How not to run out of money

All of us will have our own personal experiences of money, from childhood, teenage years, first job, first home. Some of these memories can be inspiring. Others can leave mental scars. Either way, they will influence our relationship with money and can cloud our judgement of what our financial reality actually is; how much money we really need to live the life we want to now and in the future. The key to getting this balance right is planning.

When we are young and we’ve just started earning, we never really think about the income we’ll need to support ourselves later in life. And that’s probably a good thing. Yes, you may think about saving for your first car or home, but it’s also a time when you can really live in the present and experience life in the here and now. You’ll dine off those stories when your life is busy with family, work and financial commitments or you’re at an age where you just want to put your feet up!

How much is enough?

Whatever your circumstances, however, there always comes a point in your life when you do start to consider whether or not you’ll have enough money to support yourself when you’re older. Your experiences with money will undoubtedly play a role here – you may be over confident that you couldn’t possibly run out and be frivolous with your finances or you may be over cautious, crippled by the idea of running out and missing opportunities to do more in the present. So, how much is enough? It’s a question we get asked time and time again.

The power of planning

Answering this question is where planning really comes into its own. We help our clients is to review their budget (income and expenditure), update their assets (savings, pensions, liquid investments, property, investment properties) and provide a forecast that will enable them to see what level of income they could receive when they stop work. If this is something you’d like to do with us, please do get in touch, we’d love to hear from you.

It’s an interesting process, because so many factors come into play here and everyone’s circumstances, needs and wants are unique to them. You may hate your job and want to quit sooner rather than later. You may want to spend more time with your family, how would working a four day week impact your finances? It may be that you are working every hour of the day to pay for your current lifestyle while also saving for your future lifestyle. But have you overestimated how much you’ll need for the future once your mortgage is paid off and the kids are no longer at home? Have you considered that when you hit a certain age, the idea of endless holidays may not be so appealing? Could you therefore afford to go on more of those trips you dream of now, when you want to and not worry about reducing the future money a bit as a result?

Having the confidence to enjoy life

More often than you might think, we actually help clients stop work earlier than the they thought they could. We find that they actually have sufficient monies to provide them with their required income to live the life they want in their senior years. On the flipside, there have been plenty of people surprised by the low level of income they’ll have to live off later in life. While some will feel that when the time comes they will be happy to make cut backs (age does sometimes play a part here too of course, as I mention above) or it may be the motivator they need to adjust things in their life to help bolster future funds. But without the planning they would never have known if changes were needed, until it was too late to do anything about it.

When it comes to planning, there are three things that will help you get the process right. First up is honesty, you can’t lie to yourself. Regular reviews too are essential at least once a year because circumstances change all the time and communication, the more we talk and engage in the process, the better the outcomes will be for you.

Talking to a financial planner and going through the planning process allows you to get the balance right between living your life and having enough money now and in the future. It takes the uncertainty out of the equation and gives you the confidence to enjoy life. Isn’t that ultimately what we all want?