This week I thought I’d get started on one of my financial goals for 2014 – saving more for retirement. The hubby and I do have a rental property (which is mortgaged) by way of an investment but to cut a long story short, it doesn’t make us much money at all and won’t for a long time.
That’s because of the way the property market is here in the UK – the value has decreased quite a bit since we purchased it! To be honest, it’s a bit of a headache and I’m also worried about possible tax implications in the future but I’ll save all that for another day I think.
Anyway, I was thinking that we shouldn’t put all our eggs in one basket as the property that we have will definitely not provide enough of a return for us to retire on. We knew that of course but up until now we decided to worry about that later.
Well, later has now arrived, so I’ve spent some time researching what options were available to us to begin saving more for our future. The hubby doesn’t have a work pension and I’m self employed so from what I can tell, we’ll have to start a private pension of some sort.
I then came across this article by Money Saving Expert which explains a lot about pensions here in the UK along with how much we should be putting away for retirement. According to this, we divide our current age by 2 and then take that figure as a percentage of our pre-tax wages to put away each month. So for me, I’m 33 – divide by 2 = 16.5 and that will be the percentage of my wages to put away.
Here’s the slight problem I then ran into. If I were to put this amount away and my hubby did the same, we would have no extra money whatsoever to pay off the debts. In fact, if we were to put this percentage of our wages into a pension, there’s a good chance we may struggle to pay bills or indeed feed the family on occasion.
Ever had a double kicking yourself moment?
I did when I worked out these figures. I could have double kicked myself for getting into debt in the first place. But there’s no point going down that road as I’ve already kicked myself enough times over the years and I know now that it won’t get me anywhere!
The hubby and I need to talk further about all this but I suspect we’ll try to put a lesser amount into retirement savings and focus on debt payoff. Although saying that, the hubby thinks we should just focus on getting rid of the debt once and for all first. Either way, with a bit of luck, the debt will be gone in a couple few years and we’ll be able to increase our savings then.
What would you do? Say you had a ton of consumer debt to pay off but you know you also need to save for retirement? Any advice greatly appreciated!
Here’s my fab links to great personal finance reads this week:
Charles at Getting a Rich Life wrote a great post called Why do you choose material items over your loved ones? Charles explains the importance of changing your perspective on ‘buying things’ – how experiences go much further by way of memories than material items which often get forgotten about after a while. If you’re in need of motivation to get out of debt and your finances in order, head on over to check out his post.
Have you got an emergency fund? If not, you might want to think about getting one once you take a look at KK’s post over at Student Debt Survivor. After reading about how You need an emergency fund when your furnace dies, I think I’ll be topping mine up in the near future!
Girl Meets Debt outlined her 2014 Debt Repayment Plan and explains how she’s been able to accelerate her debt repayments in the last year. I’m sure GMD will be just as successful in paying off debt in 2014 as she was in 2013!
Laurie at The Frugal Farmer wrote a really motivating post on What to do when you wake up to find yourself deep in debt. This happened to me this time last year so I can definitely relate to how this feels! Laurie describes some important steps to take to turn your situation around.
Pauline at The Savvy Scot has put together a brilliant month long financial bootcamp specifically aimed at UK readers which is well worth a read if you’re looking to overhaul your finances this January. The first post in the series outlined a check up for your utilities and bills; the second was a guide on how to lower your debt payments and the most recent post in the series so far explains how to refinance your mortgage to get a better deal.
Michelle over at Making Sense of Cents had another jaw dropping month in December as she managed to rake in $12,160 in December Business Income. How awesome is that?!
Have a wonderful weekend friends and I’ll be back on Monday!
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Image © A Disease Called Debt
19 Comments
Yeah, we are doing a bit of kicking ourselves over this stuff too, Hayley, but like you guys, we’ll probably put a little into retirement savings, and most of the rest toward debt. Just knowing we’ll go into retirement debt free helps a lot. Thanks so much for mentioning my article, and I’m really glad you enjoyed it. As we too hit our one-year anniversary of our wake up call, I can’t help but think of the thousands of others who are feeling exactly what you and I felt last year at this time. Here’s to hoping they all join us on our journeys to debt free.
Laurie @thefrugalfarmer recently posted…How to Plan for a Large Vegetable Garden
I think that’s a tough question a lot of people in debt face. I would probably do a bit of both, but focus more on debt repayment. That’s a heavy burden weighing over your head!
Tonya@Budget and the Beach recently posted…Ramblings and Link Love
You know how aggressive I am with debt repayment, but even then I’m still putting some money aside every month towards retirement. 🙂 Pay yourself first Hayley! Thanks for the link love. Have a wonderful weekend! xo
Girl Meets Debt recently posted…Oh You Fancy Huh?
Hey Hayley and thanks for the great links 🙂
I too have begun thinking about retirement, although personally I consider myself already retired!!
As I too am self-employed, I do not have any retirement savings.
That being said, I do put myself down as self-employed when I do my taxes and the money that I end up paying,goes into a government pension plan so I’ll be getting something back when I retire. In fact, if there still is a government pension plan in 14 years, I’ll be receiving more money then than I do now 🙂
Take care and my best to all.
Lyle
lyle @ The Joy of Simple recently posted…2014 – Time To “Git ‘er Done!”
Hi Hayley, I’ve got a slightly different idea about retirement in that I don’t think that you can “save” for it. I think you have to invest your way to it! We bought rentals in 2007 (the worst time in the last decade of course but never mind). In 2009 we moved home from London, the GFC was about, we lost the exchange rate and dropped to 1 income we really had to figure out a way to make more money and decided to start our own business because we realised without amazing jobs (we were nurses) we could never save enough to get ourselves out of debt and into a comfortable retirement. So now we trade property and are making enough to make headway on our mortgages and are trying to get into a position where we can buy more cashflow positive rentals.
As far as UK pensions go.. we worked for the NHS and they did a great one!
Hi Tam, thanks so much for commenting! I like your idea of investing your way to retirement. It sounds like you’ve done brilliantly in terms of trading property – do you buy them, do them up and sell them on? What steps did you take in order to trade your first one? I don’t suppose you’d be interested in guest posting on how you started your business? I’m sure lots of readers would be interested! If so, let me know! P.S. I heard that the NHS are really good in terms of benefits.
Retirement saving is one thing I know I need to accelerate, but for now buying a house is a bigger priority (Auckland housing is like London housing fyi). I’m guessing you guys live outside of London?
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London housing is very expensive so if Auckland is similar, I don’t envy your task of upsizing! Hope you get something sorted soon at the best possible price. Yes, we live outside of London and have rental property in the Midlands. We’re currently renting in rural Yorkshire, which is a little cheaper (and beautiful!).
Great links for this week!
I sometimes wonder if having student loan debt and not having a large salary helps me save every cent I make. It’s automating it all that really keeps everything in line for me. Hopefully your articles and thoughts inspire others to really think about their situation and how they can improve it for the future.
Amanda @ Passionately Simple Life recently posted…Why Don’t 20-something’s Save for Retirement?
Thanks Amanda. 🙂 We survive on a relatively small salary between us, much less than we used to and I agree – it’s a huge help knowing that we’re paying off debt now whilst things are pretty tight.
Thanks for the mention, I’m definitely in good company.
I didn’t save for retirement at all when I was in debt, and while I don’t regret the decision, per se, I do wish I’d started saving for retirement a lot earlier. If I had to do it all again I’d probably pay off debt aggressive but still save a little for retirement each month (even if the amount I contributed was really small $50 or $100 a month) that compound interest really adds up over time.
KK @ Student Debt Survivor recently posted…Box Wine: Frugal & Fun or Cheap & Chintzy?
Thanks KK – I think that’s what we’re going to be doing. I think we’ll put a little away into a UK pension each month and look for a high interest savings account as well as paying down debt!
Hayley,
Thanks for the link. Depends on the interest rate on your debt, I think people should have some assets. Constant paying down of debt can get tiring.
Charles@gettingarichlife recently posted…Why Do You Choose Material Items Over Your Loved Ones?
You’re welcome Charles, I really enjoyed your post. The hubby and I have chatted over the weekend about this and have decided to put a little into a pension for now at least whilst we’re paying off our debt.
Sometimes I think about potentially jumping into the rental market, but there are just so many stories like this.. that it just likely wouldnt be worth it. Even if it holds the value, the profit margins are so slim, you really need to go big to move the needle.
jefferson recently posted…Niche Site Update – Step Two: Building Links
It’s a tricky one isn’t it – to go big you need to have money in the first place. We got into the rental market through buying my parent’s house as they gave us a really good deal on it. However, it’s not worth all that much! We also rent out our old house which we hung onto as we needed to relocate and the property market was going downhill. All we can do is hang onto them right now. But in fact, we’re thinking that we might keep them very long term and take an income from the rent for our retirement once the mortgages are paid off.
Thanks a lot for the spotlight Hayley! I always consider debt a safe return, so try to pay that first unless the rate is so low (like my mortgage under 3%) I’d rather invest.
Pauline recently posted…New year financial boot camp: Challenge your council tax banding
You’re welcome Pauline, it’s a great series! Thanks for your advice re my situation too.