6 Simple Methods To Save For Your Retirement
It can be tough living from paycheck to paycheck, but planning ahead to save for your retirement earlier can be worth it in the end if you make the right choices.
Like it or not, old age creeps on us all, and retirement plans are often down to your preparations early in life. Here are a few things you can do to get ahead of your future and make your retirement plans a reality and a bit more enjoyable.
Knowing your budget
It doesn’t matter what stage in life you are in or how much you earn, knowing your budget is crucial if you want to be able to save for your retirement. Chances are if money is tight, you already have budgeted in order to make ends meet. However, things can change such as gas, electricity and petrol price increase among other things.
Staying engaged with your money will give you a better understanding of how you are spending and find ways to save more.
Changing your thinking methods
Most people tend to save in large amounts, but not everyone has the luxury to do so. For those where money is tight, saving even the smallest amount can be huge in the long run. Saving just £1 a day for 30 years is almost £11,000. Saving £10 a day for 30 years is almost £110,000. Changing the perspective that saving a small amount is key to keeping healthy savings and a happy extra retirement fund.
Money now, or in the future
A report by finder.com found that 1 in 10 Brits have no savings, 1 in 3 Brits have less than £600 in savings and a whopping 41% of Brits don’t have enough savings to live for a month without an income. While those who scrape by might not be able to save, those who do should look at how to increase their savings account.
With the number of ISAs increasing every year, people are looking for alternative ways for their hard-earned money to create passive tax-free income.
How much would you need to retire and when to retire
This is the biggest question, “how much does your pension need to be to retire?” There’s no general answer to this question as it hugely depends on a number of factors – for example, where you live, what’s your outgoing expenditure, and when you plan to retire.
Most people want to retire early, but it’s not always achievable, there are a few things to consider. Retiring early means you have less time to save but spend more time using your pension. The longer you delay your retirement, the more money you save.
You may also want to consider part-time roles too. Retirement is not for everyone, and some people enjoy being active. A small part-time role is a great way to gain extra money and keep an active and healthy lifestyle.
Ways to start saving
A good place to start saving is to set yourself a goal. If you know how much you’ll need to retire and by when then you’ll have a good guide, to begin with. But getting the money is another issue, so here are a few things you could try;
- Create an emergency saving pot – Having a pot of money hidden away for emergencies could help reduce stress and provide an invaluable financial cushion
- Save some here and there – Saving a bit of money here and there and not touching could make a huge difference in how quickly you can reach your goal. Another great motivation method is to create a game for yourself, put money away every time you spend a certain amount, every time your team scores, or achieve a milestone/objective.
- Make use of your tax benefits – with an ISA, you can save or invest up to £20,000 a year (in 2022/23) without paying any tax on your interest or capital gains – meaning you get to keep more of your money. It’s also worth noting that the ISA allowance limit could be subject to change every tax year, and each provider has a set of rules in regard to withdrawals.
Every little bit counts
Saving money is great a way to cushion any financial stress, but one thing you should always keep in mind is the impact interest and inflation rates could have on your savings over the years. As time goes on, things can get more expensive. For example, if you’re savings account has an interest rate of 1% but the inflation rate is 2%, your savings account is decreasing by 1%.
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