How much is enough?
It’s perhaps not the first question you’d expect a financial planner to ask you. In truth, it might not be the very first question we ask you! However, you can be sure that it’s something we’ll get to.
When saving for the future, there are two ways you can look at your wealth.
Do you simply want it to grow as much as possible?
Do you want it to grow to a specific amount?
Instinctively, you might think that you just want to grow your wealth as much as you can. However, taking the second view could mean you get more from your life, and more peace of mind.
The pursuit of “more” versus the desire for “enough”
We’ve previously talked about the difference between financial advice and financial planning, and why we believe planning is so important.
Traditional financial advice tends to focus on product solutions for specific problems. Need to protect your family? Here’s some life insurance. Want to save for your future? Start this pension.
What this can lead to is a focus on “more”. If you wanted to invest some money without a specific goal in mind, you will always concentrate on how much your money has grown. You’ll relentlessly pursue “more”.
So, what’s the problem with this?
There’s nothing wrong with growing your wealth. However, it’s vital that you have a plan in place otherwise you’ll have no idea what “more” means.
Here’s an example.
Sarah owns a successful business. She has worked with a financial planner to determine exactly how much she needs to live the lifestyle she wants when she retires. Her planner has produced a lifetime cashflow forecast that considers worst-case scenarios, which has established she needs to sell her business for £1 million.
If she sells for £1 million, she can retire comfortably, tick off everything on her bucket list, and leave the legacy she wants to her two children.
Sarah gets an offer for £1.2 million for her business. She sells, retires, and lives the life she wants.
Colin also owns a successful business but has never engaged with a planner. He knows that “his business is his retirement” and is working hard to maximise the sale price of his business.
He doesn’t accept the £1.2 million he is offered for his business, because he believes he can continue to work and drive up the value of the business. Ten years later he’s exhausted and can’t find a buyer for his company.
If Colin had engaged with a financial planner, he might have established that £1.2 million was easily enough for him to live the lifestyle he wanted. He could have sold his business, enjoyed a decade with his family, indulged his passions, and travelled the world.
Instead, he continued his pursuit of “more”.
Working out what your figure is
Instead of remaining on the treadmill trying to chase more, could it pay to find a way of funding a contented life? Chasing more leaves you wanting more, but contentment requires an understanding of what you want and how much is “enough”.
Enough will be a different amount for everyone. It will depend on how much you love your work, when you want to retire, the sort of lifestyle you want in later life, your health, and a range of other factors.
One of the ways we can help you to work out what’s enough for you is by using sophisticated cashflow modelling. We can model a range of scenarios – for example, based on different sales prices for your business, stock market volatility, pension values and so on – and establish how much you need to live the lifestyle you want in retirement.
If you’re thinking of retiring now, or Covid has made you consider retiring in the next few years, seeing your future in black and white can be genuinely transformative. You might realise that you have enough already, and that you can take the next step confidently knowing that you have enough to live on – whatever happens.
Surely this is a better option than working relentlessly for the next few years in the vain pursuit of “more”?
Get in touch
If you want to find out how we can help you determine what’s “enough” for you, please get in touch. Email team@tfp-fp.com or call us on 01621 851563.