Chris Jennings

Personal fulfilment: how a balanced lifestyle leads to a wonderful life

By David Lamb

Personal fulfilment is the achievement of life goals which are important to you as an individual. It is what makes you want to go to bed late and get up early.

It could be work, hobbies, family, fun…it doesn’t matter. It’s what drives you to fulfil your life’s goals.

Many people help to identify what will give them personal fulfilment by writing a list, a ‘bucket list’, which describes all the things they want to do before they die (kick the bucket).

A study published in 2017 found that people who write down their goals are more likely to achieve them, and psychologists suggest that these lists help connect people to something larger than themselves and lead to a sense of fulfilment when a goal is accomplished.

Daniel Kahneman is an Israeli psychologist and economist who suggests that what people remember from hedonic events are their peaks; if there are no peaks, there are no crisp memories. Bucket lists can help to create crisp memories.

We invite all our clients to complete a bucket list, including target dates and cost estimates. We can then build these into cash flow projections to help provide the funds to support those ambitions.

Research suggests that people benefit more from experiences than buying material items. I initially disagreed with this, because, if I am going to spend a lot of money on something, I want something to show for it.

Then, within a few weeks, I bought new car and went on holiday. When I first got the car, I was so careful driving it and extremely cautious where I parked it (we parked so far away from the entrance of Tesco, my wife thought it would be quicker to walk to Asda!)

A month later, I was back to driving and parking normally; the novelty had worn off. But we still talk about the holiday years later.

Remember, though, personal fulfilment should sit comfortably within a balanced lifestyle.

In the 1946 film ‘It’s a Wonderful Life’ George Bailey never achieved anything on his own bucket list. But, when reflecting upon his life he realised that because he never let his own ambitions get in the way of other people, his was a wonderful life. Which is why, seven decades later, we still watch the film every Christmas.

A balanced lifestyle leads to a wonderful life…

Don’t trade too much time for something less important – money

By David Lamb

Time is an essential component of a balanced lifestyle and, regardless of any other factors, we all have the same amount of time in any one day.

But time is a strange thing. Is it long, or is it short? It depends upon what you are doing, doesn’t it?

If you are in a new relationship time flies by, but if you are stuck in the queue at the supermarket during lockdown it drags.

Time also seems to get quicker the older you get.

Do you remember the ‘Millennium bug’, when all computers were going to crash at midnight on 31 December 1999 and aeroplanes could be falling out of the sky? I recall all the work (and time) we had to do to protect our IT systems from this potential disaster and what happened? Nothing, absolutely nothing. I did not know whether to laugh or cry.

That was 21 years ago! A fifth of a century! The frightening thing is it only seems like three or four years ago. How quickly will the next 21 years ago? Will it seem like three or four years again? How will you be in 21 years time?

It is not just our time we need to consider, but other people’s.

A couple of years ago, we went to see the Rolling Stones in concert with friends who said that they could not wait to see them again. With the Stones having a combined age of over 300 years, they had better be quick!

How quickly do children grow up? This is valuable time that should not be wasted doing less important things. One minute you are changing their nappies, the next they are scrounging money to put petrol in their cars! Have you noticed that as children grow up, when they leave you, they wave with less and less fingers?

Another strange thing with time is that people will trade it for something less important, money. They spend too long chasing it.

An important element for a financial plan should be to identify when you can stop doing the things you don’t want to do and start doing the things you do want to do. It will also help determine how much is enough which will then help you understand how much time you need to spend earning the amount money you need to support your lifestyle.

Do you have sufficient time to do the things you want to do? If not, what do you plan to do about it?

Money could make you happier, but it is relationships that will make you truly happy

By David Lamb

I have considered the importance of both physical and emotional health as part of your lifestyle in my recent blogs. This week I’m going to discuss the importance of relationships.

Do you remember all the celebrities who died in 2016? David Bowie, Prince, Mohammad Ali, Terry Wogan and Ronnie Corbett to name a few (I heard a rumour that there were a lot of celebs trying to change their name by deed poll to Keith Richards!)

But out of all of those legends of music, sport and TV, are you aware of any who had a big, lavish funeral? No, me neither.

I think that this is because, once they did not have their health, it didn’t matter what car they drove, how big their house was, how many records they sold or how much money they had in the bank. What mattered was the people around them.

Unfortunately, in this modern world, it is far too easy to lose sight of what is important because there is so much pressure to focus on consumerism, work, the stress of life and money.

My wife is a family lawyer and she sees a lot of business and career focused people who have spent years on building their business, climbing the career ladder and accumulating wealth.

Then, all of a sudden, they find themselves in the divorce process because they forgot why they started out in business or on their careers in the first place; to provide a good lifestyle for their family. And then it is too late.

So how does financial planning fit in with relationships?

Think about what you want to do for – and with – your partner, your children, grandchildren and your friends.

Do you have a bucket list? What is on it? What is on your partners bucket list? (It’s fun to discuss these things.) How much are these things going to cost? When are you going to need the money?

Do you need to spend so many hours at work? How much do you really need? How much is enough?

Once you know how much is enough, you will know how much time you need to spend on work and can then build a more balanced lifestyle.

It is important to remember: money could make you happier, but it is relationships that will make you truly happy.

Why emotional health is key to your quality of life

In my last blog, I suggested the most important factor in a balanced lifestyle is physical health. The second is emotional health.

People who are emotionally healthy have greater control of their thoughts, feelings and behaviours and are more able to cope with life challenges. They keep problems in perspective and bounce back from setbacks and they feel good about themselves and have good relationships (more on relationships in my next blog).

Poor physical health can lead to an increased risk of developing mental health problems and, similarly, poor emotional health can negatively impact on physical health leading into an increased risk of some conditions, such as heart attacks.

Common causes of poor emotional health are stress of work and money worries.

Work-related stress is often caused by demands at work that exceed how much an employee can cope with; more than 11 million working days are lost each year because of work-related stress, which can then contribute to conditions such as anxiety or depression.

Many people worry about money and one of the most common reasons why couples argue is money. These arguments are rarely about having too much money!

As a financial planner, I see a lot of people – usually business owners and members of the professions – who are working far too hard for many reasons, but quite often because they think they need more and more money.

In many cases, this is a fallacy. When they know how much is ‘enough’ they can often ease off, get a better lifestyle, and lose a lot of their stress and money worries.

Financial planning can help work-related stress by identifying how much a person needs to earn to give them the lifestyle that they want without having to work for long hours in a stressful environment. I have seen many clients relieved that they can walk away from jobs they hate.

Being financially well organised can relieve a lot of money worries. I tell my clients that with an ongoing financial plan they only need to worry about money for three or four hours a year, as part of their annual review. After that, they can spend the rest of the year focusing on what’s important, knowing that the financial aspect of their lives being well managed.

One of the best parts of my job is being able to tell people when they can stop doing the things that don’t want to do and start doing things they do want to do.

Do not let work-related stress and money worries affect your emotional health. Remember: the quality of your life is often a direct result of the quality of your emotional health.

Physical health: always number one on your list of lifestyle priorities

In my last blog, I suggested that on a scale of one to ten – where one is the most important thing and ten is the least important – money should be scored at number nine.

The most important factor in your lifestyle is physical health. If you have poor physical health, you may not be able to work or do many of the things you would normally enjoy. You may even need somebody to look after you.

Over my many years as a financial planner, I have seen numerous people who have spent too long at work chasing money and suddenly they are overweight, extremely unfit and unhealthy.

Physical activity and exercise are important for people of all ages. Regular physical activity promotes good health and you should stay active throughout all stages of your life, regardless of your body type or BMI.

Many studies have shown that regular physical activity increases life expectancy and reduces the risk of premature mortality.

Regular exercise promotes strong muscles and bones and improves respiratory, cardiovascular and overall health. Staying active can also help maintain a healthy weight, reduce the risk of type 2 diabetes and heart disease, and reduce the risk of some cancers.

A few years ago over New Year I got flu and couldn’t get out on my bike for almost a month. In the February I eventually ventured out for the first time, not looking forward to the next two hours. The rain and gale force winds were definitely going to add to my misery.

As I got to the end of my street, an £80,000 car pulled over. I noticed the driver looking down at me from his nice warm car, as if I were mad. He then got out. He was wearing a suit (at 9.15 on a Saturday morning) and was huge (I don’t mean tall, I mean wide!) and he laboured across the road.

He obviously wasn’t short of money, so he probably did not really need to be working on a Saturday morning, but he was in such poor physical condition that it is unlikely that he will get to see the benefits of all his money and there will be a good chance he will not see 60.

Focusing on number nine, ignoring number one.

How much is enough to retire: the $6m question

A friend of over 40 years said to me recently “Lamby, I’m retiring at 55 and I don’t need a financial adviser to tell me how much I need in my pension for me to retire, because I know how much I need; all I need is enough”.

And my friend was right. All you need is ENOUGH. Enough to give you the lifestyle that you want, without the fear of running out of money, whatever happens.

Most of my clients aren’t really interested in asking is X company better than Y company for pensions or should they be invested in the UK or emerging markets? What they really want to know is the answer that big question: How much is enough?

A friend of mine, Paul Armson, even wrote a book called ‘How Much Is Enough?’ (We have a limited number of free copies available on a first-come first-served basis and if you would like a copy, please e mail us at laura.fairley@lambfinancial.co.uk).

Whilst ‘How much is enough?’ is the big question, I don’t think it is the BIG question – which is ‘for what?

To know how much is enough, we need to understand what your lifestyle is like now and in the future, so we can calculate your capital and income needs throughout your life to ensure that you have enough money at different stages of your life. As far as we know, we only get once chance at life, so be had better make sure we make the most of it!

Here’s an interesting question for you: thinking about your lifestyle, on a scale of one to ten, where one is the most important thing and ten is the least important thing, where would you place money on that scale?

Personally (and there is no right or wrong answer this question) I think money is at number nine.

Over the next few months, I will explain my conclusions and discuss the major factors that make up your lifestyle and how money fits into it.

Take a ride on our lifestyle wheel

Many people think that financial planning just involves buying financial products such as pensions or investments.

I have not met many people who really want to buy a pension; what most people really want from their money is to be able to achieve and maintain their desired lifestyle without the fear of running out of money – whatever happens.

To help our clients to do this, we have to know how much is enough. How much money do they need support this lifestyle?

To help us calculate ‘enough’, we need to understand what our clients’ lifestyle looks like. For many, especially if they have not given much thought to what they would like their lifestyle to be, this can be quite difficult.

Most financial plans will include income, expenditure assets and liabilities, but the lifestyle financial plan needs to consider the components of a balanced lifestyle that I have discussed in recent articles.

To help our clients achieve this, I developed our ‘lifestyle wheel’. This helps clients understand where they feel they are now with the lifestyle and identify areas for improvement.

Give yourself a score, on a scale of one to 10 where one is low and 10 is high, for each component of your lifestyle. Then join the dots.

If you have a good balanced lifestyle, you will have a nice big round circle. You may score low but have a nice round wheel, but this probably means you are in for a bumpy ride!

Any buckles in your wheel will suggest areas for improvement. If you need to improve your lifestyle, think about why you have given yourself that low score, what you can do to improve it, when are you going to take action and what the financial implications are.

We can then build these into a cash flow model round which we can create your financial plan which will help you achieve, and maintain, your desired lifestyle – whatever happens.

Give it a go; it could change your life!

Client case study

Jack and Jill (not their real names) owned a guesthouse. Running the business involved working seven days a week, 50 weeks of the year.

When they completed their lifestyle wheel, they scored really low on time and fun and recreation. We looked at how we could create more time and more fun but unfortunately, due to the margins in the business, there was no ability to take on more staff to give them more time off.

We eventually came to the conclusion that the only way we could find more time was to sell the business.

The business was to go for sale when they reached 55. The business would be sold for £800,000 but unfortunately the sale of the business meant the sale of their home out of the proceeds. We therefore needed to buy a house for around £300,000.

The big question was, is £500,000 at age 55 enough? Enough to give Jack and Jill the lifestyle they want without the fear of running out of money, whatever happens. And it wasn’t.

The next question was how much did they need to earn between age 55 and 67? Using our sophisticated cash flow modelling software, we calculated that, between them, they needed to earn £12,000 a year over the next 12 years.

As Jack pointed out, that was only two days a week each, working in a supermarket and five days a week to themselves.

They are now time rich and don’t need to worry about money!

If you would like more information or advice on lifestyle financial planning contact Lamb Financial at enquiries@lambfinancial.co.uk or by calling (01661) 860438.

Reducing financially induced stress

An empty high street during the lockdown

On June 12th it was announced that the UK economy shrank by a record 20% during the April lockdown.

Whilst this probably did not come as a surprise to many (other than housekeeping, what did you buy in April?) it will not reduce the strain on many people’s finances. This could cause stress for a lot of people.

Consider this: the quality of your emotional life is the quality of your life. If you’re stressed, life is not good.

So how can financial stress be managed and changed?

Reducing financial stress will enable you to focus on other more important areas of your life and be able to relax in the knowledge that you have a financial plan to help cope with life’s surprises.

The first thing to do is create a budget.

This is the best tool you could use to get control of your finances and avoid stress. It will allow you to decide when and where you are going to spend your hard-earned income; it will ensure that your basic living expenses are provided for whilst still working towards your longer-term goals.

The early months of budgeting will be the most challenging but, once you develop the habit, you will reduce the amount of time you spend on it and consequently reduce the time you spend worrying about your money.

Secondly, accumulate an emergency fund.  

This is money you can access very quickly to cover unexpected expenses and financial emergencies for example a leaking roof or car repairs. Knowing you have money tucked away for unforeseen circumstances in itself is a way of reducing financially induced stress.

My recommendation would be to have at least £1,000 in an emergency fund, then focus on shorter term debts, such as credit cards and personal loans, aiming to repay them as quickly as possible.

Once you have cleared these, aim to increase your emergency fund to around six months net salary. When you have achieved this, making overpayments on your mortgage is possibly the next thing to focus on.

I suspect, because of the Covid-19 crisis, more people will be giving more thought to larger emergency funds. How many people over the last three to four months would have felt a lot happier, and relaxed, having six months income in the bank to fall back on?

If you are struggling to make ends meet, accumulating an emergency fund may seem impossible, but start by putting a small amount away each month, £10 or even a jar of loose change (find a big jar!) Look in your garage or loft and consider what you will never use again; it is amazing what people will buy on eBay or Gumtree!

Where should you behold this emergency fund? This money needs to be able to be very accessible but unfortunately easy access bank accounts do not pay much interest. In my opinion, National Savings and Investments Premium Bonds are a great option:

nsandi.com/premium-bonds

If you still feel under financial pressure, it is important to seek help. The following website provides free and impartial money advice and is a good place to start:

moneyadviceservice.org.uk/en/articles/free-financial-advice-your-options