone who has had a 6 month gap so far. I can agree that the financial freedom is the main goal of my plans. I want to work periodically and have the option to stop when I want.

    After experiencing redundancy and taking the wrong job, I wanted to be able to quit if I felt like it. If I lost my job I wanted to know that I could survive, I could live and not have to worry about work if health becomes an issue in the future. I don’t see myself as an early retiree, I see myself as a selective worker, i can take a career break whenever I want. If I start a side-hustle, so be it.

    My FI fund figures mean I could live as a single person until NRA. Now, that makes me feel secure. The funniest thing is, when going to interviews – people look at me strangely when I say I have had a career break – they wonder how I can not work for 6 months and not be worried!

    Oh – they also expect me to have traveled the world during this time!. NO, I’ve worked on my rental house and my own property, holidayed in the UK and basically chilled out with exercise, hobbies and fresh air! OK – that sounds like retirement but it is getting my TIME back to do what I want rather than being controlled by a job. Its just a shame prospective bosses don’t like it, they can’t control me!

  11. CallMeRachel · · Reply

    Hi there, I just arrived back to the Big Smoke from my gap year in the sun and wanted to add some thoughts, especially on the question what to do when you are retired/FI. I think this is really down to your own mindset.

    I am working in the so-called soul sucking hospitality industry, and YES, it is soul sucking, no doubt about that. I was really fed up with it, so I decided to leave it altogether and used available resources to live in a sunny country for a year (that set back my financial stash obviously, but hey, I had a year of holiday). To be honest with you, I never had a minute of boredom, but it did take me some time to switch off my brain from all the thoughts going round in my head (what to do with my life, finding alternative ways to make money, shall I start an online business, would that be more or less dreadful work than working in a restaurant, oh my!) but finally I was able to let it go and to relax my mind not only from the rat race but also from my own search for the way out of it. Then I could go on and occupy myself with gardening 😉

    Now that I am back in London and looking for a new full-time slave master, I took on some work at a catering agency to keep me occupied for the next weeks. Although I already had enough of hospitality and was close to a small breakdown, I now enjoy to do some minor duties in different hotels. The work to be done is boring and the pay is low, but at the moment I really enjoy it. I had quite a lot of responsibility for people and had to keep a restaurant running in my previous job, so it now is a relief to be polishing cutlery for hours and not to worry about all the other things going on. I like to observe the kitchen staff being busy, chatting with my fellow workers (that come from all corners of the world and have so many stories to tell), or just getting lost in thought. I would not want to do that full-time for the rest of my life because I would be banging my head against the wall soon, but hey – if I’d sit at home and watch TV all day while waiting for a call back from my future employer, I would not earn any money and be bored as well.

    What I want to say with this: You can find interesting environments and people everywhere, and as long as you are not forced to work your 40-50 hours per week in order to survive, it can be a lot of fun to do jobs that would otherwise be soul sucking and mind numbing. Don’t be afraid to take on work that seems to be “below you”, because these jobs can get you new life experience and will also have a lower stress level than what you were used to. Work is worst if you take it too seriously – as soon as you stop to cling to it, you are the one in power and everything is easy.

    1. Great comment. Sounds like you were brave Rachel…and reaped the reward.

      You might enjoy the post Getting paid to ski which touches on some of the same issues

      All the best in the Big Smoke 🙂

  12. […] Gap Years For Grown Ups: The Escape Artist shares snippets about a year off the job. […]

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