Opinion: What's your number?

By Simon Yates, CFP DipPFS CertsCII(MP&ER)

You do know what your ‘number' is don't you?

Your ‘number' is the amount of money you'll need for your nest egg.  It's the amount of money you'll need to fund the Rest Of Your Life, doing the things that you want to do.  Fortunately, we don't all want to do the same things, so everybody's number is different.

What do you want the Rest Of Your Life to look like?  Can you save enough?  How much is enough?  And how will you know when you've reached your number?  What if you work too long or retire too early?

Many people are terrified of Lifestyle Relapse: the nightmare that one day you'll find yourself unable to enjoy the lifestyle you've got used to.  This should be incentive enough for people to plan ahead and take action.  But is it?  Not always; people procrastinate and bury their heads in the sand.  Or maybe they know they need to do something but don't know who they can trust to help them.

Some people run successful businesses or have important jobs that are demanding of time and energy.  When can they afford to wind down and start having even more fun?  Running a successful business or job is hugely rewarding; just remember the work-life balance that so many people are searching for.  Ask yourself if you have the time to do all the things you want to do?  If not, why not?

Then there are people who receive a large sum of money, from retirement, redundancy, divorce or inheritance.  How are they expected to know how to invest that sudden wealth?  How do they know what represents a ‘good' investment?

Traditional financial planning and newspaper articles are great at helping you understand issues like the difference between equities and bonds, how to get an extra quarter percent interest on your savings and how tax relief on pensions works.  All useful stuff but they don't address the question "what do you want to do with the Rest Of Your Life and how much will it cost?"  How do you know the rate of return you need on your money, if you don't know what you want to do?

When it comes to investment, many people seem to think that the answer is to take as much risk as they can tolerate.  Interesting strategy.  My view?  Make suitable investments - which you are comfortable with and which match your life plan - and take up rock climbing if you crave excitement.

A traditional financial plan may be hollow if it's not wrapped around a life plan.  What's the point?  One approach that may work for you is Lifestyle Financial Planning.  This enables you to work out what's important to you and what you want to do with the Rest Of Your Life.  It gives meaning to your financial decisions.  After all, money is useless without something to spend it on that helps you to live your life how you want to.

Who knows the answers to all of these questions?  Who will listen to you carefully, explain things with as little mumbo jumbo as possible and apply years of financial experience to help you to achieve or maintain your lifestyle?  A good place to start is with a professional Certified Financial Planner^CM who has been trained by the Institute of Financial Planning to help clients to achieve their lifestyle and financial goals.  It could be the difference between you living the life you want, or not.

This article was inspired by my work with clients and by the book The Number by Lee Eisenberg - which I recommend you read if you are interested in the Rest of Your Life.  Remember to ask us for independent financial advice before you take any action based on this opinion.