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How to take action to retire early.

by maria gbaf

By: Paul Wilson-Personal Finance Expert at Cash Lady

Paul has worked in the finance sector for nearly 20 years for a variety of companies, in a range of different roles, including roles in marketing and in developing and maintaining commercial partnerships. Paul has a strong market and product knowledge across a number of different financial products including, but not limited to; credit cards, savings, loans and mortgages.

“Getting yourself into a position to retire early really boils down to minimising your outgoings as far as possible and maximising your savings.”

“You should look to clear any debts including your mortgage and then build up your savings pot. Of course, this is much easier said than done but if you are truly focussed on retiring early it may be that you need to sacrifice luxuries in the short term. Doing this may require a change in mindset, but focussing on delayed gratification and the end result of early retirement can help you stay motivated and disciplined. You will need to adopt a much more frugal way of living by avoiding things like expensive holidays, new clothes, gadgets, memberships and subscriptions. If you still want to enjoy holidays you can consider staycations instead of all inclusives. If possible, getting rid of your car entirely could help you save considerably. Estimates put the average cost of owning a car at nearly £3500 which could be saved and added to your retirement fund. Using public transport and maximising opportunities for home working can make this transition easier.”

“As well as foregoing luxuries, now may be a good time to work as many hours as you reasonably can, or even consider a second job. Evening and weekend jobs can be an easy way to accrue extra income that can go straight into a savings pot. Many people now have a side hustle in addition to their day job which can work around other commitments and you can earn up to £1000 a year of additional income before paying tax.”

“Every pound that you can save is a pound that could go towards clearing your debt or building your savings. For instance, you could make overpayments on your mortgage (if your mortgage provider allows this without penalty). You could also downsize your home to reduce the remaining amount repayable on your mortgage, or possibly even clear it entirely. Renting your home out could also contribute to your retirement pot. By renting your property out you could make enough to cover the mortgage and make a profit which could be saved each month. Obviously you will need to find somewhere else to live whilst you do this, but if you rent somewhere smaller your outgoings will be reduced whilst your income increases through your rental.”

“Being savvy with bills and outgoings is one more way to exploit potential savings. Never let utilities lapse into standard rates and complete regular price comparisons to make sure you are getting the best deals. This includes electric and gas, insurance policies and TV and broadband. In fact, having only the most basic TV package will save a tidy sum. Similarly, sign up to cash back websites to earn money on any bills or services you do sign up for. Early retirement can be helped along by looking after the pennies.”

“You should think carefully about where you save your money. Interest rates haven’t been great for savers for some time but you should still be looking to earn some interest on your savings, by maximising your ISA allowance and seeking out the best interest rates available via savings bonds or accounts. To truly maximise your savings, you could look at passive investments that require a nominal set up amount and then accrue money over time; this could include things like cryptocurrency, stocks and shares or start-up businesses looking for funding. It is always wise to talk with an independent financial advisor before investing and considering the risk vs reward.”

“Early retirement is something that needs to be very carefully considered and meticulously planned. You may decide to take a staggered approach, whereby you reduce your hours gradually from full time to part time followed by flexible hours before making the move straight to retirement. This would allow you to gradually acclimatise to a lower income. When you do retire, it’s important to have enough money to live. Assuming you have paid off your mortgage, you will still need to meet your basic needs like food and heating. In addition, you need to think carefully about discretionary spending in retirement, things like holidays and clothes or meals out. Create a document outlining all the costs you will incur in retirement so that you have a clear idea of how much you will need to pay off and save. This will then give you a timeline and an end goal which you can tick off all the way up to the day you say goodbye to 9-5 and enjoy the early retirement you have worked hard for.”

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