How many pay days do you have left?

“Better three hours too soon than a minute too late.”

— William Shakespeare from The Merry Wives of Windsor

If you’re planning on dying the month after you retire, then there’s no need to read on. But, if you want to actually live and enjoy retirement, this article is for you.

Let’s say you’ll retire at 65 years old. Today, that seems years away, decades away. You’re not even thinking about it. You’re currently doing your best to keep your head above water. You don’t have the time to focus on retirement. That’s for the future. That’s for old people. Once you get the latest financial emergency out of the way, you tell yourself, you’ll start saving for retirement. You don’t need to start saving now because your 65th birthday is a long way away.

But… is it?

I’m turning 40 soon. That means, if I retire at 65, I have a quarter of a century until it happens. A quarter of a century sounds like it will never come. It is a long time, but let’s start dissecting that time frame. A quarter of a century is 25 years. That means in those 25 years there will be 300 months. If you get paid monthly you only have 300 more pay days.

If you save only £1 a month, then when you retire you’ll have a measly £300. Maybe enough to get you through the first week of retirement.

If you save only £25 a month, then you’ll have £7,500. Better, but if you live until you’re 100 that £7,500 needs to stretch for a long time. Impossible.

If you only save £100 a month, then you’ll have amassed £30,000. Better again, but not enough.

£250 a month.£75,000. This looks better. But if you currently earn £37,500 a year, that means it will only be 2 years of your full time salary.

£500 a month, £150,000.

£1,000 a month saved will be £300,000 sitting under the bed. Better, again.

So what am I trying to say with this post?

Time is short, and time is running out. If you’re not saving then you need to start now, and you need to start saving big. The more you save now, the better it will be for your future self.

If you are in debt at the moment, then get that repaid immediately.

If you don’t have an emergency fund of at least 6 month’s worth of expenses, then get saving now.

If your expenses are huge then you need to reduce them now and free up that money to helping with the above points.

If you’re not in a workplace pension, get in it now, enjoy the tax relief and pump as much money as you can into the pot.

As the screenwriter John Hughes wrote in his film Ferris Bueller Day Off, “Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.”

Not even £100

Take action, and take action now.

— Brian Tracy

I stumbled across an article today from The Independent, by mistake mind you, as I don’t read or watch the news. But a portion of the article shocked me. It said: “22 per cent of UK adults have less than £100 in savings, making them highly vulnerable to a financial shock such as losing their job or incurring unexpected bills.”

Wow! Not even £100 in savings. You could save 28p a day in a penny jar and have over £100 at the end of a year. Yet 22% of all UK adults don’t have that much money saved.

From a website, I got the following statistics. There are roughly 66 million people in the UK as of 2019. About 53 million people in the UK are adults.

Almost a quarter of all adults (22%), that’s 11 and a half million, don’t have even £100 in savings.

If all those people who don’t even have £100 in savings got up and moved to their own country, they’d be the 77th largest country in the world. Bigger than Belgium, Greece, Portugal, Hong Kong, Singapore, Denmark, Norway, New Zealand, the list goes on.

In the article it talks about these 22% are, “highly vulnerable to a financial shock such as losing their job or incurring unexpected bills.”

There is no way £100 in savings is going to ride the rough sea of losing their job. It won’t even cover a bill such as excess on car insurance if they have a prang. £100 will hardly deflect any type of emergency that comes up. It might deflect a hiccup, such as your only pair of shoes just fell to pieces, or you need a new passenger side tyre. But anything that is “emergency” size, such as losing your job, the boiler blowing up, or your car eventually dies. £100 won’t make a ripple in the ocean.

If you are in this situation, what should you do?

The first thing to do is don’t panic… There are over 11 million others floating around on driftwood in the ocean with you, so you’re not alone. But you need to immediately start looking for land to get some security. You can’t worry about the rest, you need to worry about you.

What you need to do is build an emergency fund… of a lot more than £100.

An emergency fund is a pot of money, that you can get your hands on immediately, such as going to the bank and withdrawing it. This pot of money is magic, as it stops you going into debt to pay off any emergency that arises. The problem for these 11 million adults is that if an emergency happens, they don’t have an emergency fund, they don’t even have £100. So they really only have a couple of options, all are not good.

Option 1, live with the emergency and save up. This might work if your car breaks down and you work close enough to walk, run or bike, but it doesn’t work if your boiler blows up and it’s the middle of winter.

Option 2, borrow off friends or family. This option is not good for relationships and should be avoided.

Option 3, borrow, either in the form of a loan, credit card, or any type of other lending such as the dreadful pay day loans. Option 3 is the worst option, as a £1,000 emergency ends up costing you a lot more when paying interest to the lender. Nope, there really is only one real option, and that’s build an emergency fund as quick as you can, before disaster strikes.

This will take time, patience and a drizzle of sacrifice.

The end goal is to get an emergency fund of at least 3 months of your expenses, but the preference is 6 months. Example: if you add up all your bills: gas, mortgage/rent, water, food, electricity, broadband, gym, etc, that figure will be your monthly figure: let’s say £1,000. You then need to save between £3,000 and £6,000. So for 6 months of expenses you need £6,000.

The odd thing is, once you get that emergency fund up and running and full of money, emergencies stop happening.

Conclusion

If you are one of the 11 and a half million that doesn’t have £100 in savings, I feel for you. But, no matter what’s going on in your life, it’s time to start making some changes and begin to build that emergency fund. You’ll feel mentally and physically better as you begin to save each month and see the fund building up. As your financial life improves, your health and well-being follows suit.