Week of Mon 26th May 2025

I have released the tool I use to model my net current assets in order to see how well they cover my expected future cash outflows. One key input variable is the Non-discretionary lifestyle fund multiple.

It’s not immediately obvious what this is, but it’s critical to understanding the coverage of your assets. So this post will breakdown the concept, and allow you to input the correct value.

At this point, it’s worth noting that you don’t need to input it manually if you use the googlesheets version of the model. Simply press calculate plan and the tool will work out the appropriate value for you.

An analogy

Before we dive in, let’s warm up with an analogous value that most people are familiar with.

The so-called “4% rule” means that you withdraw 4% of the value of your fund at retirement, and then increase that base amount by RPI each year and you’ll never run out of money.

Another way of expressing this is that you need a fund of 25x your annual expenses in order to retire. This could be called a “Lifestyle fund multiple” of 25.

My spreadsheet model has got nothing to do with the 4% rule, which is flawed from many angles (not least it takes no account of state pension). However we do need a multiple of some sort in order to divide the assets into the three key layers: Tax reserve, non-discretionary lifestyle fund and discretionary lifestyle fund.

Discretionary vs non-discretionary spend

I have a separate post which goes into this in some detail, but in essence, non-discretionary expenses consists of all those things that are non-negotiable in your lifestyle.

So as well as the obvious food, energy, clothing etc, you need all the other elements that you consider part and parcel of your retirement. If you have 3 foreign holidays, add that in. If you dine out once a week, add that in. If you want to be woken each morning at 6am by a bagpiper in full highland dress, add that in.

The important thing for the model is that this spend stays constant in real terms. So you can’t just suddenly decide in 5 years to have 6 foreign holidays a year. What you’d have to do is maybe ditch the highland bagpiper and spend the savings on the holidays instead.

(Note that you could decide in one particular year to have 6 foreign holidays and fund the extra three from your available discretionary funds. Doing so does not impact your non-discretionary fund).

Estimating your non-discretionary annual lifestyle spend accurately is absolutely critical to modelling your financial future. You need to spend as much time as possible getting this value, in today’s money.

A quick note on discretionary spend for completeness, but we won’t dwell on it. Discretionary spend is where you can decide both the amount and the timing, but critically, spending it does not impact the ability for you to enjoy all the non-negotiable aspects of your lifestyle.

So, in the example above, you could decide one year that two of the three holidays will be upgraded to business class travel.

Non-discretionary Lifestyle fund

The final piece of the puzzle before we get onto the multiple itself is the total fund which you set aside to cover the non-negotiable aspects of your lifestyle.

This fund has a very specific job. It is forward looking, using assumptions like age at death, investment return, state pension and other things which you need to make conservative estimates for.

The fund should be pretty much zero on the death of the second partner if all the assumptions play out in practice.

This is critical, so I’ll repeat again: The non-discretionary lifestyle fund should be planned to go to zero by the time you die. Its only job is to sustain your household lifestyle until life is no more.

It’s not designed to be passed on (although of course, you can hold other assets outside this fund which can be passed to heirs).

This fund value is so important to financial outcomes, that I recalculate it every quarter, using up to date estimates of non-discretionary lifestyle spend and reviewing all assumptions. The spreadsheet model does exactly this task.

Non-discretionary Lifestyle fund multiple

Finally, we can now get to this key assumption. The total lifestyle fund is your current annual non-discretionary expenses multiplied by the non-discretionary fund multiple.

In other words, this multiple “bakes in” all the future assumptions about age at death, future inflation, future returns, state pension etc and boils it down to a simple number.

The spreadsheet model helps you calculate this input number. Once you have entered all the other assumptions, press “calculate plan” and the appropriate number will be worked out that leaves you with as close to zero as possible on the second death.

If you are using excel, you’ll have to do this manually. Just start with a value of say 15 and then slowly increase or decrease it as directed by the spreadsheet until the full plan is revealed. That is your final value for this multiple.

Rules of thumb

As flawed as the 4% rule is, it does provide a rough rule of thumb in the absence of any other information. Similarly, there are rules of thumb that can be applied to the non-discretionary lifestyle multiple.

A couple in their mid fifties expecting two full state pensions should have a multiple of around 20.

So if you are say 54 and contemplating a retirement with total non-discretionary household income of £50,000, then you will need a non-discretionary reserve of around £1m.

Or, you can work backwards. If you have a total pot of £1.2m, and set aside £100K for future taxes and £300K for discretionary items and possibly money for heirs, then you have a non-discretionary fund of £800K.

Dividing this by 20 (assuming this is your calculated multiple for your assumptions). This gives a non-discretionary spend of £40,000pa in real terms.

You then have a choice, either trim back your desires to squeeze within £40K and retire today, or carry on working until your fund is big enough to match your desires.

So, as you can see, this value is rather critical to making sense of your financial future. Please note that this is not a “standard” approach to retirement calculations. It is something which I use and works for me.

If you think it might work for you then great. But if you don’t understand it, then please don’t use it. Refer instead to some standard retirement planning texts.

Ruslan has written an excellent summary of how the role of junior engineer will evolve with AI and also some very practical steps on how this transition can be navigated:

Let’s be clear: the old model, where experience was often gained through highly repetitive tasks, was never perfect.

It was simply the established way, the way of our ancestors: software engineers learn some math and not-particularly-useful concepts in college (or take a coding bootcamp, which is much faster, and in my experience, produces similar results), join a company, shadow more senior engineers, write some terrible code, make a few expensive mistakes for the company to absorb, and eventually graduate into productive developers of software.

But like any system with inherent inefficiencies, this progression system was always susceptible to disruption.

I learned to code in 1981, in BASIC and Z80 machine code. I added FORTRAN, SQL, perl, python and HTML in the 90s, and in the last decade or so, R, PHP and JavaScript.

Apart from a brief period at the very start of my career (and bizarrely towards the end), I never wrote code for money. I think that’s why I never fell out of love with coding – it was something I did only for enjoyment.

So, of course, I embrace AI today. I remember a strange realisation early in 2025 that I would never actually be coding without it in the future. This stuff is only going to get better, and certainly faster than my ability to learn anything the old way.

But I also do something else which gives me a privileged and unique insight into how the workforce will be using AI a decade from now. I run an after school code club in my local library for 8 to 13 year olds. I have witnessed first hand how this generation use AI to solve problems creatively.

There are so many stories of how awesome these children are. For a flavour you can read my end of term report, or a recent diary entry where a nine year old boy produced a stunningly creative app out of nowhere.

They are not learning coding the old way. They would not be able to give you a very good explanation of a variable, loop, function, conditional or any other core programming concept. Yet they can produce apps which do what is in their head. Creativity is allowed to flourish.

Now consider that by the time they leave school in 8-10 years, AI will be unrecognisable from what we have today. They will be utilising AI in all manner of ways beyond coding. If they enter the workforce in a KVM role (keyboard, video, mouse), entry level positions will require a pretty deep skill set to choreograph various AI agents.

One thing they won’t be doing is hand-wringing about whether there’s a difference between a junior and senior engineer. AI is the new baseline and these children are catching that wave, and will surf unconcernedly whatever it washes over.

Too much discussion today centres on whether this or that model is better at A or B, or whether it lies or hallucinates, whether is only does basic things, whether it’s trained on stolen data and so on.

This misses the point. All those points will be mute in five years.

My friend Rob, from our school WhatsApp group, put it best when he said:

Here’s my big philosophical thought for the day. Circa 1985 the kids making the best stuff were those whose brains were capable of picking up a book on assembler and being able to navigate it.

2025 I think any kid can make stuff, since natural language is so democratizing, so maybe the kid with the biggest imagination wins.

This is what AI enables. It unlocks imagination.

Tomorrow’s workforce are already doing that today.

My first Himalayan Balsam pull of the year with Stroud Valleys Project today. Headed over to the Frome at Eastington to meet up with Britta, who is standing in for Ruth for a few weeks.

I’ve not done this section before, but our team has in the last two years and the results are really encouraging. The first 100m or so was pretty clear. A few plants here and there, but apparently was armfuls last year. This gives some encouragement, as this is a laborious task to do every year.

I teamed up with David for the first part of the morning and we got rid of small patches in various places. The plants are still mostly small, so not so easy to spot, especially among the nettles.

There’s also giant hogweed on the site, so we gave that a wide berth. This is another constant problem along the Frome.

I left at lunchtime because I had an early afternoon call with Charlotte from the Water Watch Collective. They are launching a new hub on Friday which will help to co-ordinate a lot of citizen science being done on the waterways of Gloucestershire. This could be very helpful and connect to conversations we’ve been having in Dursley about setting up an interest group for the River Cam.

In the evening, we held the regular Dursley Green Drinks – the two year anniversary since the first one in 2023. A smaller group than usual, but could be because of half term. But new faces again joining us for the first time, so the network is still proving valuable in the community.

I’m assuming you have a spreadsheet … what are your key assumptions?

Of course I have a spreadsheet! How did you know? I guess I must give off that big-spreadsheet-energy.

We make the following assumptions when modeling our retirement income and spending:

• 4% withdrawal rate informed by the Trinity study. Many FI folks lower this percentage, but we’re young, flexible, and have an aggressive portfolio. We typically run our projections with either a variable return rate, or by modeling income and expenses – but that’s just not as snappy as saying “4%”.
• 3% inflation seems reasonable for the US-heavy (60/40) portfolio, but the time will tell.
• 6% inflation adjusted expected return seemed like a reasonable conservative default
• 2.5% inflation adjusted expected dividend yield is what I’ve seen used as simplified modeling for bonds

In terms of expenses, the biggest unknown here is healthcare – not something your UK readers will empathise with. There are subsidies depending on your level of income, and your postal code can significantly impact medical insurance prices – one can expect to pay anywhere from $400 to $2,000 a month for medical coverage and it’s a nightmare to model. Freedom extends to freedom to die if you can’t afford healthcare I guess.

Oh and by the way, I’ve been really enjoying ProjectionLab – it’s a powerful but also user friendly tool that helps with modeling many different scenarios. I’ve used it to explore scenarios too cumbersome to build out in a spreadsheet. Lots of what-if scenarios.

What advice would you have for young people thinking of emigrating to the US?

A lot of stars aligned for me the right way – I happened to have a cousin in the US who was able to help me get my bearings, an old pen pal of mine helped me a great deal, and I got lucky with a choice of career – I joined tech during a hiring boom, I had a decade long but relatively painless path to citizenship.

Unlike my small hometown in Russia, the US truly felt like the land of opportunity – I could achieve things as long as I was willing to work for them – and I didn’t need to be related to someone with a good career to get into said career. I don’t know how much of this was due to me leaving home and going somewhere new, but there was, and still is, a great deal of fairness and equality in comparison with more emerging economies.

The current political climate in the United States has been changing (shocker, I know). As someone who was a frequent visitor to the same United States Customs and Immigration office for nearly a decade, I can see that the vibe has changed. Where I felt welcomed by immigration officials with open arms there are now pictures of Latin American immigrants in handcuffs. Where the employees used to welcome me with a smile, there’s now a charged, adversarial atmosphere. But as they say here, your mileage may vary.

I don’t really want to discourage anyone, but I think this is an important bit of context. With that, and the preamble that I came to the United States 15 years ago, here’s the advice that worked for me. I think this is a generic advice that could work for immigrating anywhere as a young, passionate, and energetic person:

• Be prepared for the initial grind: It took me some time to get a foothold – everything is different – social norms, how you get groceries, how you get paid. These things take time, and working extra hard in the beginning pays off (to learn the culture, get a foothold work-wise or educate yourself on a chosen career path).
• Persistence pays off: There’s a great deal of luck involved in success (in fact, you should be wary of people who only attribute their successes to their own prowess). But success is only possible if you’re there to capitalize on these opportunities as they present themselves. It took me three attempts to be accepted at Google, with multi-year cooldown periods and lots of preparation in between.
• Build a support network: I had a cousin in the US, but even with that it took me a very long time to build a support network. I didn’t want to only socialize with fellow immigrants (I’m a huge believer in engaging with the culture if you choose to move to a place) – and assimilating into the culture enough to have shared context for friend-making took time and effort.
• Research your career path: I lucked out into a software engineering career – it’s something I always wanted to do, and it happened to be in demand at the time. You should do your research and identify which careers are on the rise and in demand.
• Understand your “why”: For me moving to the United States was all about freedom. While there are many countries that can provide that, the unique American freedom flavor always spoke to me. Keeping your “why” in mind can help when things get tough.
• Financial education is key: If you’re reading Chris’s blog, I imagine you already know the fundamentals – savings is good, tax-advantaged accounts are good, investing is good. Start learning about the country’s financial system, quickly – sound financial decisions compound over time.

What sources do you use to educate and inform yourself about money?

I’m trying to build up a personal feed of fellow independent bloggers (like Chris) I can learn from, but so far I’ve been mostly following the big names:

• Mr Money Mustache (classic)
• Millennial Revolution (Canadian always-traveling couple)
• Mad Fientist (he hasn’t been active lately)

I also enjoy reading the Bogleheads forums, these are a trove of information. You can find many anonymous case studies there.

What are some areas that you’d like to hear about from other people’s financial journeys?

The other day I stumbled upon an article by someone who retired early years ago, but ran into issues and had to get back to work. I can’t find it anymore, but I think it provided much needed perspective in a world full of influencers whose job depends on their appearance of financial competence. I’d love to learn from people’s failures too, as long as they don’t mind sharing. I think that can sometimes be a lot more valuable than “look how well I’ve planned”.

More interviews like this ...

I’m participating again in a brilliant and simple idea from Robert Birming to connect and share during the month of June.

I will update this post throughout June with links that inspire and deserve to be shared.

• I feel the same when I buy a bag of crisps with my petrol and Snack Like No One’s Watching courtesy of Musings From a Tangled Mind.
• Cal compares digital lifestyle to ultra processed food in Are We Too Concerned About Social Media?. I think blogging is the equivalent of eating your greens.
• Tiramisu is questioning the dedication we put into our routines and wonders if completeness is a necessary goal
• Thomas Ptacek thinks My AI Skeptic Friends Are All Nuts and I have to agree. Having spent a week vibe coding to produce a pretty comprehensive personal application, I’m seeing the future.
• In a similar vein, Mike Masnick asks us to Stop Begging Billionaires To Fix Software — Build Your Own , giving an example of a personal productivity application he built with no coding knowledge.
• I’ve been thinking I need a link manager, so was interested in Self-hosting linkding for managing my postroll by winther. I love running docker apps on my server.
• Simon’s very brilliant roundup of The last six months in LLMs, illustrated by pelicans on bicycles.
• Peter found out that Bots Are Eating My Blog for Lunch and only 14% of his site visitors are actually human. There are some things I’d rather not know.

Early start for the regular monthly riverfly check with Graham at the Ocean. River levels were very low today, so a chance to go right across the whole width.

When I started the kick sample, I disturbed what looked like blue painted stones on the river bed. Definitely an odd, inexplicable find, so we took photos to report back to the landowner for further investigation.

It didn’t seem to dampen down the samples though. A huge number of fish and water beetle swimming about among the larvae. We got a pretty solid score of 8, which is consistent with what we’ve been seeing recently.

On the way back home, I stopped by Uley Common to see how that was doing in the growing season. It was looking pretty nice – the grassland was spreading nicely, although there are patches of bramble and hemp agrimony encroaching from the sides.

But also there were nice woodland edge plants such as dog’s mercury and hedge woundwort. I took the opportunity to restack some of the dead hedge which frees up a bit more ground for the grassland to spread,