Is Early Retirement a Reasonable Financial Priority?

Financial planning isn’t a part-time affair. On the contrary, effective money management is a lifelong concern, calling on Britons of all ages to prioritise their financial goals and ambitions. For some, personal financial priorities include leaving the work force as soon as possible, while still providing for a comfortable retirement.

Early retirement is a goal shared by many British workers, but not everyone can turn the dream into reality. Earning limitations and spending demands often eclipse personal preference, leaving workers toiling at their jobs until retirement age. If early retirement is part of your financial plan, or at least a possibility worth pursuing, there are moves you can make to increase your chance of establishing sufficient retirement resources, before reaching pension age.

Will Extreme Saving Get You There?

Many UK workers relish their jobs, eager to continue contributing for as long as possible. But for some members of the UK workforce, employed strictly for the pay and benefits, leaving the workplace behind is a lifestyle priority. Unfortunately for many Britons hoping to make an early exit, spending demands from the current cost of living prevent them from building an adequate retirement pot.

Theoretically, extreme saving seems like a solid strategy for early retirement. But can you really make it work, when you’re bringing home an average salary? Movements like Financial Independence Retire Early (FIRE) believe in the possibility, but some analysts are skeptical.

Extreme saving strategies recommend putting-by between 50 and 75 percent of your monthly earnings. It’s easy to see how such an effort might accelerate your savings rate, but what about your monthly outgoings? Imagine getting by on half your earnings. If you’re like most people, drastic lifestyle changes would be required, in order to live below this financial threshold. For that reason, extreme saving is only viable for individuals willing to live a miserly existence, in exchange for early retirement – and even then, there are no guarantees.

Finding Financial Independence

Dozens of UK websites offer anecdotes and advice about financial independence. Though tips and tricks found online may not apply to every financial circumstance, exploring these resources can help you refine your moves toward early retirement.

Eliminate Long-Term Debt – If you want to retire early, personal debt can be your worst enemy; oppressive balances get in the way of saving. As you realign your priorities, pursuing financial independence, it’s important to pay down debt balances. If you need fast finance while you’re employed, payday loans can help make ends meet, when shortfalls arise. These short-term loans are quickly paid back, so they don’t add to your long-term debt load.

Spell-Out Your Retirement Needs – It’s hard to set a course for early retirement, until you’ve established how much money you’ll need, after leaving your job. To arrive at a workable figure, start by sketching-out your potential expenses during retirement or use an online retirement planning calculator to project your spending needs. You may also wish to seek retirement planning advice from a professional, which often includes specific investment recommendations.

Cut Back Now – The less money you spend, the more you’ll have to put by for retirement. Cutting back now also sets the stage for greater affordability, once you’ve left your job. For immediate results, focus on trimming household spending on energy, food, and other necessities. And commit to discretionary spending discipline, which is essential during retirement.

Downsize Housing – The cost of housing is among the most substantial expenses for Britons approaching retirement age. Downsizing you monthly housing obligation is a great way to pare costs before you leave the work force. Whenever possible, slashing your housing expense to 15-20% of your income creates sustainable conditions, which carry over into an affordable retirement scheme.

Automate and Redirect – Automated saving schemes ensure regular deposits, taking the call to action out of your hands. Even if you are only comfortable reserving modest automated withdrawals from your earnings, small savings add up over time. And as you eliminate personal debt, it becomes easier to redirect credit payments to your savings goals, helping you reach them faster, without feeling a financial pinch.

Early retirement isn’t out of the question, but leaving your job early may require lifestyle changes – today and in the future. If you’re committed to stepping away from work before reaching pension age, manage your expectations and take steps today, putting by resources for your retirement spending needs.

Paul graduated in 2001 with a degree in Finance. Since then he has gone on to work for several of the UK's most well-known financial institutions.

An avid blogger and a huge football fan, Paul is here to guide you through the ins and outs of personal finance and perhaps save you some money in the process!

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