Life has certain stages. If you believe Shakespeare, in fact there are 7 of them from childhood to dementia!
Living up to the inevitability of your own progression through these stages can be a little depressing to say the least but there is also the need to consider how your own enjoyment (or otherwise) of each life stage might be influenced by (or have influence on) those around you. Anyone who is important in your life either now or in your future is travelling through their own life journey. Sometimes, the stages they are going through can have a profound affect on your own life.
Consider Peter. He is 66 and his wife Carol is 63. Peter’s Dad is 91 and loosing independence. His son, James has recently got married and he and his wife are now expecting their first child. His daughter Katherine is engaged and a date is set for 2 years time. Peter being a couple of years older than Carol is already retired and he is desperate for Carol to join him. He wants to catch up on missed travel and adventure. Carol on the other hand is now thinking that the arrival of grandchildren may well prompt her to retire but she has a very different view on the next couple of years than Peter.
Great financial planning is all about great life planning. What do I want my life like to look like? For Peter, there are others to consider too. There are for most of us but in the background the clock keeps ticking.
John Lennon is often quoted as having said “Life is what happens to you while you’re busy making other plans”. There is nothing wrong with this picture but it is important to have your eyes wide open to the potential sources of influence around you. We see clients put off taking a holiday because they are too busy (bang, there goes another year), we see those who should be enjoying the freedom associated with retirement dealing with sick or elderly parents, we see people working longer than they should.
Understanding your life “timeline” is your first essential step toward setting meaningful goals for yourselves. Meaningful goals means better (Lifetime) Financial Planning.
Here’s Peter’s Life Timeline.
Do you have good habits?
Probably all of us have bad habits. I won’t name any of mine here. They can be difficult to break can’t they? Where bad habits just form over time, we have to work hard to create good ones.
I was reminded of this earlier this week. I saw a couple who felt they could not save money – there was never anything left at the end of the month. When we completed their spending review, we discovered a joint income of around £3,000 and spending of £2,500. We thought we had allowed for everything. The obvious question then, where is the extra £500 each month? The answer: “no idea”. There are two possible reasons for this. We have either miscalculated the income or the spending review was not complete.
I never want to encourage people to watch every single penny they spend (I once came across a client so fixated with saving a couple of quid he spent HOURS of his life analysing different deals on various things and actually had two telephones call providers and two phones in order to allow for the fact that one was better for overseas evening calls and the other for national and local evening ones!!). BUT, the good habit I do encourage is setting budgets for all likely spending (including savings). By putting money each month into an “ad-hoc” bills account you never need to scrape around when that bill comes in. By putting a set amount of money each month into a savings account (even if you later need to delve into it) you’ll remove the spending temptation that often arrives when your current account balance has built up a bit. By starting saving a small amount and then slowly increasing it every few months, you’ll soon be saving more than you thought possible. By making sure you have a full money review once a year, you can help to ensure your longer term plans stay on track.
In short, they key to money success lies in two things, considered goals and good habits.
An interesting thing happened to me today.
About a month ago, I decided I was going to run another half marathon both to raise some money for charity (watch this space) and to put pressure on me to get fit. The event is in October and given the excess baggage I am presently carrying and an ongoing leg injury, it has been slow to get things going.
A week or so ago I went to the gym. I got on the treadmill and set the distance for 5k. After 500 meters my leg was hurting and I was out of puff!! Needless to say, I did not make the 5k. I jumped onto the cross trainer instead and mixed things up with a bit of a swim.
Anyway, to the point. Today, 4 trips to the gym later after a fairly solid session I went to the shower feeling fantastic. Even in that short space of time, I have noticed my fitness improve and whether my brain is playing tricks on me or not I don’t know but I think I actually am looking a little fitter.
There is no way I am ready for the main event yet but I am buzzing with my progress and can’t wait to do more training.
So, the link. For most of the clients I work with, their goals are long term. For ease, let’s say a common goal is to retire with a decent income in 20 years time. Seems a long way off doesn’t it. Perhaps that’s one reason why planning for it seems like something easily put off – we can always find more interesting things to spend our money on. In addition, the sheer size of pension fund needed to get a “decent income” can be a bigger number than the value of many people’s homes.
This is the “how to eat an elephant” scenario. We use this in our seminars. If you know you need a fund of £400,000 in 20 years time, you can work out how much you should have in 1 year’s time, 2 years and so on. In fact, at any point on the journey, if you make it easy to measure where you should be, you can assess yourself as on, ahead of or behind target. So, imagine how good it would feel to continually know your plans are working and that you’re on track.
If you’re not on track, well it’s better to make a small adjustment now than to wait until the day before you want to stop work and realise you should have done more.
One thing that continually amazes me as a Financial Planner is that people just don’t know where their money goes each month.
We ask anyone coming to meet us for the first time to tell us (amongst other things) about 4 things; their income, their spending, their assets and their liabilities.
In particular, when we ask about spending, we often hear “well, all I know is that there is no money left at the end of the month”. So, if this would be your response as well, then congratulations. You are normal.
Failing to understand where it goes today means you cannot possibly (at least with any accuracy) predict your cost of living in 10 or 20 years time and if you can’t do that, how can you plan effectively?
Saying “I save as much as I can afford” when you don’t know where the rest of your money goes is sheer naivety.
Letting that view go unchecked year after year means you also cannot be certain if you will reach your money goals or not. Even worse, you could be over planning and sacrificing today’s lifestyle to do so.
What you need is a money barometer. What is my goal? How likely am I to hit it? What action should I take as a result? It all comes down to spending.
You really do need to account for those things you might not even think about – the morning coffee on the way to work, the starbucks lunches, the haircuts, the window cleaner, the never ending requests from the kids. The list goes on.
Another problem (as some of my clients have discovered on completing their spending review), is that it can be all too easy to unwittingly spend in ways which serve no purpose. For example, I see clients who are paying for insurances they probably would not be able to claim on or perhaps are no longer even needed. In short, if you know you need to save more but don’t think you can afford to, I feel sure completing a comprehensive spending review will be an enlightening exercise.
If you would like to download our excel spending review, it can be found on our web site - http://www.onelifewealth.co.uk/library.html
As we approach our 2nd birthday, this is a huge honour for us as we are only 1 of 5 business selected in this category in the whole of Hertfordshire.
We’ve put together an overview of our awards submission so you can take a look for yourselves, find out a bit more about our approach and what makes us different. Click Here.
Last year, together we raised £763 for Great Ormond Street. Well, in next month’s newsletter, we’ll announce this year’s challenge.
We want to raise £1,000 this year but we want you to help us chose the charity.
Your vote is just 2 clicks.
All of our charities focus on children with very tough lives.
“I want to get organised to pay off the mortgage before we retire”
This month we completed a full money makeover for Tracey and Mel O’Connor in High Wycome for Moneywise Magazine.
Click the image to read the article.