Achieving your goals

Ultimately your financial plan should be about making the most of your life. We all know we are going to die one day, so why not aim to ensure that you have lived your life to its potential, and have done all the things you set out to do?

A strong financial base will give you the freedom to make choices for you and your family.

What happens to people without a plan?

We all have good intentions, so here are some genuine statistics which might prompt you to some action. We probably all know people who fit into these categories...

We are all living longer

In 1901 the average life expectancy at birth for a man was 45.  In 2002 this was 76. For those who make it to 65, men can expect to live until 81, women to age 84. Source: UK Government statistics website.

The state can't afford to provide for you

People tend to believe, wrongly, that the state will provide for them. As the population ages, the ratio of working people to retired will only get worse, meaning there will be fewer people available to pay for retirement benefits.

The basic state pension is currently £95.25 per week for a single person. This increases at a slower rate than average earnings, meaning it loses buying power over time.

The question is whether you would like to live on this amount when you get to retirement. What would you have to give up?

With an ageing population, it is no surprise that the Government is forced to cut benefits and extend retirement ages. Current proposals aim to increase the state retirement age to 68.

Savings, what savings?

According to a study by the Yorkshire Building Society, the average person's savings would last only 52 days. Think about your own outgoings. How long would your lifestyle last if you lost your income? Would you have enough put by to cope with an emergency?

"I won't get sick"

Hopefully you won't, but you might. According to the Department for Work and Pensions in 2007, you had a 1 in 13 chance of claiming on life assurance; a 1 in 8 chance of claiming for critical illness, and a 1 in 5 chance of claiming on an income protection plan. Yet, according to Mori in 2008, the same amount of people insured their teeth as their incomes! That's 6% if you're interested!

If you get sick the Government will give you £89.80 per week (ESA, long term benefit). If you do not pass the rigorous tests to get this benefit you are deemed to be able to look for work and therefore go on lower Jobseekers benefits.

How many days just to pay your tax bill?

The Adam Smith Institute calculates that you need to work until June 25th to pay your tax. That means, your money is not yours until you pass this point. Yet people talk about their income before tax. If you think of the expense of your tax bills, this puts your disposable income into perspective.

A debt mountain

The average household debt in the UK (excluding mortgages) is £9,180; if you take out those who have no personal loans this rises to £21,355. If you include mortgages this is £58,290. See creditaction.org.uk

Many people use debt to fund their existing lifestyle, which only serves to feather the nests of those lending money.

As well as this, there is a worrying trend to use interest only mortgages. This help people to save money and provides flexibility, but many people do nothing to work towards paying off the capital of their loans. This could lead to severe consequences later in life.

How much money do I need to retire?

Obviously this depends on your expectations in retirement. As a rule of thumb, you should be able to achieve an income of around 5% a year from your cash assets (pensions, ISAs etc). Thus, if you have £100,000 this would equate to roughly £5,000 per year. Of course, this all depends on the age you are, how much risk you want to take and so on.

Want some help?

What this means is that the traditional retirement no longer applies. We are more active, and live for longer; therefore we need more money and probably want more flexibility.

Financial planning is about breaking your financial life into manageable chunks so you can make progress in all of these. Your plan will allow you to prioritise your needs, so that the most important are dealt with first.

We work closely with our clients to develop and maintain their financial plans. If you would like some help in preparing your plan, please contact us.