When you entered the world of work from school or university, were you planning for retirement? I know I wasn’t! My first job out of university was as an Events Co-ordinator at a city centre hotel in York. I was on just above minimum wage and struggling to pay my rent and bills. So when a lady from a financial planning company came to talk to all the staff one day, I wasn’t interested in making an appointment to discuss having more money taken from my earnings at the age of 22 to support me in 40 years time.
I wasn’t interested in paying into a pension at my next two hotel jobs either, or my first training job. Saving for a deposit on a house felt like more of a priority. Then I had mortgage payments to meet, my first maternity leave to get through, nursery fees to pay for….etc, etc. I never felt that I could afford to make pension payments! It was only when the Government made pension contributions mandatory in 2012 that I started a pension plan. But even then, for the first four years I think I was only paying in something like 1%!
Fast forward eleven years…..
And wow, have those eleven years gone fast! Once kids are in the mix and you are living your life in school weeks and half terms, the decades literally fly by!
I turn 40 next month and that milestone, as well as the cost of living crisis has seen me completely overhaul my finances this year.
Planning for retirement has become way more of a focus for me. I wouldn’t yet say it’s a key one or at the absolute forefront of my financial planning. But I am so much more aware of how quickly it will be here and that I want to be looking forward to it when the time comes.
If you have followed me for a while, you will know that I am both employed part time and freelance on a self-employed basis. And whilst I am lucky that my employment pension benefit for my current job that I have been in for nearly eight years is excellent, actually because I am on a 0.5 contract, the pot is not going to be nearly enough for me when I retire.
What changes have I made?
The cost of living crisis has seen me completely strip back unnecessary expenditure in order to save money and maximise my income available for investment. This has been in both my personal and work-life, with examples below….
Personal life:
- Cutting back on energy bills, following advice such as heat the person, not the room
- Ordering fewer takeaways and making my lunch for office days rather than buying
- Combining journeys to cut back on petrol spends
- Selling unwanted items on Vinted – I love this and have done really well!
Business life:
- Working from home more, rather than using hot desks that I would pay for
- Paying for subscriptions annually rather than monthly
- Not accepting renewal fees for services such as web hosting and anti-virus. Shopping around and using cashback sites for the best deals
Planning for my retirement
As mentioned earlier, I only have pension plans from my employment and had not paid into any sort of retirement investments from my self-employment until this year. I earned so little from freelancing to begin with that it was considered just an extra, bonus income. But over the last few years, apart from the Covid disaster year, I have been making more from my freelancing than my employed income on an annual basis. So really, I needed to be taking it more seriously in terms of my retirement investments from that.
Using calculators to help with planning for retirement I have been able to work out a ball park figure to aim towards. It feels hard to commit a set amount when you are self-employed and your income varies each month. However with mine being fairly stable and generally around the same amount give or take £200 each month, I felt I would rather do a set amount than a percentage.
So I now invest a set amount on the first of each month from my freelance income. Whilst I have taken a hit on my disposable income and it means I don’t put as much into traditional savings accounts, I feel good that I am taking positive action for my future. The amount I have chosen to invest does not impact on our quality of life and I feel in control and as I head into my forties, that can only be a good thing.
Another key driver to increasing what I am able to invest in my retirement plan is paying off our mortgage early. I am finding Sprive an absolutely brilliant app for working towards this.
Hindsight is a wonderful thing!
I do wish I had started paying into a pension as soon as I started working. Even just a really small deduction right from the very start at age 22, would have benefitted from matched employer contributions and tax relief and then compound interest over the years. But who wants to think about what is coming in 40 years time when you are that age! I don’t blame 22 year old me at all for the decisions made at the time. I remember somewhat naively thinking things would just turn out alright. And whilst I do still have a level of confidence in myself on that front, on reflection it wasn’t a particularly savvy decision to not start investing as early as possible.
But I actually really love working!
I am really fortunate to absolutely love what I do. So who knows, maybe you will still see me posting from here in ‘retirement’! In all seriousness, I completely love writing and creating. So if I can continue to do that into my sixties and beyond in order to supplement my income from pensions and investments, then I will be delighted!
It will just be lovely to be able to step away from traditional employment when the times comes. Then I will be free to pick and choose what work to do on a freelance basis. The projects that light me up and give me joy; living up that millennial dream until the end 🙂