Opting out in our mid-30s - can we afford it?

[newlife4]

Like many people, DH and I have had an exhausting, miserable year and we both feel completely drained.

We're considering a fresh start by selling up, moving somewhere that we can be mortgage free or have a very small mortgage (say £200-£300 a month max) and opting out of the rat race basically.

My question is - even though we'd be mortgage free or reducing it drastically, how much money do you think we would need to earn to pay for everything else (utility bills, council tax, stuff for our one DC and potentially a car)? We currently have £30k savings in the bank.

We're only in our mid 30s and are probably far too young to be considering this, but we're just so done with it all and don't want to live to work (or is it work to live - I always get it the wrong way round!) any more.

I'm just wondering whether this plan is doable or not really. Thoughts?

Totally depends where you live etc. But yes we’ve done it and love it.

We moved from London to South Norfolk when I was 30. Downsized. Meant we have some savings, no mortgage due to inheritance etc etc. I don’t work and dh works locally in a low paid job but he can walk to work etc so very little stress or pressure. Our outgoings are about £1000 a month - we have two dc, one is 17 so costs us quite a bit so a lot of our outgoings are related to her (college costs, travel, etc etc).

We don’t have any real pension provision as such though which many here would be horrified by. We plan to downsize again in future and dh does have a work related pension. I can’t work now due to disabilities and receive the highest rates of PIP (disability benefits) indefinitely. So our situation is quite complex but we are very happy to manage how we are. We have many friends who are doing the opposite and mortgaging larger and larger homes and struggling to make ends meet.

One other thing to maybe consider which I only just (stupidly) realised is that taking a lover paid job to enjoy time with family has meant I'm not paying NI towards a state pension. I do pay into a pension through work but am now worrying a bit about my future when I retire... so might also be something to consider?

The problem with moving and just having a small mortgage, how are you going to be able to prove to your lender that you can fund this mortgage, if you are giving up your jobs? I know you said your oh is doing freelance work, but does he have several years of decent earnings to show a lender? Nobody is going to lend you anything unless your finances pan out.

@newlife4

I think you need to do a lot more planning and I think you need to have more than 30K in the bank before you can contemplate this.

@stschiap how much money would you want to have in the bank before making this kind of move, out of interest?

That depends on how much you intend to earn - to what extent you intend to opt out. I think you need somewhere between 50 and 100K and that is a buffer in case things go wrong - it isn't income replacement. You then need to be earning enough to keep the savings at approximately the same level. So if there is an emergency and you suddenly need 5K for something it can come out of savings but be built back up again fairly swiftly.

I don't know your exact situation of course but I'd suggest you go for a middle way of moving somewhere cheaper and possibly being mortgage free while continuing to work and build savings up and then reassess in 5 years time or so.

Also, looking at my situation, it's all well and good as I am mortgage free but if I wanted to move somewhere else I would not be able to afford a bigger property as I'd then need to get a small mortgage on it but I'm freelance and not earning enough and I think I'd have problems with getting any kind of mortgage at all.

I like my life, I really do but it's not worry-free as I thought it might be. I don't have children and I don't think I would have done it if I had. How old is your child?

@newlife4

I think you need to do a lot more planning and I think you need to have more than 30K in the bank before you can contemplate this.

@stschiap how much money would you want to have in the bank before making this kind of move, out of interest?

@newlife4 I think you are coming at this from the wrong angle.

Mainly that you hate your job or feel too busy.

Why can't you tell us what you each do for a job?
Advising you is impossible otherwise.

You might both be Drs or lawyers and can find work anywhere.
You might be unskilled and would struggle to find any work.

If it's the job that's stressing you why aren't you looking at a career change rather than throwing it all in?

We have had a change of circumstances (semi retirement, no mortgage, no debts) and needed to do spreadsheets for 2 years before deciding how much we needed to live on. We are older, DCs left home (your age!) and without cutting corners we allowed £25K a year ( that's after tax, so £2K a month net.) That's not cutting back on food but only having one holiday a year, often UK, running 2 cars (necessity due to location) hardly eating out etc etc.

Your £30K- what's that for? Do you intend to sell, buy with hardly any mortgage, and then live off £30K for a while and meanwhile find work?

Don't forget the costs of buying and selling. That's a few thousand so your £30K will drop to £25K.

Then there may be new furnishings for a new home.

If it's rural you are likely to need 2 cars.

Honestly? It can work, but always have a safety net. I freelance with a mix of consultancy and long - term contracts. The kicker is that I work no more than 5 hours a day and earn as much as DH does, full time. It's taken me three years to get to this point, mostly through trial and error with DH's wages keeping the mortgage going.

Paid employment has a LOT of perks - sick pay, holiday pay, maternity leave and pension. If you can find a work from home position, I would grab it with both hands and use the time saved from commuting to build up a side hustle.

OP - you say: If our bills were something like £500 per month we'd need to do so little work compared to what we're doing now.

In reality, you wouldn't need to do 'so little work' - you'd be doing the same amount of work for less pay. Taking a slower paced job doesn't automatically mean less hours. You'd be better to think about the same type of role you do, on a part-time basis. To me that's the only way you'd get the work life balance you're looking for.

As an aside, you are very young to be thinking about scaling back. You've only been an adult for 12 years! There's a long way to go yet.

Just another point to bear in mind - freelancing is great until something like Corona comes along (or any other crisis). I've managed to come through Corona relatively unscathed so far even though I had 3 months in Spring with next to no income at all (and no handout from the government for lost income - I'm in another country). I did this by using some of my savings and cutting all spending to the absolute minimum. Now that I'm earning again I'm still spending the minimum and replacing the savings I used to cover the lean times.

Honestly? It can work, but always have a safety net

Yep, I earn a lot as a contractor but have only been able to do this as I know we always have the fall back of the OH's paid employment which would cover our fixed costs.

I think moneysavingexpert forums have forums/threads about this - that might be a good place to start.

Hello OP, not surprised you're thinking this way. Have you plugged into the FIRE (Financial Independence REtire Early) movement? You need to organise a pension plan (through low cost investments is how most of them do it - Vanguard Index funds seem very popular with them), housing (mortgage free or extremely low), income (freelance, flexible and ideally some passive income streams) and learn how to live thriftily. You need to make a clear plan, and you need to think about how you might manage changes within that e.g. children, ill-health, your industry falling flat.

YANBU thinking about it, you would BU to just jump!

A family member has done this. No-one can work out how they make ends meet, but they've been doing it for 10 years. I guess the jury's out because their kids are young and will get more expensive, but I cannot deny I'm not jealous when they send a snap of a picnic on a 🏔 on a random week day when I'm stuck on boring phone calls.

The whole issue here is what is your worth in terms of employment.

I know people who can earn £1K a day. So that means they can work less. But they are highly skilled and in demand.

But there are other people who struggle to find jobs paying £10 an hour so they need to work a full day, every day.

You are trying to make too big a jump at your age.

Think about what's wrong with your life now.

If it's the long hours, can you increase your skill set so you earn more but work fewer hours?

Can you move a few miles away to cheaper housing? (Where I live there is a huge difference in property prices even within 5 miles.)

What is it exactly that you want? If it's doing less work then you can get that by gaining more experience and charging more for your time.

I sold up and moved to Devon. Bought a house to live in and a small flat that I let out on Airbnb. I enjoy working for myself instead of pulling 13ht shifts day and night. Definitely no rat race here. I wanted to be mortgage free but my house needed renovation and I ended up mortgaging but my repayments are less than £300/month and I intend to start overpaying next year to clear it quicker.

I have a couple of small pensions and hopefully a state pension! Plus I intend to either still run my holiday let or sell up for a lump sum when I get to retirement age.

Our mortgage is £350. Basic Bills come to an additional £350ish without the food shop and partners car etc. We live in Wales. Earn £54k between us with no children. Bring in around £3.5k a month between our jobs. We have a comfortable life, nothing extravagant but we have our holiday and spare cash to go out and about and a small amount of savings

I've been mortgage free once already
I didn't give up my FT job
Saved some, spent some, invested some
Continued to pay into a pension
The bills do not stop coming !

Was made redundant

Relocated for a new employment
Still working FT

30K won't last that long

Suggest you look at the numbers, state pension age is currently 66+

It will be difficult to estimate living costs until we have some idea of the cost of this pandemic to various sections of society. I'm thinking particularly of tax rates (bound to increase), and remembering the high inflation rate of the 1970s, when we also changed our lifestyle (much older than you!)
I;d decide what you want to do and where you want to live, but you'd still need a crystal ball for the future.

We did exactly this. It's awesome having freedom while the kids are young, being there for them is priceless. We've been able to massively up pension contributions too. The plan is once the youngest is at school and I'm working full time again, everything I earn will be saved. As long as you're looking forwards to your future it's ideal.

I think we all need a sense of purpose which, in some ways transcends the need for money. I have always been highly paid and enjoyed my job but now I am winding down and looking at what I can do going forward.

I couldn't have done this whilst our DC were young unless we had not supported them into their careers with financial help and that was not an option for us. They are all settled with properties and good professional careers now so we do feel this is 'our' time now. We are mortgage free and have savings and excellent pensions so we have options.

You need to ensure that any decisions you make now do not affect your long term security. If the sale of property in an expensive area to move to a cheaper one can facilitate that, then consider that first.

In your position, I would reassess exactly what I wanted and take small steps to make it happen. Al the time keeping my eye on the long term picture.

@raspberrymuffin

There are lots of places in rural Scotland within commuting reach of big cities where you can get a small house or big flat for ridiculously small sums compared to London prices. The map search on rightmove is your friend here.

I haven't opted out but I did take a pay cut to work in the public sector, where I've got no silly overtime, no daily commute at the moment, and while the work is sometimes hard I'm doing it to make people's lives better rather than to maximise shareholder profits which I can tell you makes a huge difference to how it feels logging on in the morning. I can't afford to go on a big holiday abroad but on the other hand I can rely on finishing work at 5pm most days. People who earn a lot more than me have to save their money to come on holiday where I live; I just walk out the door on a Saturday morning.

Re teenagers and rural life: round here the kids go to a rural high school rather than one in a big town so they're all in the same boat more or less, and they seem to make it work.

Raspeberry really interested in this. I have friends who work in the civil service at director and deputy director level.

The hours are crazy and the pressure seems immense. I have flirted with the idea I’d joining the civil service (have seen a few ads that would suit me), but have been out of by their experiences.

It doesn’t seem any easier that the hours I am currently working.

£30k does not last long!

After some years working in salaried office jobs, I've now been freelance for over a decade and can say that freelancing doesn't necessarily equate to 'opting out' or being less busy.

I work longer hours and have less holiday now than I ever have. Being freelance makes me feel that I have to say yes to work whenever it comes in and pack away money because I never know when it might all end. Plus the background worries about having enough for pension/no sick pay/no paid hols etc.

OK you could argue that I could manage my time and work and clients better. But I think if you're imagining having a freelance career where you work basically as and when you want to, you need to be a) sought-after enough that people will continue to offer you work even if you've been unavailable to them previously and b) very disciplined about managing your time and your clients' expectations.

The piece of the picture you don’t flesh out in the OP is what are your and DP’s fields of work and what you could hope to earn freelance/self-employed.

If I were contemplating a move I would put a lot of careful considertuin into the area. I’d want to be near a decent sized city so that if other options dry up there are possibilities of jobs without a stressful commute.

Moving to say a farm in the Black Mountains and then discovering you can’t get work would be more stress rather than less.

@katy1213

£30k does not last long!

but its enough savings to prevent you claiming any useful low-pay benefits like UC.

One other thing to maybe consider which I only just (stupidly) realised is that taking a lover paid job to enjoy time with family has meant I'm not paying NI towards a state pension

If you're receiving CB for a child under 12, you do get NI credits towards a state pension. Plus you can get credits by working fairly part time, something like 16 hours a week.

@Ideasplease322 there's a huge difference, in pay and hours between directors/deputies and office jobs or even professions in the civil service. Yes, high level people will work long hours, especially if they're in a department affected by COVID, Brexit or any other major issues, but you can get the flexible hours/reasonable workload most of the time at lower levels.

OP, how doable this is depends a lot on your expectations and whether or not you are able to earn at a decent rate when you need to by freelancing doing something you enjoy.

Or have reliable seasonal work so you have periods where you work long hours, but you only did it a few months of the year. Because as others have said, if you need an income but can only get it by doing NMW work like retail or care work, you really have to put the hours in to get a meaningful income. But if you can do a bit of lucrative web design (for example) work every once in a while, it could suit you a lot more.

On the expectations front, what people spend on 'variable essentials' varies enormously. Some people will be happy with a £50 pw from Aldi food budget, others would see anything other than being able to spend what they like in Waitrose averaging £200 pw as an unacceptable compromise.

Holidays - would you still want to afford holidays and would you want nice ones that cost thousands, or would you be happy with a few days camping?

Do you want the latest gadgets etc and all the data on your latest iphone, or are you happy with a cheaper Android and a fiver a month on a sim only contract?

Definitely look up FIRE. There's a lot of guidance on how much you need and how to afford it, whether from a passive income, use of savings, or earning money but not necessarily from a conventional job.