The answer to that is ‘yes’ if you are the client who I was recently working with!
I’ll explain how…
It is all very well looking at investment projections, expectations, anticipating the market and so on, that is mostly guess-work in all honesty. A huge part of what we do with our clients is to coach and guide them with their money – that stuff we all take for granted because savings accounts and budgeting is straightforward right? Well not when it costs you a cool £500,000!
Let’s take the analogy of a night out first. Off you go, £60 in your pocket, have a few drinks, something to eat, a few more drinks and then what ever else. The next morning, can you account for where you spent your money? Probably not – the money fairy has descended upon you again and helped herself.
Now, back to my clients, who have an income of £60,000, with annual expenditure of £35,000. ‘Yes, we have included everything in the expenditure, holidays, eating out, everything’. So in theory now, they should have had an annual surplus of £25,000 – that is over £2,000 a month – so where does that go?
Rather unsurprisingly, there was a look of shock on their faces, ‘where does it go?’ Then it started to sink in, that if they had a closer handle on things, they could perhaps help their grandchildren – intentionally and on purpose, and still have some residue for the money fairy to help herself to.
Over the course of 15 years, with the inclusion of a basic savings interest rate, this hole in the pocket amounted to over £500,000! (we use a brilliant financial planning tool called Voyant so there is no need for you to reach for your calculator). Imagine being 80 years old and being able to give your grandchildren even half of that amount?
Of course, we believe in finding the right balance between enjoying today and then focussing responsibly on the future. In the same way that a night out can drain your back pocket of cash, so can day to day ‘stuff’ simply empty your bank account. It is very easy to live to your means and even beyond.
Part of the money coaching we do is to identify this with clients, allocate some of the surplus to longer term aims, with a key caveat to save first, then spend what is left, as you can be sure, that if you spend first, there will be nothing left to save.
Do you know exactly where all of your money goes each month? Honestly?
It may not seem as glamorous as investing, but sometimes, these types of adjustments can have a far reaching and positive impact on your finances over the longer term, allowing you to live your life, the way you want, and free of financial angst.