Thursday, 14 August 2014

Can I quit my day job but maintain my current living standards? PART 1

The Dream of Financial Freedom
Many homeowners are sitting on an asset that is a worth a fortune. Yet we are still financially burdened.

Maybe you would like to take early retirement, or have the ability to go part-time, or it could be that you simply want to quit the rat race.

Or perhaps you enjoy your job and want to carry it on, but would like some extra cash to fund your children through university, or to pay for those long haul holidays that you have always dreamed about.

Or possibly you would want to start your own business from home or pursue a vocation, but need financial security before you make the leap.

Or you could simply be struggling with paying your household bills on your stagnant wages.

Unwilling to compromise
Off course we could tighten our belts a little more.  But most of us do not want to have to live like a monk to get by.

There is the opportunity to take advantage of high house prices and downgrade or move to a cheaper area. But we like our home and have no desire to move.

Another option is equity release.  But this is does not appeal to most of us.

So how can we secure financial freedom without having to live frugally and without having to downgrade?

Having your cake and eating it
In the internet age, owning a home can boost your household finances.  For home owners seeking an additional income the emergence of websites serving the "sharing economy" is becoming a real boon. These specialist websites are allowing us to exploit the money making power of our home.

Over the next 4 weeks the House-Saver Blog will be providing advice on how you can gain greater financial independence.

This week I will be explaining our approach.  In the weeks ahead I will be applying this approach to three typical home owner scenarios:
  • PART 2: a city centre / inner urban 2 bed terrace house
  • PART 3: a suburban 3 bed house
  • PART 4: a rural 3 bed house
For each scenario I will present a range of options.  This will enable you to pick and choose the money making measures that suit your circumstances.  I will also be presenting some rather unusual options for the really brave.

Our Approach
I will be making some highly generalised assumptions.  However, the principles can be applied to almost any situation.  For example, living costs in London are higher than in the rest of the country, but so is the potential income that Londoners can generate from their home.

Cost of going to work assumptions
According to we spend on average, £3,157.92 a year to go to work.  This is broken down as follows:
Fuel, train fare, parking fees £1,932.48
Lunch and snacks £696.48
Tea/coffee/milk £163.20
Birthday/leaving contributions £72.84
Work wardrobe £185.40
Sponsorship for colleagues £25.20
Forgotten or denied expenses £82.32
Total  £3,157.92

The above costs are extraordinarily high and they don't even factor in childcare costs.  According to the Family and Childcare Trust, for a family of two children, the cost for one child in part-time nursery care and one in an after school club is an outrageous £7,549 a year.

Current Income assumptions
The average household income in the UK for full time workers is £28,200. [Source: Office for National Statistics (ONS)]

Tax reduces this figure to around £22,100*.

Taking away the "cost of going to work" figure of £3,157.92 reduces this to £18,942.  This becomes our first target figure.

I have assumed that part-time workers earn £14,100 a year on average.  Once Tax is applied, this income reduces to around £12,500.

I have applied a "cost of going to work" figure of £1,578.96 to part time workers.  Taking this figure away from £12,500 gives us a reduced take home income for part-time workers of £10,921. This becomes our second target figure.

I will aim to present money generating options that match the above target income figures.

*Don't know your take home pay after Tax?  Check out

Other assumptions
I will be assuming that there is a spare room (or spare rooms) available in your home, plus other surplus space that you don't need, or that is under-used.

I will be assuming that you are a typical household when it comes to your expenditure on energy and other utilities.

Some of my options will require you to own a car.

Next Week
In PART 2 I will be applying the above assumptions to a typical city centre / inner urban 2 bed terrace house.  I will show how the "average" owner of such a property could go part-time, or even quit your job completely, by generating income from your property.


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