Five tips to Save Money and Retire Early

I will be retiring about eight years early, or, as far as the Government’s expectations are concerned, 14 years ahead of time. Here are five tips on how to get there.

From age 25 I managed to do 1 and 2 of these, and as I came within five years of retirement I did the whole lot.

  1. spend less than you earn
  2. never pay interest to borrow money for consumables, only productive or cost-reducing assets
  3. save six month’s running costs as an emergency fund
  4. pay off your mortgage before you reach retirement age, preferable five years before so you can use pension tax breaks to the full
  5. minimize fixed recurring costs such as mobile subscriptions, Sky TV, gym and magazine subscriptions. Of those you keep, make sure you get utility from them.

I’ve had good luck in some areas, such as being employed 95% of my working life, and unemployed only 1.6% of it (the rest was when I did an MSc with a grant), and having a final salary pension in a company with a normal retirement age of 60. I’ve had rotten luck in other areas - buying my first house in the Lawson boom and writing off half of it to negative equity.  I trashed over £10k chasing momentum in the dot-com bust. But these were mistakes I could afford to make. You can be too fearful of making mistakes – and then you will never take opportunities. Getting the balance right is the key…

I am not a City banker, my job probably classes as middle management if equated to the rest of The Firm. Earning a little bit  more than the UK average isn’t the secret to early retirement. There are plenty of people who earn a lot more than I do but can’t make ends meet.  The secret to early retirement is pretty much in these five tips on how to stay on top of your finances over a working life-time. These are strategic and high-level rather than immediately actionable. Indeed, if you want to use them it helps to start at half my age :)

They worked for me, and I’m toying with the idea of going along to the Write on Finance Blog Up in Leeds. I will have finished work by then, and DW has identified a Turkish Baths at Harrogate which is 12 miles away. She has a weakness for that sort of thing. And I’ll take the opportunity to say hello to these old friends, the Devil’s Arrows, as mediaeval Christians titled the three prehistoric standing stones by the side of the Great North Road.

Devil's Arrows, Boroughbridge

I like that. There is something special about a construction that has been standing sentinel for four thousand years.

This is an entry in the competition to win a 2 night hotel stay during the Write on Finance Blog Up Leeds which runs 22-23 September 2012; gold sponsor is MoneySupermarket

[...] Five Tips to Save Money & Retire Early [...]

I think this is the stage where you can consider yourself to have done alright. You must be pleased to be able to retire with such a pleasant outlook. Good luck in the competition btw.

11 Apr 2012, 8:10pm
by hotairmail


The Devil’s Arrows are not that far from me. Of course, it is the A168 now, not the A1.

Well done. Good simple advice.

“A man is rich, he who has few wants”

I love these kinds of posts, good general advice, and then some specific insight into how they actually work in your lifestyle.

I’m not doing too bad with the list of five tips, spending less than I earn, not paying any interest, and got about a three month emergency fund which could admittedly be better. My fixed recurring costs mostly involve rent, internet (indispensable!) and the gas/electricity.

The house prices are still very high in Ireland, so I can’t afford a mortgage just yet. I live in the city to be close to work so perhaps renting is ok for now. If I were to buy a house I’d prefer to be based in a village or small town.

@Rob, I was lucky in some ways, and can still screw up over the next 40 years ;) FWIW even at 35 I had far less savings than you have, though the house/mortgage thing makes comparison difficult. My parents taught 1 and 2 by example, they’re probably 80% of success in personal finance :)

@hotairmail – That explains why I had such a hard time getting off the A1M to find them last time!

@Sandra I’d have to admit that my savings were usually about 2 months for most of the time until I was about 40. You have picked up what would make a good sixth tip. Live close to work. After losing three hours a day commuting to Television Centre, I always made sure I was less than 40 minutes from work since then. Commuting is an insidious form of fixed cost, because you pay it every day in both money and in time.

[...] You may have heard these timeless tips before, but Ermine takes the story forward by showing how he has used them effectively to reach his goal of early retirement… http://simple-living-in-suffolk.co.uk/2012/04/five-tips-to-save-money-and-retire-early/ [...]

I managed four of your five, the one I’m missing is number five in your list, but reading your site has encouraged me I am going in the right direction!!!

And I am ten years younger so have a little leeway 8)

[...] Simple Living in Suffolk takes a look at ways to save money and retire early. [...]

[...] over those 30 years I didn’t buy more consumer shit than my salary could bear. I spent less than I earned. [...]

@Jay, you’re in a fantastic position to get things right if you want to retire early. 10 years gives you enough time to save both pre and post-tax. The three years I took were a hell of a rush and some things are left sub-optimal as a result.

One of the key elements, particularly if you are expecting any career progression, is to have enough savings to be able to drive your taxable income down, thus enabling pre-tax savings (which of course come out of your income). The secrets to that are a paid off mortgage, lowered living costs and/or a decent savings buffer.

I screwed up with having savings, but focused on the mortgage and driving my costs down, which sort of worked out to have the same effect.

[...] awarded me a prize of a free hotel stay in Leeds for being runner-up in the competition with this 5 tips to retire early post. and DW was up for a visit to the Harrogate Turkish Baths so we could both get something out [...]

 

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