Gibson Financial Planning specialises in dealing with clients in the Coleraine and Causeway Coast area who are either approaching retirement or already retired. Nine times out of ten these clients have saved hard and built up substantial pension pots and other sources of income for their retirement. We help them rationalise all this, build and develop a plan to ensure their financial freedom and that they’ll have peace of mind that they’re not going to run out of cash anytime soon.
That’s all well and good and great for these clients.
But what about today’s 20-40 year olds.
I fall into this age bracket – so do many of my friends. Thankfully my friends don’t engage me in conversation about pensions too often (!) but occasionally it does crop up. I’m amazed at the lack of awareness at best or heads being firmly buried in the sand at worst when it comes to thinking about when they’ll retire and how they’ll budget for and fund their retirement.
If you are Generation X and Y and you’re sticking £100 a month into your pension, I’m sorry to say but you’re kidding yourself. That won’t cut it. You have to pay yourself first and let the rest fall into place after that. What do I mean by this? Well, at the start of the month, the first expenses to come out of your current account should be pension saving and other savings. If you try and work it the other way around i.e. save what’s left at the end of the month that just won’t work.
(If you have problems budgeting I can recommend Money Dashboard – I use this for my family and it works a treat, logging every expense and sorting it you can see where your cash is going. It has a slick iOS app as well as a good website experience.)
Lifestyle creep is one of our biggest enemies and I can be guilty of it too. The trick to saving well and planning well for the future is to prevent your expenses increasing in line with income. Someone earning £50,000 is unlikely to have much more at the end of the month than someone on £25,000. Why is this? As we earn more we spend more, the quality of our holidays, cars, even our food bill increases in line with what we have available. If we set an amount aside which we know gives us a good lifestyle now and don’t allow it to expand with our income then that’s a good thing and for sure one of the keys to budgeting for a good retirement.
Have a think about where your money goes each month …