A couple of months ago, we were discussing the differences between financial advice and financial planning. One of the key points from that discussion can be summarised as:
If the first question you’re asked is about your money, you’re probably talking to a financial adviser
If the first question you’re asked is about your life, you’re probably talking to a financial planner.
While most of our clients come to us initially because they have a specific problem to solve, or a financial question to answer, the conversation soon develops into much more. Money is only ever a means to an end, and so it’s crucial that we focus on this ‘end’.
What are you saving for?
As the name might suggest, as financial planners, we help people with their money. Whether that’s budgeting, investing, saving for retirement, protecting their family or their legacy, or reducing the amount of tax they pay, we can provide advice on all these areas.
One question many clients haven’t considered, though, is “what is the money for?”
We all like to save. Whether we put our 50p pieces in a money box at home or we have a regular direct debit every month, everyone knows that it’s inherently a good idea to save.
Of course, many people do have a specific target. It could be to buy their first home, pay for a child’s wedding, or simply go on that dream holiday you’ve been planning for years.
When it comes to saving for retirement, things can be a little less focused. Again, most people know that they should be saving for later life, but don’t have an idea of how much and what they might do with these savings when they do eventually stop work.
That’s why it’s so important to focus on how you want to spend your time, not how you want to spend your money.
In 2019, Karl Pillemer, a gerontologist at Cornell University, interviewed 1,500 over the age of 65 about what they most regret in their life. The results probably won’t surprise you. The most common regrets were:
Not resolving a family estrangement
Not being careful enough when choosing a life partner
Not travelling enough
Worrying too much
Not taking enough career risks
Not taking care of their body
What’s striking from this list is how many of these regrets relate to the time people spent, not to the money. So, when approaching your retirement, it’s vitally important to think about what you plan to do. Your money is there to support your life, not the other way around.
Why planning your retirement is so important
For many people, the idea of retirement is just that: an idea. You might have a vague notion of when you intend to stop working but no plan.
The process of thinking about when you might want to retire and setting a date for this is psychologically important. When you do, it makes the idea of retirement seem real, and encourages you to:
Visualise your life in retirement
Think about what you will do when you retire
Make plans for your future.
By doing this, you’ll make the transition to retirement easier. When we speak to clients, one common piece of advice we always give is to start planning as early as possible. Putting a plan in place means you can really think about how to spend your time.
And, once you have planned exactly what you intend to do when you stop working, it’s much easier to work out how much money you will need to achieve all your goals and ambitions.
Money should support time, not the other way round. Once you know what you plan to do, we can use cash flow modelling to forecast whether you will have ‘enough’, and put a strategy in place to make sure you can afford to do all the things you want.
‘Front-load the fun’
One of our clients told us a few months ago about how we were able to show him that we can ‘front-load the fun’!
By modelling his retirement, we were able to demonstrate that he was able to spend more of his money in the early years while time and health were on his side, enabling him to do all the things he wanted to in retirement with the confidence that his money wouldn’t run out.
Get in touch
How you spend your time is often as important as how you spend your money. So, it makes sense to construct a financial plan that is as much about your goals and ambitions as it is about your finances.
This is our approach, and we call it REAL financial planning. To find out more, please get in touch. Email team@tfp-fp.com or call us on 01621 851563.