Giving up the rat race in favour of long holidays, throwing out the alarm clock and spending more time with your family, hobbies, daytime TV…does that sound like a dream come true?
Despite the rise in the qualifying age for the state pension and the frequent suggestion that we should all work til we drop, early retirement is a big dream for many of us. But if you start preparing early and manage your finances the right way, you could take the first steps towards making that a reality.
Even if 55 is beyond your reach, it’s well worth getting organised for retirement, which could be sooner than you think. Recent research has shown that 60 per cent of people have had to leave work sooner than planned, mostly because of ill health or redundancy .
Step 1 – Start saving now
A pension may seem an obvious starting point – but more than a fifth of UK adults are not saving anything towards retirement . If you don’t have a workplace pension, look at setting up your own retirement fund. Should you decide to invest in buying a property to let, you would most likely need expert help, so it’d be wise to seek out an independent financial advisor (IFA). And you could use your ISA allowance to save tax-free and shop around for the best deals. Compare savings accounts with Propertywide.
Step 2 – Work out what you’ll need
Go through your statements, bills and receipts – a spending diary may help – to see what you spend now and what you’ll need when you stop work. You’ll obviously save on work-related stuff, such as clothes and fares, but travel, eating out and hobbies could sop up the excess. Take into account the benefits of downsizing, as well as major expenses such as property repairs, inflation and life expectancy – around 50 per cent of today’s 60-year-olds will live until they are 90 , so retirement could last longer than you think.
Step 3 – Tackle debts
Less debt should mean more savings. It is best to pay off the accounts charging most interest first – you may find that consolidating several balances into a single, cheaper loan or switching to a more suitable credit card will save you money in the long term. Check your credit report before you apply. Lenders look at it to see if you’re a reliable borrower, so it needs to be accurate and up to date or you may not get the deals you want. If you find any errors, ask to have them corrected, and closing any unused accounts can help. You can see your Experian credit report with a 30-day trial of CreditExpert. Get access here.
Step 4 – Start economising
You want to be mortgage-free and it’s never too early to practise living more frugally. As a member of Experian CreditExpert, you can also get help finding the most suitable deals on credit products, from mortgages and loans to utilities. You could even try making your own work lunches, or cancelling memberships you rarely use.
Step 5 – Don’t lose sight of your goal
It’s your future, so set yourself goals – thoughts of that dream trip or longer hours in the garden will keep you going while you build up savings and chip away at costs. Regular financial reviews will show if you’re on track and your credit report will act as a reminder of how far you’ve come – and how far you need to go before your colleagues can organise a leaving party for you.