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Ten effective ways to prepare for early retirement

16 January 2019

Joe Tomlinson - RL360 Customer Services

Have you ever thought about what it would be like to quit work and devote your time solely to the things you love?

Of course you have, you’re only human.

For some people – let’s call them ‘the lucky ones’ – the point at which they are actually going to do this is fast approaching. They’re about to retire early, or right on time, and they’re going to do all of those things they’ve been dreaming about for decades.

Or, are they?

There’s no question we’re all going to retire but what remains up for debate is how we’re going to occupy our time when that day finally comes. And it all boils down to the usual. Money.

If you don’t make provision for early retirement, or indeed retirement at all, you’re setting yourself up for a fall. Instead of relaxing days around the pool or adrenalin fuelled skydiving trips, you may instead find yourself couch-bound, counting your pennies and watching daytime TV.

Essentially, now is the time to plan and save - here are 10 ways to get started:

1. Determine what kind of lifestyle you want in retirement.

This will obviously determine the kind of money your retirement will require. Are you happy living the quiet life or are you going to go big and travel the world in a luxury yacht? Plus you need to factor in contingency for the ‘just in case’ situation (unexpected medical bills, for example).

2. Analyse your spending/question your spending decisions.

You know the big overspends – if you pay for a luxury holiday twice a year and max out your credit card, then you know you’re probably not thinking too far into your financial future. That old saying ‘looking after the pennies and the pounds will take care of themselves’ applies here too – do you really need that weekly takeaway?

3. Tackle your debt/pay off high-interest debts as fast as you can.

If you’re in debt now, how do you expect to save? High interest loans and credit cards are a killer but are often inevitable if, say, you want a car. The best advice is to work out a ‘quick and dirty’ repayment plan. Just get it off the books as soon as possible, then you can start looking to the future.

4. Increase the percentage of your income that you save.

Where possible, pay yourself first before paying the bills. Think of a certain portion of your monthly salary as a ‘retirement wage’. Make sure, though, that you don’t start dipping into it. Start thinking long-term and view it as stealing from your future you.

5. Start an emergency fund

To help avoid dipping into your ‘retirement wage’ set up a separate emergency fund. That way your finances are structured enough for you to have this pot of cash to use when, as they tend to do, the inconvenient life crises (crashed car, broken boiler) hit.

6. Start a profitable side venture

This one can be tricky – do you have time? Will it impinge on your job? – but, where you can, a nice little side earner can be a goldmine. You might be building your lucrative future career as a big social media star, but putting your wages from your part-time bar job into savings can be useful too.

7. Set up a continual income source/create a passive income stream

Making money in your sleep - that has to be a goal doesn’t it? If you’re lucky enough to have a second home don’t let it sit there empty, rent it out and watch your bank balance thank you. A simpler version of this could be renting out a room in your house.

8. Get serious about lifestyle changes:

Do you need all the ‘stuff’ you have in your life? Do you need to collect vinyl records? Will your future you thank you for all those back issues of Kerrang magazine? No? Then go minimalist – suddenly excess will be an alien concept and an obvious by-product of that will be less spend/more saved.

9. Accumulate savings but also invest a set amount regularly:

Setting aside a regular amount of money to save is vital but how about investing a regular amount of money and (hopefully) watching it grow? You may find you’re a whizz at playing the markets but most people will find they need a little help from the experts in this area, hence point 10.

10. Meet regularly with a financial adviser:

This really is the key to all of the above. A good financial adviser will help you go through your spending, make suggestions on where you can make savings and talk you through ideas and any investment plans you might want to consider. Like RL360, many companies providing in any investment plans you might want to consider. Like RL360, many companies providing investment products only do so through a financial adviser.