Being able to retire early with a large financial nest egg is the dream for many. Unfortunately, many savers struggle to meet this ambitious target. However, there are several simple steps you can follow to help you get there.
Get saving
The most obvious step is to start saving as soon as possible. Even if you can only put away a few pounds a week, over the long run, these small deposits could make all the difference.
For example, since its inception three-and-a-half decades ago, the FTSE 250 has returned around 10% per annum (even after recent declins). On this basis, £3 a week, or £156 a year, saved and invested in the index during this time would be worth £46k today.
Get investing
As noted above, the FTSE 250 has returned about 10% per annum since inception. These sorts of returns would be impossible to achieve with cash. That’s why if you want to get rich and retire early, it’s vital to start saving and investing as soon as possible.
You don’t have to invest in the FTSE 250 either. There are hundreds of funds, stocks and trusts out there you can buy to earn the best return on your money.
Tax benefits
Opening savings accounts with tax advantages could also help speed up your journey to early retirement. SIPPs, LISAs and Stocks and Shares ISAs all offer their own unique benefits. LISA savers receive a bonus of 25% of their deposit from the government (up to a maximum of £1,000).
Meanwhile, SIPP contributions attract tax relief at your marginal tax rate. That’s 20% for basic rate taxpayers. So, for every £80 you save, the government will add £20, taking the total to £100.
Pay down debt
If you have any debt, paying this off as soon as possible could also help you build a large financial nest egg quickly. High-cost debt, such as credit card debt can be particularly damaging to wealth creation.
The best strategy could be to pay off any debt before saving. Most credit cards charge borrowers 20% or more a year. Few, if any investments, have the potential to produce these sorts of returns, which suggests reducing debt is the better option.
It might be best to eliminate all borrowings entirely before you start saving and investing.
Invest in yourself
If you’re serious about building a large savings nest egg, investing in yourself could be well worth the time.
Investing in books about personal finance, and stock picking, might not generate an immediate return. However, they should help you avoid making any serious investment or savings mistakes.
It’s essential to concentrate on the long-term benefits of these books, rather than the short-term cost. Some of the best books on personal finance cost £30 or more. That might seem like a lot, but if they help you build a £1m pension pot, they should be worth the money.