Is there a price to pay for Downshifting / Early Retirement?

Can you have it both: A nice excursion on a week-day plus a (employed) career? Even if you are the most efficient of workers, sadly the answer seems to be No. (pic: Kloster Andechs, close to Munich)

Can you have it both: A nice excursion on a week-day plus a (employed) career? Even if you are the most efficient of workers, sadly the answer seems to be No. (pic: Kloster Andechs, close to Munich)

After a stretch of outstanding good weather over Germany, today it is raining cats and dogs, so Woodpecker took the time to think a bit about our business world:

The actual question is:

Combining a family- and/or freetime-focused live with career, in other words, having both, is that possible?

My honest observation unfortunately so far is: No.

Obviously I don’t expect a “bonus” for the family/downshifting person in the company, i.e. if a person produces less output because he prefers to spend time with the family, it is “fair”, that he/she will earn less in absolute terms (This holds for the company salary. Whether the state decides to put something on top to reward the contribution to society by e.g. having kids is a different story).

The actual question for me is: Is there a MALUS attached to the family guy / the downshifter?

E.g. are his career chances reduced in an overly way, i.e. will he/she be more likely to be excluded from certain career levels that provide an even higher relative salary (i.e. salary per actual hour worked)?

For Germany, after making my own observations for some years and collecting the experience of many others, both men and women, the answer sadly is:

Yes, the average German company IS discouraging people from having a family or – if they have one – caring for it. Same holds true for downshifting with or without kids.

The average German company does only promote real work-life-balance on the shiny external self-advertisment flyers.

In reality – quite contrary on what the companies might say – you still in 2014 have to make a decision as soon as a kid is there (the same holds without kids, and if you simply want to shift focus away from the job a bit):

Is it your family, or is it your company you are in love with?

Are you in with the pack or are you out?

This is still hard to accept for Woodpecker, as you should think todays society is quite a step further. In the end, especially in western economies, we are living in an abundance of wealth and over-production. The economy is so efficient that actually we all could work 30% less and still be quite well off I guess. We as a society could (and should) afford to work much less, to become less focussed on money and consumption, to put away some of the daily stress that is caused by the shortness of the ultimate important resource: Time.

It seems so bloody obvious to me, that it is hard to understand why the hell this is not happening.

Why we as a society are still slaving away day by day as if our lifes would depend on it?
Because, surprise, they don’t: The time you need working for given basic needs like food, clothing, housing etc. have decreased dramatically since the past, so we could still all thrive AND work less. Much less.
Then, everybody is calling out that work-life is changing, the business world is getting more flexible etc.

In fact it is not.
(Or I am just in the wrong company. Let me know if you know a place where this is different!)

I mean, yes, you can make some choices a bit more easy today and do paternal leave or part-time, but as soon as you practically start doing so, you will see that companies very often do not give away this voluntarily, but allow very often exactly what they are forced to by law anyway.

And they do it very reluctantly.

Let’s say you start to downshift, put a bit more priority on your non-office life, do parental leaves, home office and the like, but still do an excellent and dedicated job with very good results in your work time and thus would still like to get rewarded for that, at least a bit.

In reality (women probably knew this all along) you will face very often bosses who will not take you fully serious anymore. Bosses who – despite they officially say otherwise – do not look on your efficiency (which might be even higher than that of your rat racing co-workers) but on the time you are available, the number of eMails sent at the weekends or after 7 p.m.
A rather ancient and non-economic way to look at things, but still very, very, very common, at least in Germany to my observation (as said, let me know there are places more shiny, I will apply the other day!).

And don’t get me wrong:
There are positions where availability is important, and I have no problem when always-available people have an advantage at these jobs. But there are jobs where this is not the case (and these are many), where in fact all that counts is that some output is produced until a given deadline. In this jobs it just should not matter if you are there until 5 or until 8, if you type enough superfluous mails on weekends or not. It should matter if the job is done, and nothing else.

For some reasons this is not the case. At least in many cases I observed.

OK, but enough of the ranting.

The world is like it is, in the end it is of no personal worth to complain about things you can’t change.

So what do you do with that fact when planning to put your life above your job and considering downshifting in any form?

Basically you can go two reasonable ways:

1) Drill into your career. Collect the fruits later.

Run heavily in the tread-mill, invest a lot of your time into the job. Play the perfect company soldier. Be always on, go to every evening drinking session with your boring bosses. But still live a frugal life and save a lot. Your earnings will increase quickly and as you still life frugally, your savings will skyrocket. Invest wisely, and financial independence (FI) will come to you rather sooner than later.

Having said that, “sooner” might not mean too soon.

I’d say FI (if you start out with nothing) is unlikely before mid 40s even without family/kids and at very good investment skills, or as “late” as mid 50s, if you are not too much into investing and have to rely on average returns plus you have a family to support (I know there are these hard core early retirement plans, but no, I think most of them are not realistic for normal earners or people that don’t want to live on the most minimal standards).

So one day you will make it, but until then you have to tread quite a bit.

The reward then is early retirement, probably a sweet thing where you still can enjoy decades of healthy life afterwards.

But here comes the risks:

  • If you do this consequently, you’d better do it alone. E.g. a family and kids are very costly, and VERY time-consuming things. Both will get into your way if your sole goal is FI as early as possible.
  • As you naturally will get focussed on your finances, thus this is what might happen: You postpone getting a family further and further, knowing the slowdown this will cause to your career / savings stream. And then finally, sorry, nature decides now it is too late, and you might end up missing the great fun and shelter of having a family (OK, family is not only fun, but still a lot. Anyway if you want family and want to go for early retirement at the same time, be careful!).
  • If you still have a family while pursuing FI as quick as possible, you will not have a lot of time for them. You will outsource family care and still concentrate on the job (this is the post war patriarchal model. Even women can go for it today by making use of todays large – but costly – childcare industry. However strange thing to have a family and then never see them in Woodpeckers view)…
  • …thus you might miss out a lot of opportunities to have fun with your family when you can have it best: When your kids are still young, admire you truly ;-) and want to be with you.
  • Even worse, concentrating on their careers, not few people even miss out finding a partner, simply because they spend too much time at work or are getting a bit boring because they have nothing to talk about besides their job. And finding a partner later gets more difficult. Especially for women, but also for men (especially if they life frugally and don’t want to invest in huge presents ;-) ). Or, as a friend of Woodpecker recently said: At some point of time, extremely career focused people lose their competence in initiating and running non-business social contacts. Very wise observation.
  • Sorry for talking about it (never mention “death” or “sickness” in today’s world?), but there is a chance you will not make it to FI: You might die, get ill, injured, or in a less drastic scenario, a market crash or financial turmoil wipes out all your savings. Not nice to think about this, but as in finance, any honest calculation has to discount future returns for this kind of risks.

For me, despite the great advantage of being FI earlier on, this were always to many “cons”.
So there is option 2.

2) Start doing your career, maximize income, and then downshift from a certain point on.

You start out very diligent like everyone else. You play the game and pocket a few promotions. But you steer your career differently: You are not aiming at the “very top” but try to develop into a direction where you will find a relatively save haven when you start to downshift. That means you try to move into a position where availability is relatively unimportant, where you are e.g. in an expert position that makes you more invulnerable, and possibly work in a company that is large enough to allow for downshifting and working more flexible and less.

However, there are challenges and risks as well:

  • FI is postponed. Until time x, you will more or less move in line with others (maybe a bit slower already, as your nature will probably call for a fair amount of idle time already). But from time x on, you unfortunately will fall behind in most cases (only in career terms of course), as discussed in the beginning of the post. At least in Germany, this is likely to happen, better face it now.
  • Thus, the longer you wait with starting downshifting, the more you move to option (1), the earlier you start the more you will postpone FI.
  • The question now is, what time x is optimal?
  • This is a very individual question. Woodpecker started downshifting when the first boy was there (age 35 that was). I think this was a good point of time. I am barely “loosing” 5-8 years of career making as in our company most careers are made until early 40s anyway. I started having abundant time when there was something really good to invest in: The family founding.
    There was and is a good return, as kids provide ample fun especially if you have time and years fly by once kids are there. And: Downshifters are quite a rare group still in Munich/Germany and most 30s aged people without family work like hell. So the family business adds the benefit of providing a peer group around you to do things with in all your new spare-time. Chances of getting bored are thus low.
  • Plus: While it will not benefit your career at all, at least shifting down is much more accepted when you have kids. For what it’s worth, colleagues and even bosses normally understand your desire to spend time with your family more than just to idle out.
  • There is a price I paid and continue to pay career-wise I guess, and it is sometimes painful seeing people passing by that produce next to nothing for the company but get ahead mainly because they life for the job 24/7 and play the availability game to a perfect extend.
    But then, sitting here at the wood oven with my two funny boys and looking forward to a good season of early knocking-off times, late evening workday baking tours and extended weekend trips, I think I can live with that.

Cheers,

Woodpecker

14 comments on “Is there a price to pay for Downshifting / Early Retirement?

  1. witchdream says:

    Look at the math.

    Look at compounding. Look at the marvellous effects of early heavy savings and reinvestment.
    And yes: Look at your cost of living. Owning a car before FI will eat years of your life.

    Cheers, witchdream

    • mrwoodpecker says:

      I am not sure what you are trying to tell me.

      But re. owning a car: It is not that easy.
      In fact, owning a car does not eat years of your life, but certainly prolongs your time until FI.

      But so does eating, having beer out with friends, travelling (even if done frugaly), and certainly many hobbies like my favorite: Sailing.

      Thus this hits exactly the question of this post:

      Is FI the only goal to persue with all power at any time even at the cost of leaving out some other great things in life (this would be option 1, or “early retirement extreme”) ?

      Or is there a trade off to be made between having a good time NOW and the time you need to reach FI – if at all (option 2).

      As fleshed out in the post, it is my firm conviction that option 2 is the way to go.
      Question now is to find the right balance for this.

      Obviously I agree that saving and investment is all important, but e.g. the cost for a car (while agreed eating substancialy into budget) can still be very well invested, given all the trips, travelling and other fun that it enables people to do.
      Not to forget that this (and other) activities bear a dividend of their own: Ever deepening social contacts and a good family life plus a childhood that kids (hopefully) will love to remember.

      Everyone has to make his own math here and take in monetary aspects as well as other aspects.
      If the result is that you are not convinced by the outcome, you should sell the car immediately.
      Otherwise you keep it.

      Cheers,
      Woodpecker

  2. FIDreams says:

    Great work – always love reading your posts!

    Here’s what has worked for me:

    1. Work to become an expert at something and then consult. its not a capital heavy and allows you to manage your time excellently. Plus the client doesnt want to be billed a lot so incentives are aligned.
    2. Get married early but having children later. Use dual incomes to save a lot in the beginning since I have found that the need to financially independent didnt kick in until I became a dad.
    3. Learn to invest, read and understand Warren Buffett, generating 12%pa is possible. Appreciate the effect of compounding and its possible to get there much quicker.

  3. […] a bit of moody time the last weeks, probably caused by thinking too much about such boring things as a career, this day was a great […]

  4. freebutfun says:

    Or the third option, be an expert in your field (and choose the field in a suitable way), be your own boss.

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