If you can tell us what you want from life, we can help you to plan for the cost and tell you when you have enough money. In a nutshell that is what Financial Planning is.
How do you know when you have enough savings?
Guessing just isn’t good enough. We need to do a calculation. We have all tried on numerous occasions to come up with a plan. We total our outgoings and projected our future income and expenditure. But we always forget things, life doesn’t go to plan, the calculations don’t work and we have to start all over again.
Well now there is a nifty tool that helps us and the results are believable too. It’s called Moneyscope and we can show you how we use it. But first we need to start at the basics.
OK, let’s get started
Everyone has to cover the essentials every month before you can really start to enjoy the savings you have left. These are your everyday committed payments like Council Tax, Gas, Electricity etc. We need to work out the cost of these.
Just your essential commitments. You need to live somewhere, you need to eat, you need transport. You include only the items which you need today and always will need in the future. Like wifi!
The nice things in life like holidays, powerboats, light aircraft etc. you can live without if you have to. Don’t add those in, the nice things come later. So we want to initially calculate only what you need, the bare essentials.
I know what you are thinking
That’s no life. No it isn’t and that’s my point. This monthly total amounts to survival only. It’s an existence but nothing more. Many clients are shocked when they complete this estimate of committed costs because its usually relatively low. Knowing this number is like owning a sturdy bed. You will always be able to sleep at night once you are sure you have all the basics covered. Peace is a level of expenditure lower than your ongoing guaranteed income. We now need to add inflation to this figure each year because our bills just go up and up.
Next comes the hard bit.
You have to dare to dream. What do you want to achieve with the rest of your life? It may be holidays, second home, helping your kids get on the housing ladder or just a new kitchen. The difference here is that often these are one-off items. It’s going to take some time to dig these out, because if we carried these goals, dreams and aspirations around with us all day we would be just so frustrated. Sit down with a glass or two of wine and a piece of paper. Fill it in with everything you want to do over the rest of your life. Create your bucket list.
You’ve calculated your budget and created your bucket list
Now you make an appointment with us at our office and together we plot your future into our cash-flow modeller. Although your bills will continue to rise for the rest of your life, crucially your dreams will probably reduce in number and total cost as you achieve them one by one.
I have many clients who are in their 80’s who tell me life now looks like a good cup of tea and a crossword. They can’t even spend a couple of full state pensions anymore. At a certain age, money is no use to you unless you can maintain your health, your energy and your confidence. It gets worse if you lose your partner.
Money is simply a form of energy, allowing you to do the things you want in life. But it is no use without the will to spend some. Your money energy should reduce as your physical energy and personal confidence does. Getting used to spending will take some time. We will cover that next.