I recently had to take unwanted financial advice in order to get myself out of a protected-benefits pension scheme — and it had one big unexpected benefit.
Make a plan
It required me to add up the value of all our assets and financial commitments, and work out how much my wife and I are likely to need to live. Fortunately, we have a modest lifestyle and a paid-for home, and the offspring have long departed.
I was always fairly confident that we’d be reasonably comfortable, but having all the figures written down makes things a lot clearer in my mind — and it solidifies a previously abstract idea.
So get all your facts and figures down in black and white, because that’s the only way you can know your current position and what extra you’ll need to do.
Cut costs
Reducing your spending can make a big impact on your possible retirement date, and it can be easier than you think.
Photography is my biggest hobby, and in the past couple of years I’ve seriously considered spending around £5,000 on a top-range camera system.
But if I invest that sum in shares for the next decade, it’ll probably bring my feasible retirement date forward by about a year. So I’ve settled for something far cheaper in the camera stakes, and more money is going into the investment pot instead.
You might not have such a luxury spend that you can forego, but by cutting down on non-essentials, couldn’t you save a few thousand pounds a year?
Invest more
Once you have your cost savings in place, add that extra money to your investments. You don’t need to wait until you have thousands before it will make a difference, and doing that can lose you the enthusiasm anyway. Instead, got a spare hundred or two per month?
Bang it straight away into an ISA, say, and forget about it for now — and you probably won’t even notice it’s missing from your regular spending. Then, when it builds up into a sufficient sum to invest in a cost-effective manner, go buy some shares with it — you know, in the companies you’ve identified as part of your plan.
And start as soon as you can – like now. I know plenty of people who are getting round to it, but every month they prevaricate is delaying their retirement.
Buy quality
Investing in the right things can make a huge difference to the date you can retire. It’s pleasing that large numbers of Brits are using at least some of their ISA allowances every year, but it makes me want to tear at my remaining hair when I see that the majority are going for a cash ISA.
Cash ISA interest rates (ignoring time-limited special offers) are struggling to get above 1% these days, and inflation is currently running at about twice that rate. That means a cash ISA is guaranteed to lose you money! What a rip-off.
For me, it can only be one thing. Shares, either in a Stocks & Shares ISA, or a SIPP (or both). You can get more than 4% per year from the FTSE 100 these days from dividends alone, and an overall 6% or more is certainly feasible.
