How you can RETIRE by 45 & exactly how much you need to tuck away each month, according to finance expert

GETTING a maintainable work/life balance isn’t easy. 

But for a lot of people, the dream is to retire early and live life doing the things they’ve always wanted to do. 

In order to retire by the age of 45, most people would have to have an adequate savings pot. 

We’ve spoken to Salman Haqqi, personal finance editor at money.co.ukto find out when people should start saving and how much, if they want to retire at 45. 

But he said the answer is simple, and people should start saving as early as possible. 

Money expert Salman said: “The answer to when you should start saving is as soon as you possibly can. The best time anyone can start saving is as soon as they start earning. 

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“Even if this is in your very first part-time job as a teenager, it’s good practice to put some of that money away. 

“Saving is a habit, and the earlier you instil it the better off you’ll be in the years to come. 

“As your career progresses and you earn more, you can be more sophisticated in how you save by looking into different accounts and saving options, but developing the habit early can mean thousands of pounds more in savings down the road.”

However the personal finance editor also revealed there are a couple of common mistakes people make when saving. 

The first is setting an unrealistic goal to start with. 

And the second is waiting to earn enough money to start saving.

Salman said: “When you start saving, it begins with budgeting and setting reasonable goals for how much you can save based on how much you earn and what your monthly expenses are.

“Often people make unrealistic goals that don’t account for unexpected expenses, or their natural impulse to treat themselves occasionally. 

“When it comes to saving, it’s not how much you save, but that you save something every month. 

SALMAN’S TOP SAVING TIPS

  • Work out what you spend: It’s best to have full insight of your finances before laying out your savings plan so they remain realistic. Being conscious of what you spend each month enables you to decide what you can comfortably save.
  • Set goals: If you’ve got a goal in mind that you really want to reach, you’re more likely to keep saving.
  • Choose the right savings methods: It pays to do your research, be it a private pension or savings ISA, choosing the right method can help better your financial prospects.

“Even starting out with £50 is better than nothing. It might seem like a small sum at first, but it adds up over time, and you can always increase the amount as you earn more.”

Salman said if you’re looking to retire at 45, how much you need to save will entirely depend on your spending habits and how you have planned your finances ahead of time. 

The money expert explained if you were looking for an early retirement you’d need to consider what your actual spending is each year.

Then you’d be able to work backwards from there, keeping in mind the sum can be invested, and gain interest.

He said: “As a basic calculation, to retire at 45 and live on an annual salary of £14,000 per year (until you are 80), you would need to have saved a minimum of £500,000. 

“This means you would need to save £20,000 per year from the age of 20 which works out at approximately £1,666 monthly. 

“This can feel unachievable, but those such as the ‘Fire Movement’ in the US have made it possible, by saving most of their income and investing their money properly. 

“Also do remember, in the right place, your savings can earn money through private pensions.”

Personal finance editor Salman revealed a big benefit of starting to save early, is getting yourself into a habit of positive money management. 

He said this means people are more likely to be able to maintain and build for the future more effectively and having these savings will make bigger purchases such as buying a home, feel more achievable. 

In addition to this, it will also help you to better withstand unexpected events, added Salman.

He said: “This was evident in the COVID-19 pandemic, during which those with healthy savings were better protected during the unforeseen events of 2020 and 2021. 

“Finally, saving early and considering your retirement at a young age means that when the time comes you are set up to make the most of your retirement years.” 

For more money stories, this mum revealed she's mortgage-free at 35 thanks to her savvy spending – and she once did a £1.2k supermarket shop JUST with coupons.

And this mum cut her weekly food bill to just £16, here's how you can do the same.

Plus this savvy mum shares easy envelope system which helps her budget for her family-of-four.

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