How to make the most of life when the outgoings outweigh the incomings

It’s time to retire the word ‘retirement’. Few of us these days come to an instant halt to all work, even at my undeniably retiring kind of age of (yikes!) 66.

Even though I’ve voluntarily given up my main source of regular income, I kick back hard at the R word.

When asked how my retirement is going, I protest, a shade too aggressively, that I’m still doing some freelance stuff.

But while I can reassure (or con) myself that my work bustle carries on to a degree, inside I know I’ve taken a massively significant life step.

Because from now on, our outgoings will always exceed our income. This month we began “drawing down”, as they say, on our investments. That was an almightily stark reality.

What’s in the fiscal tank now is all there is or ever will be. I’m actually confronting the “enough” question.

I have seen countless pie charts from advisors outlining this in theory. Now I have to eat the pie as slowly as possible.

Thankfully our sound financial advisor (everyone needs one of those) is sanguine and confident that my wife and I are OK through to Shady Pines and beyond even if the coronavirus and uncertain government policies have knocked a big hole in the property valuations we were basing many assumptions on.

But that relatively reassuring outcome is not the result of forethought. I had a very privileged upbringing which is probably why I’ve never been particularly astute or vigilant on financial matters.

I took things as they came and only really engaged in proper financial planning when we had our first child when I was 37.

By the time the third one came along at 45 I was finally fully focused. (That’s about 20 years too late to grasp the real significance of compound interest, if anyone wants some free advice.)

In my investing life I’ve always been conservative and trusting of the conventional system. Too much so.

I shudder to think how much I’ve squandered on exorbitant fees, clumsy policies, slack managed investments with default big financial brands held blindly for way too long, ignoring tracker funds, not optimising cash flow, timing property sales poorly, inefficient tax structures.

I am acutely aware that I got talked into a multiplicity of products by a former adviser – a plague of under-performing rats and mice for every small sum.

And I know I haven’t paid nearly enough attention to all of this stuff.

None of that is recommended, if you want some more sage advice. However, the counsel for the defence says, we have also not made any big mistakes. We did not squander personal pension funds when we moved jobs.

We are debt free and have diversified assets with eggs in each of the three main baskets – property, equities and cash/bonds. We are balanced well enough offshore and onshore.

There’s a reasonable mix of a smaller number of reputable financial brands in the portfolio after exterminating the rats and mice.

I’m also, very belatedly, becoming more conscious of fees, commissions, and investment performance.

And our risk profile is deliberately low with no complex tax arrangements. I still bear the mental scars of my ailing father believing that, after a lifetime of prosperity, he’d been bankrupted by a court ruling that the elaborate family company structure he set up was illegal.

For several agonising months he believed he was facing a ruinous revenue bill. That’s the stuff of nightmares for me. But an even bigger fear is becoming fearful about money.

Now that the outgoings outweigh the incomings, I could quickly become miserly and miserable.

Worried about the sustainability of our savings. Anxiously scanning the skies for black swans. Fretting about the cost of everything. Regretting that I wasn’t moneywise far earlier. Never losing an opportunity to count the lost opportunity cost.

The primary challenge for me in ‘the drawdown’ (I prefer that word to ‘retirement’) is to have a positive relationship with money. To be prepared to spend confidently on the right things.

Between us, my wife and I have worked for over 75 years to get to this place where we can make conscious choices.

I need to constantly remind myself that while we do not have a fortune, we are exceptionally fortunate.