Does X + Y + Z + time = enough?


“We earn X, save Y and our investments are worth Z… are we going to be okay?

The heart of financial planning is answering that very question; are we going to be okay?

This is starting to get increasingly real for me. My wife and I were 44 at the end of last year and I’m slowly realising we’re not getting younger. (I’m not sure if she realises it as well and I haven’t got round to telling her yet). With a 12-year-old and 14-year-old at home, I keep thinking of the future for us and wondering… are we going to be okay?

At Chatfield, this is part of a large, collaborative exercise we help clients through.

“Are we going to be okay” can be a big, scary question. Sometimes people don’t like to ask it because they are afraid of the answer.

But you can only enjoy a secure financial future by knowing the answer. Don’t be afraid of it, ask it early and engage with it instead. As the Boy Scouts motto says, “be prepared.”

Firstly, let’s quantify your situation.

Put some numbers on your circumstances.

What you earn is easy to measure. If you’re salaried it’s straightforward, bonuses aside. If you own a business or are self-employed, you can still probably answer that question with a few caveats.

How much you contribute to your pensions, ISAs, SAYE schemes etc, and what they are worth can also be quantified relatively quickly. If you own any buy to lets you can put numbers on their values and the cashflow they produce too.

Cash savings? Banking apps have made it simple to get a balance. Otherwise, it should still be quite easy to find this out.

Secondly, let’s qualify your situation.

What do you want to achieve? Why? And over what timeframe?

Here are some examples I’ve been given over the years:

  • “We want to sell our business and retire within ten years. Our plan was always to sell up before we are 60. If we do that, are we going to be okay?
  • “I’m fed up going to work every day, it’s not the same and I’m just not enjoying it. Are we going to be okay if I retire now? If not, how soon can I stop?”
  • “Things have happened, I can’t work anymore… are we going to be okay?

To a certain extent, “are we going to be okay” depends on how much you want to spend, which in turn depends on what you want to do and how much it costs. This is something else we discuss and quantify with you.

We put all this together into the forecasting software we use to elegantly show you in a few charts what your financial future can look like. We can vary it there and then, change the timescales and assumptions and answer that question: “are we going to be okay?”

Finally, this is not a one-off exercise. We keep doing this every year to keep showing you how you’ll be okay and what you need to do to continue being okay.