Translating financial independence from American to British


There are so many great US books and blogs about financial independence that you may want a guide to help you translate American into British.

I’ve done 2 versions: the short version and the long version.

Here’s the short version:

1. Ignore the healthcare stuff
2. Ignore the travel hacks
4. IRA => SIPP
5. 401k => workplace pension

Job done!

What do you mean you want more than that?!? OK, next we have the longer version which includes some of the cultural differences that set the frame for FI seekers in the UK vs the USA:

The maths of financial independence

The same principles work everywhere: earn more, spend less, invest the difference wisely and know how much is enough.

And the basic maths of financial independence is the same…even when maths is spelt with an S. As a quick re-cap it takes about 17 or 18 years to go from broke to financially independent at a 50% savings rate. And if you manage an amazing 75% savings rate (I didn’t) it only takes 7 or 8 years.

This is based on a 4% withdrawal rate. In other words, you have enough not to work again when you have invested net worth >25x your annual spending. This means that every £1 you cut from your annual spending brings the “finish line” closer by £25.

The Safe Withdrawal Rate

The safe withdrawal rate in the UK is the same as in the USA.

Some people that say that UK shares support a lower withdrawal rate but this misses the basic point that you can invest in US shares from the UK or (better) a global low cost equities tracker fund. That’s safer than just investing in UK shares.

[Note: Here we’re talking about market risk…sadly, there is more political and taxation risk in the UK currently.]

Fund choice

A lot of US bloggers recommend VTSAX: the Vanguard Total Stockmarket Index Fund or VTI (the Vanguard Total Stockmarket ETF). Both include only American-listed stocks.

I’ve always thought this a bit strange. Even if you agree that America is the world’s powerhouse economy (I do) it’s riskier to put all your eggs in one (admittedly large) basket. The example of Japan from the 1980s provides a warning of how one country’s stockmarket can form a bubble that takes years to deflate.

If you are in the UK why not go for a true global fund such as VRXXB (the Vanguard Global All Cap index Fund)? An ETF alternative would be VWRL (the Vanguard All-World Equities ETF).


Let’s split UK pensions into 3 types:

  1. The state pension
  2. Workplace pensions
  3. Personal pensions (including Self Invested Personal Pensions)

The state pension is what the Government will hopefully pay you. Many FIers are not relying on that (although it is worth considering making additional National Insurance contributions to get a full state pension).

In the UK, you can’t access a personal pension until you are 55 (57 from 2028). So, to be financially independent in the UK, there are 2 tests:

  1. Do you have invested net worth of, say, >25x your annual required spending?
  2. Do you have enough outside of your pension(s) to “bridge the gap” until you can access your pension?

Individual Savings Allowances (ISAs) allow you to invest in shares or bonds or cash and access your money at any time so they offer tax shielding with no “lock-up” restrictions

Saving for children

How do you save for children in the UK? Should you use a Junior ISA or a Junior SIPP?

Wrong question. Yes, tax shielding makes sense but a better question is: how do you teach children to save for themselves?

That means showing your children what saving and money management looks like through your own example. And them getting a paper-round / Saturday job when they are young. This might just be the most valuable education there is.


Housing is different in the UK. There simply isn’t the space there is in the USA…and that means residential land and housing are WAY more expensive.

This means you might have to go extreme get creative. Here are 4 powerful property strategies to either crushing your rent or building wealth via property:

  1. Get lodgers
  2. Use maximum leverage, buy “doer uppers” and flip your way up the property ladder (risky but its what I did)
  3. Become a property guardian
  4. Geographic arbitrage

Geographic arbitrage is a made-up phrase for an old concept. Moving is not cheating. You shouldn’t be afraid to move somewhere good for earning in the accumulation phase of life (perhaps somewhere like London) and then move somewhere lower cost / sunnier (e.g. Portugal) later.


Cars are money incineration units. The bigger the car, the more money it burns…so buy smart. The more cars you have, the higher your burn rate…and gas petrol is lot more expensive here.

So can you design your life around no car / one car in your household? This is made easier (or harder) by where you live (e.g. in the town or country) and by how your town is laid out.

Much of the USA is dominated by the car: roads that don’t cater for pedestrians and sprawling suburbs designed around cars.There are obviously many exceptions (its a big place) but large parts of the USA feel like hostile territory for walking and cycling.

One of the great glories of Europe are its towns and cities. I recently was in Edinburgh, a wonderfully “liveable” city. You could easily walk anywhere. It had trams, buses, bikes and a fast rail link to London. The architecture was classic, sometimes grand yet always human scale. I visited a beautiful apartment block where people kept bikes in the hallways.

I can’t emphasise enough that walking and cycling are not just cost-saving measures. They are quality of life UPGRADES.



The food rules are the same in the US and the UK. Good food is natural food: the things that our ancestors ate…not processed food made in factories.

American readers have told me that fresh veg is cheaper in the UK. Any vegetable served with butter or olive oil is ridiculously cheap, energy dense and healthy. Remember: processed foods and sugar are the enemies (not natural fats).

Fruit, eggs, fish and chicken are all very reasonably priced. And they’re basically giving rice away.

With a bit of planning, you can eat incredibly low cost if you put your mind to it. Here’s Ken & Mary from The Humble Penny on how their family of four live in London on £50 a week food budget.

Schools and college

One roadblock to financial independence in the UK is the desire to give kids a private education. Its natural to want the best for your child. But, for some high performing people, wanting the best for their child can turn into Dr Evil’s Mini-Me Syndrome. Better to give your child an elite private education for free.

My daughter has just gone away to university (college). So I’m very aware that the UK has moved towards student debt. Its fair enough to ask people to bear some of the cost of their education but the problem is that this normalises getting into debt.

And its just not true that having a degree will guarantee getting you a good job. The answer: avoid courses that don’t improve your value to employers, encourage students to live frugally and get a part-time job whilst at college.


Good news if you are in the UK!

To many outsiders, the US healthcare system seems bonkers inefficient and costly. The UK and USA get comparable health outcomes (e.g. life expectancy) and yet the UK spends about 9% of GDP on healthcare compared to the USA which spends about 18% of GDP.

But many corporate employees in the UK have private health insurance and you may be afraid to lose that if you quit The Prison Camp. But for urgent and life-threatening conditions, the NHS is excellent. And for less urgent stuff, FIers always have the option to buy in private healthcare when needed.

Hospitals deal with sick-care not healthcare. To optimise health, start by looking at your own diet and exercise choices and eliminating unnecessary stress from your life. Anyone can get ill…but the right lifestyle choices tilt the playing field in your favour over the long term. Focus on what you can control.


The pressure of consumer culture is greater in the USA. In a lot of places there isn’t a lot going on other than work, shopping and TV adverts. As Bruce Springsteen put it: 57 Channels and Nothing On.

That has a 2 fold effect. On one hand, it makes for a more compelling push factor for pursuing financial independence so I guess you could say that’s helpful to pursuing FI. But on the other hand, it must sometimes make it harder to stick to The Path. We are social creatures and they say that you are the average of the 5 people that you spend most time around.

We can do it

The USA’s history over the last couple of hundred years is based on immigration and the search for freedom and prosperity. The American Dream is consistent with financial independence (even if it got hijacked by consumerism along the way). When in the USA, I’m struck by the can-do attitude, self-reliance and the idea of pulling yourself up by your bootstraps.

The UK has a different history and that included a class system that has thankfully now mostly been taken apart. But it left some unhelpful hangovers and these often form part of your money blueprint.

The Shopfloor mentality reflects a working class mindset where people traditionally struggled to put money aside and lived paycheque to paycheque. But its more than that: people may not aim high enough. They may fall into the trap of “knowing their place”. If you don’t know what I mean, go watch the classic film Educating Rita.

If you grew up middle class, you have been fed security your entire life. This will keep you from ending up in the gutter, but you’ll always be risk averse. Ed Latimore

Middle class people often play it safe. This can mean buying too much insurance. Or buying expensive “safe” cars (eg Volvos & Audis). Or being too nervous to invest in shares. It can hold you back from letting go of a monthly salary and going freelance, interim or part-time. Remember: safety is an expensive illusion.


The aristocracy have historically given financial independence a bad rap in the UK. There is something inherently unfair about hereditary titles. The aristocracy were living off the spoils of wars fought by their ancestors (who no doubt did oppress the poor).

The class system left many Brits with an inbuilt suspicion of wealth. Our minds are still influenced by outdated images of factory workers and miners oppressed by evil toffs who look like Jacob Rees-Mogg the old white guy on the Monopoly Board. Remember: cartoons are for kids.

Understand that ethical wealth creation is possible. If you secretly despise wealth, it will elude you. Naval Ravikant

A better mental model for today’s FIers would be entrepreneurs such as James Dyson or Bill Gates who have created value in the world via their work and then use that wealth to achieve freedom and make the world a better place.

Don’t underestimate the social and cultural factors that influence your money blueprint. As that old saying goes: whether you think you can or you can’t…you’re right either way. You will tend to live up (or down) to your belief.

For more on the differences between pursuing FI in the UK and USA:



Financial Coaching




  1. Good post. – I would add

    6) Consider possible impact of wealth taxes.

    USA is a long long way from introducing wealth taxes. Their inheritance tax kick off is something like $11m versus our £325K and other wealth taxes are not on their horizon at all.

    In the UK we have already have the lifetime allowance on pensions reduced to just £1m by a Conservative Government. This is possibly the most counter productive tax ever invented as it is encouraging health (in particular) and other professionals to refuse extra work and/or to retire earlier than they necessarily want to thereby creating further strain on our creaking public services.

    Adding to that the other main parties policies on attacking wealth – wealth taxes from the Lib Dems and general redistribution aims of Labour – means the risk is of your money being confiscated for the “greater good” is very real.

    Wealth taxes are considered very unlikely in the USA and this is reflected in not being covered in USA blogs in any detail. Given the much higher risk of wealth taxes in the UK it would be really useful to have some conversations on the impact of this for UK FIRE.

    1. I would also be interested in some thoughts (from TEA or anyone else) on taxation and political risk, although I suspect it would boil down to:

      a) Focus on what you can control; you can’t control politicians in any significant way (sure, use your vote, but it’s not a lot of control)

      b) The only real control you have, as far as I can see, is to emigrate, which is a bit of a nuclear option and takes ages. I have a fuzzy idea of what’s involved in this from a gaining citizenship perspective, but no idea on how taxation works for dual citizens of UK+another country. It would be interesting to read about this if anyone has any links aimed at “ordinary” people, not high-net-worth types.

      I did a quick web search and couldn’t find any recent (from 2019) concrete proposals for a UK wealth tax; do you have any? I see the Lib Dems did have some proposals in 2018 but I don’t know if they’re still current and I didn’t bother reading up on them.

      I would hope (delude myself?) that someone who’s FI on a low-income-low-expenses basis would be relatively unaffected by such taxes (not to say they’re right – or wrong, I have an instinctive aversion to them but not an informed opinion). I could imagine wealth taxes kicking in at around the million pound net worth level, and you could be very comfortably FI on a low-income-low-expenses basis with far less than a million pounds – my target is well under that, at least. But of course the threshold could be much lower – e.g. a quarter of a million still sounds like a lot and could be a threshold with popular approval, but all but the most frugal FIer is going to exceed a quarter of a million net worth by the time they retire.

      1. Hi Steve

        Everyone should use their vote wisely….especially FIers…and especially in times like these.

        I don’t think its the Liberal Democrats you should be most worried about.

        1. Some countries have agreements that you wont be taxed twice on certain accounts. The UK, Australia and USA have this on pensions to a degree. So if you are taxed on your pension in the UK you won’t be taxed on it in oz. They don’t recognize ISA’s though so you would be taxed on your earnings from your ISA in the US and oz for example.

      2. Unfortunately you may be deluding yourself! A couple of examples…

        1) Lifetime Allowance. Brought in about ten years ago at £1.8m for very high earners. Intention was for it to increase by inflation annually. It is now just over £1m whilst it should be circa £3m.

        2) Insurance tax. Introduced at 2.5% in 1994. Now 12%

        3) Stamp Duty. Brought in for big properties back in the day at a low rate. Look at it now!

        Also – did you include the value of your house in your net worth calculation?

        I may just be a pessimist on this issue but I think it is when not if for wealth taxes although they may not actually be badged as such. We already have LTA, sliding probate fees and sliding stamp duty which are all effectively wealth taxes and all these made worse by a Government that believes in low taxation. I think it is fairly easy to predict the direction of travel if other colours of Government are elected.

        The problem in the UK we are not honest with ourselves on taxation. The Government (again of all colours) wants more. You can argue the merits of that but if, for example, you want “free” health care etc, someone has to pay for it. Putting up the basic or higher rates of tax is hugely unpopular so these new taxes are introduced – supposedly for the super rich – and then stealthily increased so more and more people are caught in their net.

        The problem with these taxes is they distort markets. The worst example is LTA which is so badly designed that it causes well paid health consultants to refuse extra work as their marginal tax rate is over 100%. So nobody wins. The queue for your operation goes up, the consultant does not earn extra money and the Government tax take goes down. It is one of the reasons many in the private and especially public sector are retiring or reducing hours at 55.

    2. Fretful Finance · · Reply

      On the post-death wealth tax front, I’ve never been that fussed about inheritance tax. I’ll be dead so I don’t care too much if 40% of my money over £325k (or even significantly more) goes to funding public services. In fact, I’d be quite happy about it. Better that than taxing me on my income during lifetime.

      Granted I don’t have and don’t want children, which may account for my cavalier attitude, but even if I did have them, quite frankly they can earn their own damn money.

      However, I do worry about retirement plans being thrown by a lifetime wealth tax of some description. I can’t see it really affecting me – I see myself always being in a modest home and never having the significant levels of liquid assets that would be probably captured. But you never know.

  2. Agree with your point that UK savers can invest in US shares – but think you omit the key risk which is currency fluctuations. 4% USD SWR will not necessarily be the same as 4% in GBP in future!

    1. Currency risk is like the weather – its everywhere, its gonna vary and there’s not much you can do about it.

      I could write a long academic treatise about why I don’t view currency risk as lowering the SWR but there is already too much enough pontification about the SWR out there.

      When I see people debating the SWR online, I want to ask them…have you done everything else? Did you already read Your Money or Your Life? Did you already track the last 6m spending? Did you already trade in the SUV for a Nissan Leaf? Do you ride your bike to work? Did you rent out that spare room? Did you cancel your cable TV? Did you get promoted at work already this year?? etc etc

  3. You suggest ignoring travel hacks. I haven’t looked too deeply into the U.K practicality of copying the model talked about on Choose F.I.

    Is this due to so many low cost airlines in Europe?

    AMEX offer a pricey British Airways card that I found on Martin Lewis’s MSE website. Applying through Quidco would give £45 cashback. Still seems steep.

    Could you point me in the direction of some U.K resources of the pros and cons?

    Thank you.

    1. I typically make good use of the Amex 2-4-1 voucher. Have just flown with my daughter on an overseas return flight for a couple hundred quid and a bunch of miles. I travel on business a lot and generate quite a few Avios but you can do the same through some strategic credit card churning. I did an article on it a while ago but you could also check for some travel hacking advice

      1. The travel hacks in the UK are pretty non-existent. It’s ridiculous how many credit cards give you sign up bonuses in the US.

    2. A really detailed article by SavingNinja also see – took him 2 years – and he’s documented it all

  4. Another great post TEA. I was so inspired I have expanded the post for the Australian context.

    1. Well done for spreading the word! 👍🇦🇺

  5. Nice post, thanks Barney.

  6. Great post, thank you TEA. I do think its better to invest in a US index vs. a global one and think the Japan example is misplaced. The Japanese stock market was much more exposed to idiosyncratic domestic factors (such as the local property bubble) than the US companies. In addition, emerging market companies that comprise a substantial part of any global index typically suffer from worse governance (which leads to material value leakage for shareholders) and local government crises (Brazil, anyone?)

    The US companies, on the other hand, typically have good governance and offer global exposure through their end markets

  7. Hey Man,

    Just got round to reading. Great post! Thanks for sharing the YouTube video too :). Much appreciated.

    By the way, I’m a subscriber to the mental model that you referred to re Gates and Dyson.

  8. Very useful. Thanks.

  9. […] TEA has a go at translating US FIRE to the UK (30) […]

  10. Great article, as a Englishman living in Texas I would comment:

    Be grateful fort he very generous tax incentives in the UK. In the US it’s $5k IRA (ISA) and $18k 401k (pension) compared to the UK’s £20k ISA and £40k pension.

    You can buy a mansion in Texas for £200k but you’ll pay around 3% of property tax every year (about 6k). Is it better to buy a cheap house and pay a lot in property tax every year or buy an expensive house but have lower property (council) tax?!

    You will get great healthcare but a lot of it is waste (you have a bruise on your leg, lets do an x-ray and MRI;)) and even though you (or your company) are paying a fortune you still have to wait a month or two to get a general appointment with your GP.

    You wouldn’t believe how much you can miss simple pleasures like being able to walk and cycle to places that are close by.

    The wages are higher although you’ll likely work 30-60 minutes each per day but it’s true that it’s a much less classless society.

    Flights are a lot cheaper in Europe.

  11. AJP, having lived in the States for a couple of years I think you are spot on. Not everything is as good as it seems from across the pond. I would also add £33k of free money you could get should you take full advantage of the LISA

  12. Hi – thanks for teh article!

    Just to give an UK to NZ immigrant perspective (and not withstanding yesterdays disastrous Rugby World Cup result!) the general impression is that consumables, including food, as a tad more expensive over here, albeit tax on petrol is a little less – although with the political push to bolster NZs clean and green image this could change.

    Interestingly most plastic has an annual charge associated with it and I find that financial products over priced in general compared to the UK.

    As far as taxation goes there is s purchase tax of 15% on everything – including food and kids clothing. The top rate of income tax is 33% and kicks in at $70K – which is lower than the UK with comparable median income. There are few tax breaks on investments or pensions (no ISA’s or SIPP) – only a marginally lower rate for some Portfolio Investment Entity funds – and a weird capital tax regime on non-australian/NZ shares that I doubt anyone really understands.

    One thing I miss from the UK is the ISA and the inexpensive investment platforms available to individual investors as charges on funds through the limited range of index and ETF funds offered by platforms are high.

    Most kiwis (who can afford it) save for retirement by buying BTL properties given a number of Ponzi schemes in share funds decades ago that have seared themselves on the collective consciousness of the nation. There are few controls and rights for tenants and poor quality rental properties are common. Renting property also has tax breaks – which admittedly have been tightened up a little recently, but they are still there.

    It may come as no surprise that housing is expensive in any of the major towns and cities. On the plus side, and outside major centres, land can be had for smallholdings relatively cheaply and are called lifestyle blocks but its a lifestyle choice to take this up (they are also called life sentences).

    Herding alpaca is on my resume but it never paid much………

    Alternatives to BTL are Kiwisaver funds, and individuals select one in which to invest from contributions from your salary, a 3% of salary (taxed!) contribution from your employer and a $570 top up from the government annually. They pay out at age 65 or to help purchase your own home or in cases of hardship. Again, investment by the individual is relatively expensive with flat charges being absent from investment systems.

    Acute healthcare is free (like the UK) but there is a thriving private health insurance and private hospital market as publicly funded healthcare has long waits/criteria for non-urgent items – although self insurance has been my strategy I know many kiwi’s do pay health insurance. Health spend is comparable to the UK as % of GDP.

    The 4% rule is generally accepted as being reasonable here but many people work on in to their later years as they are unable to afford retirement earlier, even with a relatively generous state pension scheme.

    It’s a beautiful country and I’m fortunate in having a modern home in a lovely spot. Although a car is necessary for life’s essentials I can cycle 12km in to the nearest town for work and play. E bikes will make a difference to me here!

    For me, I was fortunate and transferred over my NHS defined benefit scheme (after much agonising!), when the regime was loosened a few years ago, to NZ and its invested in international stocks and shares which have grown over the last few years’ bull markets so I’m pretty much FI now.

    Sorry – this was going to be short and snappy but….!

  13. Hi Barney
    Thanks for the great post. I read in the past, and I am sure you use to compare VTSAX to VWRL. I have noticed this has been changed to VRXXB.
    I was wondering if you are no longer seeing VWRL as a good option / what the advantages are of VRXXB.
    Thank you,

    1. Further to my previous comment, I notice you mention VWRL still later in the post. So I presume you are just giving the index fund as the suggestion to compare closest to VTSAX.

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