Overspending and pessimism
I’m not going to pretend that this is an easy problem. As a financial planner I have to make lots of assumptions about the future and I typically advise clients that few of them will be accurate, but they are all reasonable, but just as importantly, they are reviewed.
In simple terms, financial planning attempts to ensure that you don’t run out of money. Great financial planning attempts to ensure that you get and keep the lifestyle you want. There are numerous assumptions that I have to make, not least of which is your life expectancy. Most people under estimate this. Pause for a moment. At the risk of boring you… as I say this to clients… if we take a conservative approach to your life expectancy and assume you live until you are 100, your money has to last longer and thus work harder… if we assume you live to say 80, then it doesn’t need to last as long or work as hard… but if you invite me to your 80th birthday party, I’m the least popular person in the room, because once we’ve had a drink, the cake and a bit of a dance, I turn the lights off. That’s it.
OK, you may have other sources of income (State Pension etc) which would continue, but the point is merely to help you grasp the significance of this assumption… which I find seems to work. Importantly we review this (its an educated guess)… the day you die isn’t something that we can easily predict, but we can at least build scenarios into your plan.
The Destitute Pensioner
There’e a new film out which I plan to see as it stars the rather wonderful Maggie Smith. Its called “Lady in the Van” and is on general release on 13th November. Its based on a true story. I’m not sure if this was a lifestyle choice or something that was forced upon her, but it makes for a good script. Without proper financial planning advice, many pensioners are going to run out of money, the only way to properly engage with this prospect is to provide a proper financial plan which includes cash-flow forecasts, without it (as many advisers still appear to be) you are up the creek with the proverbial paddle. Here’s the trailer.
You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email firstname.lastname@example.org