The biggest non-financial question we’ve been getting lately, now that folks know we’ve retired, is “Aren’t you scared?!” And you might assume that people who’ve made the big leap and given up the big paychecks would say, “Nope!” But that’s not true. We are scared. Just as anyone doing something big and at least a little bit risky should be. But we didn’t let that fear hold us back, and that’s what actually matters.
We’re about to go through a life and financial transition as big as graduating from college or getting married — and that’s switching from earning plenty while working to earning very little in early retirement. Which means that we need a new set of systems to ensure our financial success, especially given our status as anti-budgeters. But it also means that we’re bringing back a tool we gave up years ago: the personal allowance.
Today I’m (finally) sharing something that I’ve wanted to write about for a long time, but haven’t tackled because there is no easy formula: how to determine what is “enough” to save for early retirement. “Enough” is perhaps the centrally important concept to early retirement, but it can feel overwhelming to quantify your own. Here’s a breakdown on how we calculated ours, and how you can do the same for your own circumstances.
We know — the excitement of the *early* part of early retirement is powerful. So much so that it’s easy to focus our retirement planning mostly on those early years. The later years are also so much harder to predict — more variables, a longer time horizon, more unknown unknowns. But as we’ve seen in our own planning, it’s easy to have an inadvertent early phase bias built in — here’s how to suss that out and ensure that you’re planning for both your early retirement and traditional retirement.
It’s so fun and exciting to plan for financial independence and early retirement that it’s easy to focus only on what happens when things go well. But it’s important to pressure test our plans to make sure they will still hold up even if (or when!) things don’t go as planned. Here’s our suggestion on one way to do that.
We like to plan for pretty much every possible eventuality, and given that we’ve already put about as many contingency plans in place as we can, we’re still thinking about the question, What if things don’t go as planned? But now we’re on to the more metaphysical answers, not the financial ones, like: What are our early retirement deal-breakers?
I am definitely a planner by nature, which means that we have all kinds of contingency plans, emergency preparedness plans, you name it. But I recently realized that I tend to plan for the worst only, and not for the almost worst. Today we’re talking about what happens if any of those not-quite-worst-case scenarios happen.