Is early retirement money and life as expected?

Dorina had a question for me which she posted in the comments against my August 2021 early retirement costs & targets post:


I was wondering if you would share a comparison between your spending now and what you estimated before retiring? You have some years of data and I'm really curious if it was above expectations?

I love this question, it's exactly what I was asking myself back in 2016 when considering my own early retirement decision. What would early retirement cost, would it be more or less than I was currently spending? This was a huge question that I was desperately trying to answer before deciding whether or not I could press the button and hand my resignation notice to my employer.


Then, in addition to the money question, there was the matter of trying to envisage what life might look like if I retired.


So these are today's topics:


  1. How does our early retirement spending compare to pre-early retirement expectations, and perhaps to our actual pre-early retirement spending?

  2. How does early retirement life compare to my pre-early retirement life?


Spending - comparing actual to pre-early retirement expectations

Even with the benefit of hindsight and some half decent records, trying to answer this question is proving difficult. That probably explains why it's such a challenging question at the time of the early retirement decision.


The first difficulty is that, although I did keep records all those years ago, I didn't keep them to the same detail as I do now. Looking back, we used much more cash, but whether that was spent on groceries, coffee shops, nights out, or something else entirely, is something that my records don't tell me.


The second difficulty is that our lives were different back then, for example, we still had our son living at home. We also had good jobs with regular and healthy pay cheques which, at least to some extent, meant we spent a little differently. Perhaps a bigger difference was that we were expatriate workers living and working in Dubai, meaning at some point shortly after retiring we would have to leave and live somewhere else with a different cost of living. As it transpires, we seem to have gone from one relatively high cost of living area to another.


The third difficulty is that the change of countries means we have costs in different currencies, and ever moving exchange rates make things difficult to compare.


As a result, any financial comparisons are imperfect, perhaps by quite a margin. But I won't let that stop me having a go. By the way, when Dorina posted her comment/question, part of my response was that I thought I might have already posted something on the subject. I've looked back, and found that I had - I'll use some of the same information here and add some more comments too.


Anyway, what I found is that in 2015, the last full year before my early retirement, we spent a little over £80,000 (US$110,000 or €94,000 at today's exchange rates). At that time, we were a family of three living in Dubai.


I had access to that same information when making my early retirement decision, but I honestly can't remember looking at it. Instead, I think I did two things. Firstly, I'd always had a number in mind - if we could have a before tax income of £50,000 (US$69,000 or €58,000), then I reckoned we could live on that. I don't think this number had a huge amount of science behind it, but I have a vague recollection of subsequently putting together a rough budget as part of my early retirement decision making, and concluding that living on that amount seemed to work. So that was what I based the "what would it cost" part of my early retirement decision on. We would have to pay tax of course, which would reduce that amount to an after tax spending budget of £45,000 (US$62,000 or €52,000).


Now to what actually happened, what we really spent since full time early retirement started.

Our annual early retirement costs (they're in GBP, multiply by1.38 for USD equivalent or by 1.17 for € equivalent)

But things aren't that simple, during those four years we lived in different countries and also travelled a fair amount.


2017: Lived in Dubai for the year (our son was still at home for most of this year)

2018: Lived in Dubai for 6 months, travelled for 4 months, lived in France for 2 months

2019: Lived in France for 9 months, travelled for 3 months

2020: Lived in France for 9 months, UK for 3 months, and there's that Covid thing too


However normal or abnormal those first four years of early retirement were, we can say that:


  1. Our average annual spend of £54,000 was substantially less than the amount of £80,000 that we spent in Dubai during my last full year before early retirement.

  2. But, at the same time, our average annual spend of £54,000 is quite a bit higher than the after tax budget of £45,000 that I had in mind when I made my early retirement decision.


However, maybe even that's not the end of the story, because we of course have choices. A quick look shows that some of our big items of expenditure are mostly discretionary. Based on the 2020 spend, we could get our annual spend down to £25,000 (US$35,000 or €29,000) if we took out travel (we've done some mega trips), furnishing a second house (not a normal thing), gifts/charity, sports equipment and medical costs (if we stayed in the UK we would have free medical). Obviously we wouldn't want these things to all be zero, we'd like a holiday, to buy our loved ones birthday and Christmas gifts, there's always a little maintenance to be done around the house etc, but I think we could be in the low to mid £30,000's (US$41,000's or €35,000's) with our spend if we wanted, even lower if we pushed it.


So what does all this mean? We've spent on average less in early retirement than in the year before when we were working full time but, conversely, we've also spent more than the figure I had in mind when making my early retirement decision. But that's living a life that's certainly not thin FIRE - if we had to cut our costs by around 40%, our life would be a bit different, but I think it would still be a good and enjoyable life. What's more, our investment income covers our costs and I'm sure that causes the purse strings to be a little more relaxed.


Does that answer Dorina's question? I suspect not precisely, partly because my records pre-early retirement aren't as comprehensive as they are now, but also partly because the amount we spend is to an extent influenced by the amount of income we have. If we needed to spend less, we could and we would.


Early retirement life compared to pre-early retirement life

This wasn't what Dorina asked, but her question got me thinking about it. How does my life now compare to my life before, when I worked typically fifty to fifty-five hours a week? Below are some things that come to mind, not the complete story, but a quick brain-dump:



Has my early retirement life met my expectations. Given that I have no desire to turn the clock back, it has to be a resounding yes. But to be honest, the thing I did realise at the time of my early retirement decision was that I couldn't picture exactly what early retirement would be like. It was akin to trying to describe a place you've never been to. It was something I would have to discover once I arrived. It's not been a disappointment.


Some things are probably as I thought they'd be, but many are different. I never expected to be living in France. I love the time that I have to think about things and also the mindfulness that seems to have come with my early retirement. I enjoy that I'm trying to be adventurous, at least by my definition, and I like knowing there's a whole world of opportunity out there to be discovered and that I have the time and the youth to go and do it.


It was a good question from Dorina, and I've enjoyed spending some time thinking about it, trying, and probably failing, to answer it. It was a lot more fun than being at work!

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