Redress the balance of work and life

Swapping a high salary for a better quality of life can work - but only if you plan ahead, says Kate Hilpern

Had enough of the rat race? The perpetual, debilitating slog of long hours, stressful work and evaporating leisure time? Perhaps it is time to trade in your high-pressure, high-speed existence for a simpler, more balanced life by downshifting.

Had enough of the rat race? The perpetual, debilitating slog of long hours, stressful work and evaporating leisure time? Perhaps it is time to trade in your high-pressure, high-speed existence for a simpler, more balanced life by downshifting.

According to Datamonitor, a business information and research company, 200,000 British workers will downshift in 2004, bringing the total to about three million. "An alarming number of people appear to be unhappy in their employment and unfulfilled by their work," says Angus MacIver, director of research at insurance company Prudential, which deduces from its own research that one in 14 British workers has already downshifted and that more than half a million 35-to 54-year-olds plan to join them in the next three years.

For some, downshifting involves drastic change - uprooting to the country or even abroad. But for others, it simply means taking a less demanding, lower-level job in the same location. Many people downshift without changing employer.

Analysts point to a number of reasons for the trend. First, the pressures of work are more demanding than ever before, forcing many to call a timeout. And people are beginning to value their time more. Many see no point in earning a high salary for 40 years if they get few chances to enjoy it - particularly likely in Britain's long-hours working culture. Another factor is that society is generally more affluent than a generation ago, giving many people the option to forego the cash incentive for a more measured, serene existence.

"The bigger picture is that we want a better quality of life, spending time on the things we like and with the people we like," says Dominik Nosalik, an analyst at Datamonitor. "A lot of downshifters have children and are reassessing their values."

Jessica Jarvis, adviser for the Chartered Institute of Personnel and Development, adds that in the past, having children often led to women stopping work while fathers climbed the career ladder even more furiously. "Increasingly, there is a trend towards both parents downshifting instead," she says.

Even more people would like to downshift than the numbers actually going for it, according to Prudential. "Our research shows that as many as one in five Britons are considering it, but a lot don't do it because they assume their dream is not financially tenable," says Mr MacIver.

"However, as our research has shown, many people are already living their dream. With the right forward planning, it can be possible."

Some people claim to be better off financially after downshifting. Nick Zea Smith, 30, who downshifted with his wife nine months ago, says, "We were both journalists living and working in London and we have moved to Wokingham, near Reading, where I work in PR and my wife works for an education charity. We earn less than we used to, but our living costs are cheaper and we no longer have to pay for season tickets, congestion charges or expensive lunches. We have more time and more disposable income."

This is not always the case. Sally Wright, 40, who downshifted from a senior management job in marketing in London to a junior managerial job in Hampshire, says: "I took a £10,000 drop in salary and I certainly notice having less in my pocket. But it's taught me to be more aware of the value of money. I think before I buy things now and search out bargains, which I get a kick out of."

Nonetheless, she does feel cheated when it comes to stress. "I decided to downshift, largely to have less pressure in my life," she says. "But even with lower managerial jobs, there is stress. I get slightly resentful about that sometimes.

Martin Evans, 39, actually has more stress in his life post-downshift. However, having left his high-salary, high-pressure job as a management consultant in the City two years ago to become a teacher, he has no regrets. "It's the sort of stress that I feel is worth riding because the job itself feels so much more worthwhile," he explains.

Then there's the risk of becoming bored and unchallenged. Alternatively, people can carry psychological baggage into their new lives, such as the internalised aspirations of ambitious parents, which can affect whether the shift downwards works.

Deyon Jounston, 48, who has moved from being a director of a recruitment consultancy to being a PA for BMW, believes it helps if you've reached your peak in terms of the mark you want to make in your industry. "Because I'd achieved my goals, I was ready to let go of them," she says.

Assessing your motivation, as well as conducting detailed research into your planned new lifestyle, is vital to the success of downshifting, concludes Amanda Davidson, an independent financial adviser at Charcol Holden Meehan.

"Equally crucial is looking far ahead," she adds. "Your decision to downshift may be based on wanting to spend more time with your children, for example, but what happens in 18 years when they want to go to university, the cost of which is growing all the time? There's also a trade-off when it comes to retirement because stopping work early will probably be out of the question after downsizing."

Other considerations for the future should include pension contributions and insurance premiums, she says. "If you're used to having an employer contribute towards your pension, it can be disconcerting to find yourself alone at the helm of your fund. Even if you remain with the same employer, there may be issues. If you're in a final-salary scheme, for instance, and you move to a lower salary, you'll need to find out the definition of 'final salary'. Rules vary, depending on the scheme."

Likewise, life assurance may be linked to your salary, says Ms Davidson. "I have a client who is moving to half her income and all of a sudden her life assurance has dropped dramatically. She has the same responsibilities - two children - and so she needs to top it up herself."

A cash reserve is essential for downshifters, according to Philippa Gee, an adviser at Torquil Clark Rothenberg, who reports a dramatic increase in the number of people seeking her advice about downshifting. "If you have a big mortgage and no savings, setting yourself up to downshift is virtually impossible. You need a fair-sized financial cushion to see you through," she says. The amount should be based on a risk assessment of your potential new life. This involves going over your plans to isolate areas where something could go wrong.

"A lot of people think: 'Oh, I've got lots of equity in the house. I'll use that if anything goes wrong.' But by borrowing on that equity, you'll be adding to your overall costs," Ms Gee cautions.

Depending on current savings and investments can be chancy too, she says. "Downshifting is not compatible with high-risk investments, so downshifters need to reassess their savings and investments, maximising their tax-free allowances."

Tax is an area that Paul Oliver, an adviser with Andover Investment Management, also points to being the downshifter's friend. "Downshifting can be positive in terms of income tax," he says. "If you move from a high to lower-rate tax band, you may find the fall in net income is not as great as you'd thought - both in terms of tax and national insurance."

Perhaps most important of all for downshifters is working out precise ways of cutting spending and having a trial period, according to the Prudential. "Make a realistic note of your family's running costs - remembering to include the cost of things such as Christmas and birthdays," says Mr MacIver. "The trick is to work out where you can make cuts - for example by trading down to a less expensive car. In addition, you should remember to involve everyone in the household who spends money, otherwise you could come unstuck when they don't follow your plan. You should then have an idea of how much you'll need to keep afloat and practice living within these means for a set period."

For people deciding to move abroad as part of their downshift, planning should start even further ahead, says Prudential. Among the considerations should be VAT - we don't have it on property in the UK but it crops up elsewhere in Europe.

Meanwhile, you'll get clobbered on capital gains tax in many countries, even if your new property is your only home. Next add estates agents' fees, land tax and the cost of the notary and you might need a bilingual lawyer, too. Last but not least, think exchange rates. In the months that it takes to buy the average property, fluctuating exchange rates could add thousands to the price.

For people deciding to downshift to a different career, training can have major financial implications, points out Barry Regan, 40, who has been working in IT for the past 15 years and is about to embark on a new career as a yacht skipper. "It's not just the cost of the training. The time it takes is significant too," he says.

Well-planned downshifts are by far the most successful, says Sheridan Hughs, consulting director for the career consultancy Career Max. And for various reasons - including the fact that people often feel threatened when a peer leaves to do something different - there's often no going back. "I've never come across anyone wanting to go back, which speaks volumes in itself," she says.

Financial advisers: IFA Promotion 0800 085 3250

www.unbiased.co.uk

If you are interested in starting a business in the UK: www.ukonline.gov.uk; www.businesslink.org

To start a business abroad, it's worth looking at www.tradepartners.gov.uk; www.chamberonline.co.uk

'I have more time to myself'

Sarah Sharp, 33, left, downshifted from her senior management position at the recruitment consultancy Kelly Services earlier this year.

'I left teaching to work in education recruitment when I was 25 and I did the whole career ladder thing. Last year, I'd reached a senior management position - a very high-pressure, high-responsibility job. I'd leave the house at 6.40am and rarely get home before 7.30pm and that was with hardly any travelling.

I was well rewarded financially but last Christmas, when schools were closed down and I was off work, I realised this wasn't the life I wanted. My dad had become seriously ill, which made me think hard about what life is all about. His illness also meant my parents needed to move in with me and I wanted the time to be able to support them.

I had enough savings to tide me over, so I decided to hand in my notice and look for a lower-level job - probably teaching. But my employer suggested downshifting within Kelly Services. I was amazed because the recruitment industry isn't known for putting people first. I am now special projects manager, a job that has cut my earning capacity by half and involves working three days a week, and I love the lack of pressure and having so much more time to myself.

Financially, downshifting has meant buying less expensive food and clothes, and trading in my high-performance car. I've given up the flashy holidays too, but I find I am able to go away for longer periods of time now. But re-examining my spending priorities has been humbling. I used to be conscious about the names on my carrier bags. Now, I don't care and with a bit of effort, I can easily live on my new earnings.

Probably the hardest learning curve for me has been the fact that if you're a hard worker by nature, you'll probably be inclined to overwork in any job. Because I am like that, I have had to make a big effort to put boundaries in my new role.

The greatest benefit of downshifting is the extra leisure time. I've been talking for years about wanting to do things like learn Italian and go back to painting and drawing and I'm doing both those things. The biggest downside is not having the security of where I'll be in terms of work and finance in five years time.'