It’s easy to give good reasons for planning your pensions, investments, savings and protection. So why wouldn’t you do these simple things? Morven Millar, director of Gresham Wealth Management, looks at the most common obstacles to good planning.
We all make excuses in life – whether relating to exercise, diet or any other aspect of our lives. And we delay big decisions until tomorrow, rather than seizing the moment. This is particularly true of making financial plans. We’d all love the peace of mind that comes from long-term security and fully-costed future goals – so why do we continually put off seeking it?
The answers vary from person to person, but it’s a safe bet that at least one of five reasons below will raise a wry smile.
1. Lack of experience
Our life experience influences what we feel comfortable tackling, and what makes us uneasy. To put it another way: we like to play on our home turf. We stick to what we know – and if that isn’t pensions and investments, then those areas of our lives may get neglected.
But hang on a minute. You don’t let your lack of plumbing experience stop you from getting a tap fixed, or your lack of mechanical expertise keep you from fixing your car. In both those cases, you simply call in a specialist. Exactly the same applies when you’re dealing with something like share portfolios or pensions. There’s no shame in putting your hand up and admitting you’re not an expert in these areas. In fact, it’s a sign of good sense to know the limits of your own knowledge and when it’s time to contact a professional.
2. Choice overload
But let’s say you have taken the plunge and want to start long-term financial planning. Almost at once you might find yourself overwhelmed with all the different options. You’re faced with different forms of savings/investments, then the decision of how much money to allocate to each one, then the choice of which iterations of these to use, then which providers… there is more new information than one person can comfortably process.
The way to avoid becoming bamboozled is simply to focus on your goals and objectives. This is where a financial adviser comes into play. You know your goals – and they know the products. By working as a team, you can together narrow which choices are most suitable, and set the best course of action for your circumstances. Last but not least, they can then set everything up on your behalf, saving you the time and effort.
3. FOFO (Fear of Finding Out)
Standing up and looking at the reality of your situation isn’t always easy to do. And if we suspect that our finances might be less than ideal, we might prefer to ignore that suspicion until it becomes unavoidable. But turning a blind eye only makes things worse in the long run – whereas acting in good time can effectively deal with even serious shortfalls.
Especially if you’re nearing retirement, it’s never a good idea to bury your head in the sand. You don’t have much time to make a significant difference – but you can still make a difference. There are several free-to-use calculator tools available online that give a good idea of the level of savings you will need in retirement, and you can also make an estimate using the tips in this article.
Knowledge is power when it comes to financial planning – so even if the news isn’t great, it’s better to know it than to keep yourself in the dark. You may however discover that things aren’t so bad as you think. Plenty of advice clients have discovered old pensions that they never knew they had, or benefits linked to their current pensions that leave them much better off. Ultimately, you can only identify the best plan for yourself and your family going forward if you have a firm grip on what you already have in place.
4. Thinking you don’t have enough
People are often under the impression that only the highest earners need to consult a financial planner. Although there are some financial planners who work on the basis of a minimum level of investable funds, there are plenty more who work across a whole range of income and wealth levels. It’s simply the case of finding the right adviser for you. Once you add up all the money held in your pensions, savings and other assets, you may find you have more ‘investable wealth’ than you think. Also bear in mind that financial advisers often work with families or couples, so look at your combined family assets rather than what you own individually.
5. The need for instant gratification
It’s human instinct to crave immediate rewards, and the modern digitised world hasn’t helped. This ‘need for speed’ clashes awkwardly with the world of financial planning, which always involves ‘playing the long game’. You’ll make investment decisions and then may not see benefits for several years at least, so financial planning is initially hard to get excited about.
The key to beating this obstacle is to develop a set of shorter term financial goals. For example, set up a direct debit into an ISA every month, aim to make an additional pension contribution of a set amount every financial year. You can then ‘thank yourself’ with a small reward such as meal out when these goals are achieved, which provides the necessary instant gratification. Then you’ll get a deeper sense of achievement when you see the funds beginning to accumulate.
If the time has come to ditch the excuses and take proper control of your money, have a chat with a financial adviser. Most don’t charge for the first meeting, and you could discover a whole new world of financial freedom.