Life not finances…
Why it’s important to appreciate what we have, not dwell on what we don’t.
As financial advisors, we see a lot of different financial situations. Lots of good ones, some difficult ones and lots of very good ones. Often we see that people find it hard to appreciate or fully grasp just how strong their financial position really is. It’s human nature to compare yourself to others and comparison is the thief of joy. More often than not, when it comes to money, people compare themselves to those wealthier than themselves, so they come away feeling poorer, less fortunate than they should. A recent Guardian article highlighted how many people in higher income brackets misjudged just how well off they really are.
The author carried out research for the New Statesman magazine with the Redfield & Wilton Strategies polling firm. One statistic really jumped out – 60% of those on £80k-£100k salaries believed that they were ‘about average’ on the income scale. In actual fact, the median salary in the UK before tax is just under £35k. Earning over £82k puts you in the top 5% of the population. If you earn over £183k, you’re in the top 1%. We try to tell our clients just how well they’re doing and to make sure they appreciate where they are in terms of our society as a whole.
With the average age of Engage clients sitting at around 40 years old (rising to 49 when we bring in the newly acquired client families), one of the key issues on people’s minds is finding the balance between enjoying life now and saving for their future. Your own perception of your wealth undoubtedly plays a big part here.
I’m 41 myself so I understand and empathise with clients that this is a tricky time of life. You want to be enjoying yourself, you want to spend time with family and have holidays but finding the balance is really tough. You’re entering a time of peak earning potential so work can take over, your kids are still very dependent and your parents are becoming increasingly dependent on you and that’s before we factor in seeing friends and wider family. For some, the worries about how you’re going to pay for the future life you want to lead can weigh heavy.
As a result, a lot of people find themselves saving hard for the future, cutting back even more on their spending than they have had to do already (due to macro-economic factors). This then makes the day to day even harder to endure. You’re doing all the work, being stretched in all directions, but you’re definitely not reaping the rewards. Of course we know how important it is to save for tomorrow but if that means that you end up poorer – both financially and in terms of life experiences - than you need to be today, then what is the point?
The key is to plan for tomorrow, but factor in that you have to live your life now too. That is where a robust financial plan comes into play – it’ll show you truthfully how much can you afford to spend now so that you can still enjoy the life you want to in the future. The reality is that it’s usually more than you think, not least because, as I’ve already said, most people don’t feel they’re as well off as they are. We also need to be aware that tomorrow doesn’t come for everyone, life can change in an instant and so striking the balance between now and the future feels important using this framing.
But whatever your views on your own wealth, there are always things that you can do to make the most of your spending choices. Firstly, we always recommend spending on experiences because they last a lot longer in the memory, so you get more for your money now and in the future. Secondly, spend money on the things you really love and go big, being tight with the things that are not that important to you will help you afford this. And finally, try to avoid big mistakes, any that can be detrimental to the outcome of your life plan. Make more frivolous, riskier purchases on a small scale to minimise your exposure. If you can embrace this approach to spending, you’ll be well on the way to being able to really appreciate the life you have and feel all the wealthier for it.