What financial resources do you have available now to help you meet your objectives? Are you ‘guesstimating’ what you may have now or in the future? Or are you confident in the accuracy of the figures you have pulled together?
True lifestyle financial planning is fantastic and can often be life-changing. However, it is only really possible to make a difference if there are financial resources with which to work. If you haven’t got any financial resources then your options are, I am afraid, somewhat limited. Your best bet at this stage is to set about making an effort to build some wealth. Fundamentally, there are only three ways to do this:
- Earn more
- Spend less
- A combination of the two
This sounds very simple, and it is. There is no need for an extravagant strategy or concepts here; it is much like losing weight. Yes, you can go on some fashionable diet promoted by a celebrity, or you can simply eat less and move more. It is the same with money: if you earn more and spend less, you will accumulate wealth.
Starting off small
George Soros and Warren Buffet are two of the richest men in the world. They both started with very small amounts of savings and just kept building by earning more and spending less. It is remarkable to think sometimes how many people in Western culture spend more than they earn. I am not, of course, referring here to low income households or those that struggle with illness or disability. I am referring to those who earn good money and still spend more.
I have personally come across people that earn more than £300,000 per year and still spend £320,000 per year, and have done so for a number of years. They, of course, have no financial resources to speak of except a large pile of debt, and perhaps some bright shiny toys that will very quickly depreciate in value.
A measure of clarity
There is a great book that deals with this type of thing and I highly recommend it: Rich Dad Poor Dad by Robert Kiyosaki. (Published: Plata Publishing; Second Edition 27 April. 2017)
Once you have at least a measure of clarity on how you want your future to look, the next thing you need to do is really understand and quantify the resources you have available to you. And by resources, we don’t just mean money in your bank account; we mean your whole, overall financial position.
- Assets (your home, car and business)
- Savings and investments (ISAs, savings accounts, stocks and shares and so on)
- Pensions (state, personal and occupational)
- Life assurance policies
- Entitlements under any trusts
- Other property such as buy to lets or commercial property
Many people consider their financial position in the wrong way. It is not simply looking at the money in your bank account and assuming this is their only resource. It’s about gathering what are known as ‘hard facts’, i.e. the really factual data; like how much and where. It is vital to quantify where you are now before attempting to make the journey to where you want to be. We have to know where you are starting from to know the direction and pace of travel in which to move.
No walk in the park
This can be hard work, depending of course on the complexity and extent of your existing resources. There are, however, no shortcuts, unless you employ someone else to do this on your behalf.
For some, this will be a simple matter of checking what is in the bank. For others, it will require gathering data from several different insurance, investment and banking companies, as well as perhaps speaking with estate agents, pension providers and trustees. It will also be necessary to look into detail at your expenditure, plus of course your income from all sources.
This work is very necessary and very worthwhile. You’ll have a true picture of your available resources and be one step closer to living the life you want.