As a client of Charlton House, the early stage of our relationship will involve putting together your financial plan.
A significant focus of this stage involves spending time assessing what’s most important to you, so we can ensure your financial plan is designed to help you achieve your goals and ambitions.
In last month’s newsletter, you may have read about some of the key themes that can help you identify your financial goals.
Articulating and defining what’s really important to you in life (your goals) can be more difficult than you may think. I know this as I’ve had to tease such information from a fair few people over the years!
Sometimes, I have found it more productive to work backwards by considering negative outcomes, and then planning to give yourself the best possible chance of avoiding them. In fact risk aversion theory goes a long way towards explaining why people might be more motivated with a financial plan that seeks to avoid negative outcomes rather than achieving positive ones.
So, read about why sometimes thinking about things you don’t want to happen can be the best way to motivate you to plan for your future.
1. Working in a job you don’t like, and having to work longer than you want
Maximising your wealth through your earned income is all-important. Furthermore, your job can provide you with structure and help define who you are.
However, at some stage, you’ll want to step off of the treadmill and have control over when you do, rather than finding yourself in the position of having to work on beyond your intended retirement date.
You need to be confident that you’re setting enough aside and have an effective investment strategy to ensure you are in a position to stop working at the time you want. You may also want to avoid having to work in a job you don’t enjoy simply because the pay is good, and you can’t afford to take a step back.
The alternative may well be for you to continue working for longer than you had planned or hoped to ensure you have the means to enjoy the retirement you’ve worked for.
Effective planning can help you to plan your career so that you actually enjoy what you are doing – particularly during the time approaching retirement when you’re looking to slow down.
There is also clearly a time to maximise your earnings potential, especially if you are highly paid and internationally mobile before you settle down with your family and start setting down more permanent roots.
2. Not having the space to be comfortable or live in the way you envisage
How you live once you have stopped working can be dictated by where you live.
So, it’s important to ensure that you avoid ending up constrained by the size of your property or geographic location.
For example, life in Hong Kong can often feel restricted by smaller property sizes, and one of the key drivers for your planned return to the UK may be the ability to live in a property with more space and substantial grounds.
Alternatively, you may be planning to downsize or are thinking of having two properties to live in at different times of the year. Avoiding the UK winter is a common desire.
As a result, your plan should include an idea of where and how you want to live. Clearly this may change, and a whole series of potentially unknown factors could affect your decision-making. Yet, having an outline idea at the outset can pay dividends.
3. Being unable to support your children or grandchildren with key milestones
One of the key attractions of retirement is being able to spend more time with your family.
If you have children, and then grandchildren, you will likely also want to be able to support them and provide financial help at key times in their life.
This could include the cost of private education, as well as their university costs, plus maybe funding post-graduate studies or employment-related qualifications.
Beyond that, you may want to help them to get on the housing ladder of funding a wedding. How would you feel if you were unable to provide this support if it is important to you?
So, to achieve these outcomes, it’s important to plan ahead, so you have the right savings and investment strategy in place.
4. Not being able to afford to pursue your dreams
As you read in last month’s article, you will probably have a bucket list that you’ll want to fulfil once you stop working and have more time on your hands.
However, neglecting any form of planning for this, and instead leaving things to chance, could easily result in you not having the means to tick off many of the items on your list. This could leave you with severe regrets for your lack of preparedness.
At a simple level, this could mean extensive overseas travel and so you may want to make a detailed list of things you want to see and experience while you are still active.
Without planning you may have to compromise and constantly have to be aware of your budget. By planning ahead, you can avoid this kind of outcome and enjoy a five-star lifestyle rather than one more akin to a youth hostel (if of course five-star is important to you)!
Additionally, you will likely want to spend time with your friendship group, sharing experiences. Again, planning will make it more likely that you won’t be the one missing out.
5. Having your retirement choices restricted by poor health
When you do stop working, you will want to enjoy a long and happy retirement.
A key part of this will be taking steps to avoid your retirement coming to a premature end because of ill health and ensuring you are well enough to enjoy the retirement you have in mind.
Clearly you can’t guarantee perfect health. However you can take steps to give yourself the best possible chance of enjoying a healthy and active lifestyle for as long as possible.
This can include taking steps to guarantee access to the best private healthcare, including such preventative measures as advance screening and annual medicals that can flag up potential issues before they become too serious.
You will want to give yourself every possible chance of being able to spend time enjoying yourself and with your children and grandchildren. Taking steps to protect your health and wellbeing will be a key component of that plan.
Get in touch
If you would like to talk about any aspect of your financial planning, please contact us by email or, if you prefer to speak to us, you can reach us in the UK on +44 (0) 208 0044900 or in Hong Kong on +852 39039004.
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