Do you know your number? Here’s why (and when) it matters

Your “number” is the capital you need to fund your desired lifestyle when you retire.

Although there will ultimately be one number, when you think about your financial future, there are three important numbers to know:

1. What age would you like to be able to stop working or have the financial freedom to do something different?
2. How much monthly income will you need to support your new lifestyle?
3. What size investment portfolio will you need to generate that income?

These numbers are vital for our financial futures, yet many people seem reluctant to start planning for retirement until it’s too late.

Imagine your future and then plan for it

Many people fail to make the link between the current state of their finances and how they will fund their future plans, dreams, and life goals.

A large part of our job is to help clients understand the gap and create a financial plan that helps them meet all their objectives.

We work with many entrepreneurs who have sold their business. In many cases, they sell before they’ve figured out how much they need for the next phase of their life, whether that’s retirement or to fund a new project.

“A lot of people do it the wrong way around. They sell their business, and only then do they start thinking about how the money they make from the sale works for them. Often, either they don’t have quite enough, or they discover they could have sold six years ago.” – Anthony Villis, Chartered financial planner and founder of First Wealth

Before you can work out your number, you need to know what you want from life

Before you look at your finances – your budget, pension, or investment strategy – you need to know what you’re trying to achieve.

Life goals and objectives will be different for people at different stages of life. It may be buying your first home, saving for retirement, ensuring you leave a legacy to your children, or paying for care in later life.

Likewise, knowing how you want to spend your time when you’re no longer working every day can help you understand how much money you might need to fund your desired lifestyle.

A life of travel, sailing, and golf will require a very different budget to time spent at home playing with your grandchildren or pottering in your garden.

Having a firm understanding of what you want life to look like, allows you to set a monetary figure to aim for.

“A client who just sold her business is about to spend £2 million on a Mallorca villa, so her number is a lot higher than someone who prefers a staycation!” – Anthony Villis

Focus on what matters most

When we sit down with clients, we spend time getting to know them. We ask them about their life goals, and really get to grips with their outlook on life and understand how to help them get from where they are now, to where they want to be.

Pete Pastides, a client since 2017, has first-hand experience of how we work.

When Pete approached us, he had a very specific requirement about his pension investments. Having solved his initial enquiry, we opened the bigger and more important conversation: what matters most?

Watch the 3-minute video: Meet Pete Pastides

Fortunately, Pete had a very clear idea of what kind of lifestyle he wanted to lead: “I really want to be sure that when I hit sixty, I can just hang up the mouse, as they say, and I’m full time travelling and enjoying my life.”

With our help, Pete has a robust financial plan that he has complete faith in. He knows his number and that means that he isn’t going to run out of money until he is 101.

Visualise your financial future and work out your number with cashflow modelling

Our cashflow modelling service sits at the heart of our planning process.

A detailed conversation will help to establish the objectives that are most important to you. Understanding and differentiating between what is really important as opposed to “nice to have” is critical.

In conversations about your future, we’ll look at your goals and objectives and use cashflow modelling to play out a variety of “what if?” scenarios to help you understand how much money you need to achieve your dreams.

By plotting the various financial inflows and outflows over your lifetime, we can work with you to establish whether you can make that dream purchase, retire at your desired age, or whether you need to put your money to work harder to achieve your goals.

Once we have established your position, we can take a closer look at how to best allocate your assets to keep your plan on course.

Our cashflow modelling process helps you visualise where you’re at now, where you need to be, and helps give structure to a sensible and informed conversation about risk.

Inevitably, life will throw some curveballs over time (ill health, divorce, losing a job, for example) so regular reviews of the plan are essential to keeping you on track.

It’s a match!

The correlation between goal setting and financial success is high. So much so that we have created an app that helps clients figure out their objectives.

A bit like Tinder for financial objectives, Life Goals works by displaying different objectives to help you determine what is important. Use the app to swipe left or right depending on the levels of importance you associate with what comes up on the screen.

The result allows both you and us to see what matters most and start building a financial plan to deliver on those objectives.

Get in touch

If you want to know your number or are looking for a financial planner who can help you find the best ways to save and plan for the future you desire, please get in touch. Email hello@firstwealth.co.uk or call 020 7467 2700.

This document is marketing material for a retail audience and does not constitute advice or recommendations. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.