Wednesday, 30 October 2019

The new Master Plan (the good and the bad)

While I was waiting for my Southpaw edits (the book is no longer called that, by the way), I went down a particular rabbit hole; there've been odds and dead ends and books that led to other books, but in the end, I found what I was semi-consciously searching for. I say semi-consciously, because where I started with my questions wasn't where I ended up.

The question was: when will I have enough money in my pension to be able to say "Cheerio, Ms Sophie" to the full-time, all-out, screamingly mad day job, with the aim to spend more time writing and no longer trying to fit two and a half full-time jobs into my 44-year-old brain, which is seriously getting old. All of that without getting my partner to carry the burden of looking after another human being who'd rather spend time talking to people who don't exist than earn money, and who is very unlikely to "break out" in a tiny genre dominated by author collectives and people paying for Amazon ads while employing a dozen ghostwriters to make a million or so on Kindle Unlimited.

(I write because I love writing, not because I want to make a shiny million running a stable of ghosts.)

And the answer was... complex.

Backing up.

I crunched numbers, ran scenario analyses on various returns of investments, multiple income streams, various cash flows, and then I compared that against a number of budgets. Ultimately, it was "what can I achieve if I hustle" versus "What do I actually need", and then I changed the variables like two dozen times to account for Brexit, being kicked out of the country and having to return to Germany, sterling tanking 30%, etc. I looked into every bank account, every pension fund, every debt, and I read several personal finance books and blogs and sat down with a big sheet that had "assets" and "liabilities" and then "net worth" written on it, and I tallied it all up until I knew to the exact pound how much my partner's worth and how much I'm worth (ie our household worth), and where that value is trending. Also what my pension entitlement is, and how to maximise my partner's state pension.

Then I tracked my budget - how much do I spend on what. I still had the numbers fresh from doing my company taxes, so that part was relatively easy.

That gave me numbers; on the positive side, the numbers are quite pleasing by themselves, but they aren't big enough to do what I've set out to do. The good news is, the income side is pretty generous (thanks, day job), but the bad news is that I was throwing out a lot of money without return for lack of a strategy.

That last part has now been remedied. I have a strategy. It involves a multi-pronged attack on the problem:

1) Save money.
2) Cut back.
3) Invest.
4) Patience.

Point 1 means I'll stay the course and not spend money just because it's there. That should be pretty logical, but the mental habit to break is "I can afford this" or spending as a comfort blanket, and just put the money into the kitty. So that expensive fountain pen I've been eyeing for two years just got cancelled. This will have a direct impact on audiobooks - I don't really make the money back if I pay for them myself (I make maybe £50/month in Audible royalties, meanwhile having a novel produced easily costs £1,500 - so 2.5 years of income go into one audiobook, and I'm leaving out the fact I'm paying taxes on that money, which is another 20% at least, while I could use the money to buy my freedom. Same for author swag - I had some really cool ideas that cost like £800, and those are cancelled too, much as I'd love full-colour printed insulated coffee mugs with my cover art.)

Point 2 entails cutting back on spending that I was already doing. I've cancelled pretty much all subscriptions (gym, Audible, KU, Muso, etc) and I think I had one takeaway coffee last month. The idea is to keep cutting back to reduce my outgoings to the bare minimum. This also involves being super selective about which conference I'll attend. There's no way I can justify the £2,500 to attend GRL (flights, hotel, lost income/value of the holidays), but I can swing the UK Meet and EuroPrideCon, as well as Salon du Livre. If I were super hardcore, I'd cancel those, but the truth is, they refresh my soul. This will also include spending on holidays and restaurants, birthdays, Christmas, etc. I love food and travel, but I love my freedom more. The biggest challenge will be how to fit charitable giving in there, and I'm still working on making sure I'm helping people in some way.

Point 3 is kinda funny and relatively recent. The extra "saved" money is getting invested into a number of assets. I've been in financial services long enough to have a strategy. Even assuming there's a crash, I'll come out quids in. And if the global financial system collapses, and my strategy stops working, well, then I'll likely have bigger problems than retirement, to be honest. But so does everybody else. I've tested my strategy backwards and forwards and plan to beat - at the very least - the guy who's running my pension fund at Scottish Widows. I know an insane amount about finance, so this is the part where I'm putting all of that to work. I've pondered the ethics of this quite seriously and 2020 is the year when I really get going on this. Paying off the mortgage is part of this strategy, so that's happening too. Once the house is paid off, I'm taking a big chunk out of the amount I need to spend just to live, so a paid-off house will seriously help.

Point 4 is possibly even more important than the others. Over the past 12 months, it's become very clear that my day job has a "best before" sticker - it won't be forever, or certainly I won't. I tried to go part-time, but the bank basically said "these are the parameters of your role, take them or leave", and I decided to take them. Based on the numbers I've crunched, I need to stay for anywhere between two and seven years. Two years is "must", five years is "should", seven years is "can", so I'm aiming for five, to be safe and because I don't have money coming to me by way of inheritance, otherwise I could shorten that period.

Thinking five years ahead is a bit of a sinking feeling, but the truth is, I've already done 4.5 there and I can do another stint, because I know what I'm doing it for, and I know to the hundred pound note exactly how much my freedom costs - and that of my partner, because if I'm going to walk free, I'm taking him with me. I already have a headstart in some ways - I'm still healthy, well-educated, I have all kinds of skills, and I contributed to a pension even while I strictly couldn't afford to lose that money. Past me, thank you for every penny you put into that kitty 11 years ago, this is really helpful now.

In 5-7 years, I should get to the point where I live mortgage-free, have some modest income from investments, and greatly reduced need for money (thanks to all the cutting back), and then I can live off writing. Or reading the cards and/or interpreting horoscopes, coaching, or running other people's money - I don't expect I'll ever stop working, but at least I won't have to commute to an office anymore.

That actually leads me to point 5: Learn more skills that allow me to earn some more money from side hustles for the point in time when books are written by computers in thirty seconds each. I'm quite seriously considering getting actual qualifications as a portfolio manager (yes, I'm absolutely going to channel my inner Francis de Bracy for this journey).

The guiding principle of all my planning, as I said to my partner this morning, was that I need to get us to a place where we're both comfortable even if one of us dies, or we separate - and that very much means earning double incomes for as long as it takes, ie a few more years from now, and stash most of the cash and put it to work. It's not a flashy "rockstar" lifestyle, but it'll be sustainable, modest, and safe, and allow me to spend the next expected 40 years of my life doing things I love.

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