03 Jan 2018
Spending less on luxuries could mean an additional £10,000 a year in retirement
Research conducted by life, pensions and investment company, Scottish Widows, shows that savers could have as much as £9,853 in additional annual income in retirement if they cut back spending on luxuries in their early years.
The provider’s calculations are based on a 22-year-old planning to retire at 68, and putting £124 a month into a pension with a matching contribution from their employer.
On average, individuals were found to be spending £124 per month on “every-day luxuries”, including ordering takeaway meals, taking taxis rather than public transport and buying clothes that are never or rarely worn. At the same time, 32% of people said they simply cannot afford to save any more than they already do.
According to the research, the majority of people underestimate how much they spend on everyday luxuries by £74 a month. One in nine people admitted to not tracking their incidental spending at all and had no idea how much they were paying out for non-essentials.
The research also showed that 62% of people plan to set a financial goal in 2018, whether that is spending less (28%) or saving more (45%). A third of people spend less in January, cutting back by an average of £109.03 during the month and while 30 per cent use this money to pay off debts, only 25 per cent save some of it.
Robert Cochran, a retirement expert at Scottish Widows, claims that January is traditionally a time when individuals set out to improve their financial habits for the year ahead.
“While it would be unrealistic to suggest we live entirely without little luxuries, there is an important message about the need to ensure untracked spending today doesn’t harm our financial security tomorrow.”
Mr Cochran continued to say:
“Our Retirement Report shows almost 23 million people are failing to save adequately for retirement, and so there is no time like the present to make the first step towards positive change”.