Our everyday lives have been turned upside down and I’m sure we have all found ourselves contemplating what the future holds. Especially those who have been isolated working at home.
It is all very strange of course, but I’m finding that some of us are really enjoying the new working freedom and cannot imagine going back to the previous regime or anything close to it. Others though are finding it very difficult and are missing the structure of the working day and the camaraderie. It does beg the question; what will happen when life returns to something close to normal?
Having more time has also allowed for a period of reflection, not just on work related matters but on other aspects of our lives too. With our new client enquiries, we are finding that so many people are recalibrating what is important and perhaps appreciating the simpler things in life. Nearly all of us are finding that we aren’t spending as much money which, in turn, stimulates thoughts about how much money do we really need?
Perhaps the answer to the question “how much is enough”, particularly in relation to retirement, may now be somewhat different than if the question had been asked before lockdown?
Recent research suggests that in the UK, a couple requires an annual combined income of £47,500 to have a life with few or no money worries in retirement, while a single person would need £33,000. This estimate assumes a lifestyle that includes three weeks’ holiday in Europe per year and food shops costing £56 per person per week. (3 Dec 2020)
I think the food shop is a tad stingy!
How much is enough depends entirely upon your lifestyle
How much you need in retirement depends upon the questions you ask yourself and, of course, the answers you come up with.
It depends upon how you really want to live your life.
Try having a go at answering the questions below, if you haven’t already done so in your own mind, and perhaps ask your partner (if appropriate) to write down their thoughts too. Then compare and contrast:
· What do I really love doing?
· Have I got a sense of purpose or a mission?
· If I could design my perfect day, what would it look like?
· How fit and healthy would I like to be?
· Would I like to help others?
· What makes me happy?
· What will help me feel fulfilled?
· What do I want to be remembered for?
Knowing your number
I always ask prospective clients what their number is; how much do they need and when to live the life they want? Most people don’t know.
In my experience, the vast majority of people overestimate what they need in retirement and, as a result, delay the time when they could retire. If you love your job then fine, but you should still have a plan. If it feels like you are a slave to your job then you need to know your number and quickly, whether you are aged 45, 50, 55 or 60 and beyond.
It’s time you took control and placed yourself in the driving seat!
Figuring out how much you need
As part of this journey, it is important to try and work out how much money you need each year. Best guesstimates will do. Again, try and do this separately from your partner to start with:
· How much do I need to take care of the family?
· How much ‘spare money’ do I want for impulsive things?
· How much will my luxuries cost?
· How much money do I need for travelling and holidays?
· What is the minimum amount of money I need to be able to enjoy life?
· How much money would I like to have to be able to help family/ friends, charities etc?
Now we have the beginnings of your number!
A pipe dream or reality?
Having identified the lifestyle you want to lead and the anticipated costs, now we need to know whether this is all a pipe dream or whether it is a realistic possibility.
Investing in cashflow planning with us creates an emotional connection to all the numbers. By pulling together all your financial information, we model various scenarios, depending upon how you have answered the above questions. Each scenario will have its own number that you need to aim for.
This is where trepidation transitions into excitement and you begin to realise what’s possible.
Life is too short!
Sadly, the Covid-19 pandemic reminds us of this all too frequently. My message to anyone reading this blog is not to let inertia rule your life. If you are not fulfilled, then do something about it.
Lockdown is the perfect time to evaluate what’s important.
Change can be daunting but, managed properly, it can be the start of something truly amazing.
Gary Neild B.Sc.Hons. DipIP PFA
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.