In last month’s newsletter you read about the four crucial questions you need to answer before designing your financial plan.
However, there is one overriding question, which epitomises financial advice and planning for your financial future.
This is often the elephant in the room and it’s what all of us really want to know. It will sit there as a subconscious feeling, whilst all the other questions you might typically ask are a means to “the end” – how should I invest my savings? Should I review my pensions? These are all the ‘means’.
The question is this…
Are we going to be OK?
The front page of one of the tabloids caught my eye in the newsagents recently. They had listed some of the financial challenges facing individuals and households in the coming months. These included:
- Inflation – now expected to reach 9% this year
- Rising energy prices
- The cost of filling your petrol tank
- Increasing National Insurance.
Throw in a worldwide pandemic and the largest European land war since the mid-90s, if not 1945, and it’s perfectly understandable if your reaction to all this is one of concern and anxiety.
The confluence of events has prompted many people to look at their financial position and ask themselves: “Are we going to be OK?”
It’s a very understandable question to ask
Although it’s often couched in different terms, such as “what happens if…?” or “can we afford to…?”, it’s a question that’s commonly put to me in client meetings.
Regardless of the context or words used, the underlying sentiment is the same. Worrying about your financial future is a perfectly understandable human emotion. Interestingly, in my personal experience, it’s an uncertainty that affects everyone – regardless of their wealth.
If you’re asking it, you clearly need reassurance, and it’s my job to work with you to put the plans in place to give you that peace of mind.
Effectively, all financial planning can be boiled down to dealing with this question. Everything to do with your investment portfolio, how much you contribute into your pension, and the amount of life cover you have all ultimately comes down to ensuring that you and your loved ones will be OK.
Answering the question can often be distilled under three separate headings.
1. Planning for your retirement
Once you stop working, you lose the safety net that’s been in place for the best part of 40 years. It’s the safety net that consists of the regular income you use to cover your ongoing needs.
At that moment you’re likely to feel very much on your own. The certainties of a daily work routine give your day-to-day life a valuable structure, and the regular income funds your lifestyle.
But you won’t be on your own if you have a plan in place.
At a very simple level, even if you’re no longer earning a salary, you’ll still have an income. If you’ve planned ahead, you’ll have the withdrawals you make from your pension fund as well as income you can draw from other savings and investments.
Your wealth will likely be growing too – driven by continuing investment returns on your investment portfolio. If you have a robust plan in place, you can also minimise the tax you pay.
We can use cash flow forecasting to inform your planning process and to help ensure you’re prepared for unexpected events and challenges.
Ideally, your financial structure should be flexible enough to adjust to changing circumstances as required.
2. Dealing with external events
No one can predict the future. The perfect crystal ball has yet to be invented. After all, at the end of 2019 who would have guessed that we’d spend the best part of the following two years dealing with a worldwide pandemic?
What we can do is use the detailed cash flow modelling tools referred to, to help ensure any plans you have are strong enough to withstand the external events which may affect them.
We won’t just do this at the outset. It will form an integral part of your annual review. This means you’ll be able to see how a long period of high inflation could affect your future plans, likewise a stock market adjustment of the kind we saw in 2008 and in March 2020.
All of this information will inform your decision-making process to help ensure you won’t run out of money and to give you the best possible chance of enjoying the comfortable future you’ve worked hard for.
3. Should the worst happen
Of all the “what if?” scenarios that run through your head, “what if something happened to me and I couldn’t provide for my family?” is the one that should give you the most pause for thought.
To give you peace of mind, your financial plan should include suitable provision to help ensure that, should the worst happen and you’re unable to provide for them – through death, illness, or incapacity – then, yes, your loved ones will be OK.
This also extends to legacy planning. Your plan should be designed to provide the reassurance that, not only are your loved ones going to be OK, but you’ve also left your finances strategically planned to minimise Inheritance Tax (IHT). This helps to ensure that your accumulated wealth passes to the people you want.
Get in touch
I can answer the all-important question you’ve read about here and work with you to help ensure your finances are in order and your loved ones are taken care of.
To find out more, please give me a call on 07769 156 250.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
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