Personal Finance/Wealth Creation
Start Saving Early For A Comfortable Retirement
About 20% of people prefer to retire early, say from age 55 years.
Most of us pray for early retirement with enough money pot to live comfortably but have not considered exactly how much retirement money we need to do so.
In the UK, where I live, many borrowers are unable to free themselves from debts, even after 65 years of age. That is the unfortunate reality of how deep debts affect comfortable retirement. To compound the problem, the introduction of a lifetime mortgage means people end their lives in debt.
Lifetime mortgages or equity releases have become more popular in the last decade after soaring property values have encouraged people to seek to pull cash from their homes.
There are some who, although NOT owing on their home, are so hard up, that they are unable to maintain the property, or even heat it up. Generally, lenders are not obliged to extend loans on properties and can ask for a court order to put the property on the market to recoup their loan on it.
How To Get Out Of Debt & Boost Savings
Despite a difficult past few years due to the coronavirus, it is still possible to repay debt, albeit gradually, and boost savings and investments towards a comfortable retirement.
Cut Down On Purchases — This is about the fastest way to boost whatever you have left for savings and investments. A friend once advised that the best policy is to ‘BUY NOTHING’. This means perhaps buying only food, and paying essential utility bills. Anything short of that is unnecessary spending.
ONE simple step to avoid getting in the red in the first place — if you can’t afford it then DON’T BUY IT
When you are struggling to get out of debt, recreation spending should also be to the barest minimum. Look for local holiday venues instead of flying abroad, the term staycation has been coined for this.
Look For Better Deals On Existing Debt — Switching your debt to lower interest rates will definitely save you a few pounds. So look for those with lower interest and or zero rates for a period.
Make A Budget — to see what you need to prioritize. Prioritizing payments ensure you pay essential bills on time and do not attract additional levy for late payment. A budget will always show you what you have in excess to save.
Having a budget includes arranging overdrafts in advance from your bank. Most people do not know that overdrafts only cost you when you use them, but it is important to have them in case you need them.
Don’t Keep Up With The Joneses — Don’t covet what your friends or neighbours have. Those who do so are usually high in debt, and this is what you are getting away from. Less debt simply means more savings towards your retirement
The Takeaways
- Investments should be in a mixed portfolio to mitigate the loss of one against the other.
- Savings remain one of the best ways to accumulate wealth for your pension. A simple £20 put away weekly for a year gives you a whopping £1.040. If you are consistent, you will soon build up a massive pension fund over the years.
- It is not always that Investment and pension Managers give one the best outcome, so learn simple investment tricks yourself and carry yourself along. Stock markets, properties, and commodities remain the top investments of Pension Funds.
- Stay away from high-risk/high-yield portfolios. If it is a high risk, you are likely to lose MORE than you gain.
About The Author
Lanu Pitan is a Nigerian ex-pat living in the United Kingdom. She is a Chartered Accountant, and for many years was a Group Head of Finance of a Publicly quoted Insurance Company. She now manages her own small operation.
