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Guest Post: ERE-Lite or, How I can easily live on £5000 per annum — Part II

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Read ERE-Lite: Living on £5000 per annum — Part I here…

ERE-Lite: Living on £5000 per annum — Part II

Since leaving my job and striking out on my own I have really come to appreciate this hierarchy of capital types. Social at the top, financial at the bottom. Recall above my previous concerns about whether the financial industry would survive 2008, tie this to my idea of real wealth and the imminence (or at least inevitability) of peak oil, and you will see why financial capital is at the bottom of the hierarchy. It is the least stable, least secure of the three, prone to counter-party risk and strongly correlated to the health of Western industrial civilisation. My non-financial capital includes my home, my garden and the tools to work it. My social capital resides with my friends and neighbours, and provides me a network whereby I have gained some of my physical assets, access to paid work, exchanged food and labour, dissipated my excess production and derived a lot of entertainment, education and pleasure. In terms of priorities, I’d rather add first to my social capital, then my non-financial capital, and finally to my financial capital.

Perhaps the best way to illustrate the workings of social capital is anecdotally. I could try in the abstract, but it would be less convincing as it would tend to contradict many common worldviews, and encounter resistance (Ed’s Note: Agree on that point with Macs! Just read, How blog comments look in a parallel Universe). Aliases have been used to protect the innocent.

At the beginning of the tale, when I was little more than a cubicle-jockey running on the 9—5 tramlines of conformity, my social capital was low. I had moved home (and country) a few times and shaken off most of my old social connections, but eventually found myself resettled on my native soil as a debt—slave working an uninspiring job mostly to pay off a modest mortgage. This last was not a common experience, and I was truly unhappy to be in such a position. After a hard day’s work I’d often find myself in the local pub (which we’ll call ‘The Rainbow’, for anonymity’s sake) bemoaning the soul-lessness of my existence. Now, the secret to building social capital boils down to two words, really: ‘Be nice’. Make and build friendships, maintain them, be available, be honest, be true to yourself. Be aware that a gift is an investment in social capital — it’s not quantifiable, not tallied in a ledger anywhere, but it strengthens relationships. So when Mr Grey was out of work and down in the dumps, a drink or two were appreciated. After a while he was employed in the kitchens at the pub, and I found I had a source of re-used containers and potato sacks I needed for my garden. In return I supplied some of my surplus potatoes to the kitchen (for a few pints), and some herbs from my garden.

Mr Blue, another keen gardener, brought in excess runner beans — some went to The Rainbow’s kitchen, some came my way. Likewise the pheasants he brought in after a shoot — now, I didn’t know how to prepare a pheasant for eating, so I spent a couple of days in the kitchen myself, helping out and learning the ropes on preparing game birds. A bit of upskilling! All unpaid except in terms of social capital. Another friend — Mr Silver — also likes a bit of game, so I made sure some of the pheasants went his way, and then when he’d made too much marrow chutney for his family, some ended up in my store cupboard. By the time I was ready to give up the day job, and I knew I had more time to spare, I mentioned to Mr Silver that I’d be available if needed — he works as a handyman and gardener, and I knew some jobs would require more than one pair of hands. Sure enough, a few short contracts have come through that way. He’s been able to take on jobs he might have had to refuse, and I have some enjoyable work I’d never have accessed otherwise. In this particular instance that social capital actually yielded cold, hard cash.

Panorama shot of my foraging grounds

Panorama shot of my foraging grounds. 🙂

Besides gardening, I also enjoy a spot of foraging around the woods and hedgerows for wild foods. Often as not I go out on my own for a bit of peace and quiet, and to enjoy the scenery, but on occasion I’ll team up with Mr Grey and/or Mr Silver, sharing my knowledge of what’s out there, what’s good to pick and how to use it. The latest joint venture is a nice big tub of elderberry wine which is bubbling away in Mr Silver’s spare bedroom. That will be a good party when it’s ready, and of course, we’ll have a few spare bottles to distribute, again bolstering our social capital. Foraging has also yielded quite a nice haul of other produce: elderflower cordial earlier in the year, (wild) raspberry jam, bramble jelly, apples, hazelnuts, rosehips, sloes… Some of this produce stocks my own cupboards of course, some is distributed around the network, swapped for meals out with Mrs Scarlet, or eggs from Mr Green. And of course garden produce can also come in excess, so that is also dissipated through the social network, too. Mr Crimson, I have found, is mad for marrows — which my garden has been producing quite prolifically this year (grown from seed swapped with Mr Silver).

Mr Crimson has also been employing both myself and Mr Silver for garden work and a bit of freelance geekery — a damaged ‘phone needing the data extracting, setting up a blog for his business and the like. Some work yielded cash, some beer… He stretched me a bit, too, when he said he needed a new shower enclosure. This was where my professional-style resignation paid off, as I was able to go back to my previous employers as a customer, and enjoy a nice ‘ex-staff’ discount. And amazingly I’d learnt enough at that old job to be able to fit the enclosure, including doing the tiling and some plastering. Never knew I had those skills until I tried it!

Greenhouse with water tanks

Greenhouse with water tanks

Perhaps the best synergy between my social capital and my garden arose when Mr. Grey announced his father needed to dispose of a greenhouse. In return for dismantling the greenhouse I was able to move it to my own garden which has already made a great improvement to its productivity. There were a few broken panes of glass to replace, but Mr Silver had a source of surplus glass, so that was easily solved. To have purchased that style of greenhouse from new would have cost me a good £300-400, so I have had a real bargain, Mr Grey Senior has had a bargain through not needing to dispose of it and clear the site himself or pay for it to be done, and some valuable materials have been reclaimed instead of being dumped. Now I have an extended growing season, and better facilities for propagating plants, some of which are going to be spread around to Mr Crimson, Mr Silver and the garden at The Rainbow. When I needed water storage to capture the rain run-off from the greenhouse, a quick word around at The Rainbow evinced a reply from Mr Red – a local plumber — who had a couple of 50 litre tanks cluttering up his garage. Result! For the price of a few pints.

Some final benefits I’ve derived from my social capital include the contract to trim all the hedges at The Rainbow, and a share in a massive crop of plums which another customer needed to dispose of — more delicious jam for gifting! Mr Crimson’s old shower enclosure was saved from the dump when I looked at it and saw instead of waste, the makings of a couple of 2 metre long cloches for the garden – they’ll be very useful next spring for starting off early seedlings under cover.

Certainly, I could have stayed at work and bought all those things which I have acquired through exchange of social capital — except of course I wouldn’t have. I would have had no time to devote to my garden, to build a greenhouse, to go foraging in the woods. And you might say in terms of value I would ‘earn’ more in a job than say foraging for hazelnuts. In terms of a simple cash yield that would be true, but the yields are multiple. A couple of hours spent collecting a few pounds of hazelnuts might yield maybe £5 worth of nuts. On a one-dimensional cash-mediated account that is worth less than two hours paid work. But it also yields two hours of entertainment, two hours of healthy exercise, two hours immersion in nature (the lack of which is a major source of mental stress and anomie). In the cash-mediated model, two hours of work would not supply £5 of produce and pay for two hours in the gym, another two hours of entertainment and still leave time for a nice walk at a time defined by working hours. ‘Earning’ the cash would entail further costs — a wage is not pure ‘profit’. To go foraging, I just walk out of my back door, at a time of my choosing. To go to work I needed to wake up early, wear more expensive clothing, drive a car for half an hour, suffer the stress of traffic, spend all day indoors sat down and staring at a computer screen, then drive home again. For the eight hours I’d worked, I’d used up ten hours of my life and degraded both my physical and my mental health. In short, I have exchanged ‘standard of living’ for quality of life.
In truth, much of what we classify as ‘standard of living’ is better described as ‘cost of living’. What may not show through much of the above (although an annual budget of £5000 hints at…) is that I have withdrawn almost entirely from consumerism. I don’t define my ‘worth’ by the things I own, or derive any satisfaction from much of what most people consider to be normal culture. For one, I do not watch or even own a television (Ed’s Note: I can’t even explain how liberating it is not to have TV. Although I own a TV (but no cable, Sky, dish, etc.), it is my parents’ old one from 1984, and gets used occasionally for an odd DVD). That plugs one gaping hole through which pours an incessant stream of discontent and envy into the average person’s life. I’m not interested in ‘celebrity’ culture or keeping up with fashion or organised sport or soap operas or manufactured ‘reality’. I hate being advertised at — either overtly or by insidious ‘product placement’. I resent the condescension implicit in advertising, that vapid consumption of inherently unsatisfying gimmicks somehow bestows on us our ‘worth’. I am not what I drive, or the label on my clothing. I do not need to be anaesthetised by second-rate fiction, I do not need my emotions to be manipulated for someone else’s commercial interests. I do not need my worldview to be pre-digested by the narrow focus of corporate ‘news’ and sterile political ‘debate’ that doesn’t even examine the unstated assumptions of our way of life (Ed’s Note: If you want a more detailed exploration of these ideas, read this post and then, this one). In fact, I don’t need much at all, and most of that I already have. Shelter, food and water, health, a place in society, meaningful work, intellectual engagement. Oikos.

'Still life' composition of some of my 'real wealth'

'Still life' composition of some of my 'real wealth' — (Clockwise from right) Marrows, Apples, Potatoes, Hazelnuts, Jams (Gooseberry, Strawberry, Plum), Jellies (Raspberry, Blackberry Apple) and Marrow Chutney. Preserving summer vitamins for winter use.

Not only is our current way of life unsatisfying, it is also crumbling. We are bumping up against ecological and resource limits – infinite growth in a finite system is inherently impossible. We like to tell ourselves the story that economic growth comes from innovation, human ingenuity, this or that political theory when in fact it almost exactly matches energy use (Ed’s Note: A data-centric treatment of that idea behind energy usage can be read from here). We need to change that story as our energy options are becoming constrained, which inevitably entails an economic contraction, yet our economy is a complex adaptive system that can only remain stable within certain bounds. For one, it cannot accommodate contraction, as an ever-expanding pool of debt backed by the assumption of infinite growth is required to maintain the current financial model. I see the present as a transitionary phase, that now-cliched Wile E. Coyote moment where the majority have yet to look down. I believe the near future will not much resemble the recent past (Ed’s Note: I recommend the Crash Course videos for a quick systems level introduction to our civilisational memes and problems. No, I am not a member, nor do I get paid for that link).

The future will be low-energy, low-tech and local. This is why our most valuable assets will be those which are productive of real wealth. Meanwhile, it is necessary to operate with a foot in both worlds — build up those real assets whilst being able to feed the money-demands of the doomed system. Cutting money costs frees up the time to create the alternative support system — gardens and social capital, our individual ‘oikoi‘.

It’s fair to say that when I left my job, it was a bit of a leap of faith. I had no great plan mapped out for the next few months, just a small safety net — a bit of cash, a garden needing work, a small income from Amazon and other sources. I had no way to know beforehand what my social capital would yield, yet it has made a great contribution towards my needs. To set out on a journey, it is not necessary to know every footstep it will entail. If I’d waited until the future looked secure, then I’d be waiting still.

Ed’s Note: Macs has made it a self-contained post, and I have supplemented suggested readings to whatever topic needed more explanation. However, Macs would be happy to field questions ranging from something as pointed as “‘How can you possibly live on less than £5000 a year?” all the way to very strategic questions one might have about his approach. Fee(l) free to ask. ;-). If the answers have to be long and involved, Macs might even tease out a few more detailed posts. So, put your thinking caps on, and throw those questions (but not the kitchen sink!) at him. 8)

Ed’s Note (2): From Barry Ritholtz‘s Blog: Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
In other words, we have a very liberal approach towards dissenting opinion, but we will choose to block downright inflammatory remarks aimed at the author or his lifestyle. Thank you.

Guest Post: ERE-Lite or, How I can easily live on £5000 per annum — Part I

with 5 comments

About the Author:
I encountered Macs first in Early Retirement Extreme (ERE) way back in 2008. He would leave an occasional comment, the keyword being “occasional”! 😉 His comments(*) were quite thoughtful, intriguing and added a complementary angle to Jacob’s post, so I filed him away in my memory as an intelligent and an interesting person. I really started having interactions with him over at Simple Living in Suffolk (SLS), where we found more opportunities for shared discussions. Macs’ ideas generally represent a non-mainstream approach to irritating real life issues, which is his unique selling proposition (USP). 
(*) And if I might add, like the majority of comments at ERE

About the Post:
The old Chinese curse about living in interesting times has come true, or so it seems. Whichever direction you turn, there’s talk of austerity and unemployment, volatility and inflation, companies reporting profits and layoffs(!), and of course the no-longer-ignorable-and-widespread protests, etc. All talk for the common man is centered about the difficulty in making a living in these tough times. Over a few interspersed discussions at SLS, Macs outlined some of his own approaches towards shoring up his “quality of life” to be as free as possible from all these extraneous factors. So much so that: By Toutatis, the only thing he worries about was, if the sky would fall over his head! 😉
I asked him if he could consolidate all his ideas into a single post to provide strategies and validation to others that might be looking for inspiration. Macs kindly consented, and he sent me a classic one.
At times, the unfamiliar words that were leaping from the page kept reminding me of a Nero Wolfe mystery novel (Part I), whereas all the people names and the description of fun activities were reading like Enid Blyton (Part II)! 😉 I had good fun reading and digesting it. I hope you will too. Thanks Macs!

Serendipitously, the theme of the post is similar to Jacob’s recent “How I live on $7000 per year“.

Early semi-retirement lite — Social capital and the garden economy

They always say you should begin at the beginning, but that presupposses that there is a beginning, that it is singular, and that events follow on in a linear progression thereafter. To meet such requirements, I’d have to start with “FIAT LUX” although – denominational & teleological controversies aside – that would surely be absurd.

Instead I shall begin with what has become my ‘word of the week’, which is oikos (οἶκος) — the Greek root common to both ‘ecology’ and ‘economy’. Oikos denotes a dwelling, a household, and encompasses both one’s place in the world and one’s manner of inhabiting it. One’s environment and one’s self, if you will.



This is simultaneously a duality and a unity, like the Taijitu (yin-yang symbol), a glyph of enantiodromia, the principle of one condition at its height containing the very seed of its opposite. A tendency of the Universe to abhor extremes and redress balances. These tendencies are evident in both ecology and economy. In ecology there is the ‘logistic equation’ which describes predator-prey population fluctuations based around the over-predation / population collapse / explosive recovery / over-predation cycle. Each species in its extremity is its own downfall – there is no total domination without overshoot. Yet in the longer term the ecosystem — the ‘big picture’ — persists stably, over-arching the cycles. In economics we talk of ‘business cycles’ and ‘supply and demand’ where prices and goods sit on the see-saw.

In the cusp of tension between these warring children of oikos — ecology and economy — we human animals must make our homes and derive our livelihoods. But what has any of this to do with early (semi-) retirement, you may well ask? In my case it all speaks to the ideas of home and how to inhabit it.

An alternative start point could have been the day I handed my boss a little envelope which contained my letter of resignation. Or the day I first read Jacob’s ERE blog. Or the day I first took peak oil seriously. Or … you get the point — beginnings never are, are they? There’s always something earlier. Consider a river – say the Amazon. Where is the source of the Amazon? I know some intrepid explorers have risked life and limb in tracking it down along many tributaries, yet the very concept is a fallacy. The source of the Amazon is its entire watershed, nothing less than maybe a third of the continent of South America. Likewise, my journey towards semi-retirement draws its sources from many and varied roots.

Needless to say, I wasn’t enjoying my previous job managing online sales for a small bathroom supply company. All I could say in its favour was that it paid the mortgage and the bills, and that it kept me connected to the internet all day, and like all cubicle-jockeys I found there many things more interesting that my allotted tasks! It reminded me of peak oil (an issue I’d buried from my consciousness a few years earlier), and that as things stood I would be very vulnerable to the changes I expected over the next few years. For a start, my job was vulnerable, and it was also soaking up so much of my time and effort that I had none left over to prepare my home life. Then I discovered ERE and a few other ‘working a job sucks’—themed sites, and an escape plan started to form.

From LATOC, I took on board ideas about ‘prepping’ for an imminent collapse of Western industrial civilisation (which I now regard as slightly less imminent, but no less inevitable (Ed’s note: See this article by Jacob for a detailed, yet similar prognosis), but it was mostly short-term ‘lifeboat’ style preparation — stock up on basic foodstuffs, save rather than squander spare cash, and of course, buy a bit of gold… So I got to the point where — if the lights went out tomorrow — I wouldn’t starve for six months or so, and I had something of value I could slip in a pocket and run away with should the Four Horsemen come knocking. But I was still tied to my job and Jacob’s ideas about financial independence really started to kick in. I’d got the quick panic out of the way, but of course that always leads to ‘what next?’ (Ed’s Note: See ERE’s 21-day makeover)

What I liked about Jacob’s ERE was that it wasn’t just another ‘get-rich-quick’ site, or dependent on earning a wage three times what I was earning, but rather a series of alternative viewpoints, different ways of looking at finances, and ultimately the power of reducing needs — or more specifically of reducing the need for cash to fulfill them.

I was in a bind. What I really needed was TIME. Doing a full-time job denied me time, and it ate into my psychological well-being too — stress, exhaustion, existential angst, you name it. I had one ace in the hole — a life assurance policy due to mature at the end of 2010. Back in 2007/8 I was really having doubts about whether the finance industry was going to survive long enough for me to cash out. It was too soon to count that particular chicken, so I carried on working, reducing my living costs and buying more gold with what I saved. By early 2010 further misuse of my employer’s bandwidth had brought me into contact with Monevator and Ermine’s ‘Simple Living in Suffolk‘ and a few others, and this had convinced me that extra income streams, even small ones, were worth cultivating, so I started diversifying. I bought a bulk load of remaindered books and set up an Amazon account; I started doing paid online surveys; I started a high-yield stock portfolio in an ISA. The Amazon business and the surveys meant I was obliged to register as self-employed, which was a great step to take as it freed up my horizons for later.

By the time 2010 ended the finance industry and myself were both still alive, and a nice cheque arrived in the post. The next day the mortgage was paid off, and I still had about 1 year’s worth of my reduced living costs. This is where the envelope for my boss made its appearance, and I left to
‘spend more time with my own business’. That shocked him even more than the fact I was resigning!

On the 1st January 2011 my new life started. I’m now solely self-employed, with a growing portfolio of small income streams, and a much-reduced need for cash. In round figures I can easily live on £5000 per annum, which is actually below the personal income tax allowance. It would be a lot less if I gave up alcohol and tobacco, but that’s a fight for another day (Ed’s Note: Reminded me of a thread on the ERE Forums).

About 20% of that is covered by surveys, dividends and interest payments (bank accounts and peer-to-peer lending) (Ed’s Note: I participate in P2P lending myself, and if done correctly with the right people, is a good income source), on which I probably spend 2 or 3 hours a week. The Amazon returns are trickier to calculate due to the amount of stock I have to shift, but that makes another useful contribution. Being self-employed means I can take up casual jobs here and there, and so I’ve been doing quite a lot of gardening work, with about 10-15 hours a week at minimum wage being enough to fill the gap between needs and other income.

I’m now time-rich and cash-poor (Ed’s Note: Kiyosaki readers will understand what that means, but for the rest, this article by Jacob gives a more detailed explanation and provide a context for the explanations that follows below), which gives me the opportunity and impetus to realign my ideas of what really constitutes ‘wealth’ and ‘capital’, and brings us to the nominal theme of the piece, which is ‘Social Capital and the Garden Economy’ and how I have transformed how I inhabit my ‘oikos’.

What are ‘wealth’ and ‘capital’?

Our immersion in the money economy blinds us to the true nature of wealth and capital. The instant response for most people is to equate both with money itself, and the reasons this is not so are many and well-rehearsed. My viewpoint is that wealth is the means to satisfy human needs, it is rooted in the real economy of goods and services. When you buy a loaf of bread, the wealth is the bread, not the coins exchanged to obtain it (it is also the labour expended to earn the coins you spent). If there were no bread, the coins offer no nourishment. I’m not going off on a ‘we don’t need money’ tangent, I just want to emphasise that the money is a medium of exchange, a marker of wealth. But true wealth resides in the actual goods and services required to meet human needs.

Capital is slightly trickier, for reasons I’ll touch on later, but a working definition would include both an accumulation of wealth, and a resource with a capacity to generate wealth. In money terms it is simple to connect these two ideas as though there were no difference — pile up your money where it earns interest and more money will appear. This obviously doesn’t work with bread — pile up your bread and leave it for a year, and you will have a big stinking pile of mould, not more bread. The wealth represented by bread is derived from it meeting human needs, ie being eaten. If more bread exists than people can eat it ceases to be wealth, but becomes a health-hazard — a cost. What then happens when we have more money than required to buy all the goods and services available in the real economy? When there is more than enough money to meet all valid human needs? Are all human needs then met? I think a quick look around the world will answer that one…

So, I like to distinguish three broad classes of capital. Obviously there is financial, or monetary, capital. This is an accumulated excess of exchange tokens. Then there is non-financial capital — which you may regard as roughly being ‘physical’ capital. It is the means to generate real wealth, be it a pear-tree, or a widget-making machine. It might be a raw resource or something built from previous investment of other wealth. Finally, there is social capital which is non-material and non-quantifiable. It resides in relationships between people and grows with co-operation rather than competition, when it is distributed rather than accumulated. It tends to be local and resilient, and the best currency for building it is simple gifting. It builds and holds together communities.

Ed’s Note: Macs’ application of these ideas will be continued: in Part II

Ed’s Note: Macs has made it a self-contained post, and I have supplemented suggested readings to whatever topic needed more explanation. However, Macs would be happy to field questions ranging from something as pointed as “‘How can you possibly live on less than £5000 a year?” all the way to very strategic questions one might have about his approach. Fee(l) free to ask. ;-). If the answers have to be long and involved, Macs might even tease out a few more detailed posts. So, put your thinking caps on, and throw those questions (but not the kitchen sink!) at him. 8)

Ed’s Note (2): From Barry Ritholtz‘s Blog: Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
In other words, we have a very liberal approach towards dissenting opinion, but we will choose to block downright inflammatory remarks aimed at the author or his lifestyle. Thank you.