“I never thought of that”

In two client meetings last week I suggested something that led to the same reply: “I never thought of that”.

Client One is being made redundant. The first £30,000 of any redundancy payment is tax free and I suggested the taxable part of his severance pay above this amount be paid into his pension by his employer before he leaves. To which he replied:

“That’s a great idea. I never thought of that.”

A lot of income tax saved, pension boosted and easy for the company’s HR department to sort out.

Client Two is in her early 70s and was widowed earlier this year. Her investments are almost surplus to requirements as all her spending is funded by various State and personal pensions. However, she has an equity release mortgage with a 6.5% interest rate, the compounding effect of which over time could soon erode any equity in the family home.

The client already realised it is possible to re-mortgage the property with another lender and more than halve the interest being paid. However, I also queried if the loan could be paid off as there would be more than enough investments left over to cover any additional spending if needed in the future. To which she replied:

“Hmmm, that’s interesting… I never thought of that.”

On reading the above you might think that what I suggested was fairly obvious. But it’s surprising how often people can have a fixed mindset about their finances and not be able to see any alternatives.

A common request we hear a lot from clients is to draw the income from their investments. Dividends may be quarterly or half yearly and differing amounts, but most of your bills arrive every month. So instead of sending clients an ever-changing amount that could be zero for several months in a row, we set up portfolios to send a fixed amount to the client bank account each month.

I don’t think it will be long before someone says “I never thought of that” to such an approach as well.

What is your fixed mindset telling you about your finances?