17 Aug 2018
For most people, saving for retirement means putting money away in a pension. If you start early, say in your early 20s, this could mean saving for a fairly lengthy period, possibly even 40 or 50 years.
During that time, there will inevitably be a huge call on your income, and if you’re not lucky enough to have an inheritance, the biggest sacrifice may well be saving up to buy your first home. Add to this any debt that has to be repaid if you went to University, possibly a loan for a car, as well as day to essentials, like buying food and having a mobile phone!!
Despite all of this, it remains extremely important that you try and find a way to put something aside, and the earlier you start, the easier it is to get used to.
Here are some of the best ways to get started identifying where you can save money and how you can get started.
By making a budget you can figure out how much monthly income and outgoings you have from your salary.
Understanding where your money is going is the first step in getting yourself on the right track for retirement.
Consult your bank account statements monthly and see what you’re spending your money on every month.
Now that you’re more aware of where your money is going on a monthly basis, you can start to spot things that maybe you don’t use anymore or direct debits that you thought you had cancelled.
Online services are a big culprit here for things that you once signed up for but forgot to cancel.
Are you still using that Spotify premium membership?
There may also be areas that you can reduce your monthly spending by shopping around and looking for cheaper alternatives.
Sometimes just by switching the brands that you pick up in the supermarket or even the supermarket that you do your weekly shop in can drastically reduce your monthly outgoings.
By reducing your monthly outgoings, you can start to free up some money to be used for savings.
Debts with a high interest rate can cancel out any growth that you see on your savings account and it’s better to deal with them when you have some spare money available to do so.
If you have multiple debts, then it’s worth paying off the debt with the highest interest rate first.
This is called the debt avalanche method and can get you on the road to reducing your overall debts.
If debts are an issue and you’re struggling to get control of them then it may be worth speaking with Stepchange to help you set up a debt management plan.
If you’re over 22, not self-employed, and earning more than £10,000 a year you should have a workplace pension. Every employer now has to offer one.
By paying into your company pension, your employer will usually match your contributions up to a certain percentage of your salary. Check with your employer how much they match your contributions and then pay up to that amount every month if you can afford to.
When you pay into a pension and your employer contributes you’re effectively getting money for free so it’s definitely worthwhile to take full advantage of it and it will go a long way to helping you save for retirement.
You may find that you have extra money left over to save every month once you’ve done all of the above and there are many ways to make that money go further by either investing it or saving it in things like a lifetime isa.
Organising a chat with your local financial adviser can help you to identify what options are available for you depending on the level of risk that you’re willing to take with your money.
Following the steps above will definitely help you get on the right track for saving up for retirement.
It may feel like a long time away, but the sooner you start saving the better position you’ll leave yourself in.