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How First Wealth Puts Financial Wellbeing At The Heart of Financial Planning

Posted by Robert Schwarz, Financial Planner

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Financial wellbeing is one of five core elements that make up your overall health and wellbeing.

In his book, The Financial Wellbeing Book – Creating Financial Peace of Mind, Chris Budd breaks financial wellbeing down into five separate elements:

  1. A clear path to achieve identifiable objectives
  2. Control of daily finances
  3. The ability to cope with financial shock
  4. Financial options in life
  5. Clarity and security for those we leave behind.

At First Wealth, we take each element into account to ensure that financial wellbeing is at the heart of the planning we do for all our clients. This article explains how.

We focus on your motivations and objectives…

The key to this section is to have a clear path to identifying your goals and objectives. Because the world is full of choice and compromise, we built a tool to help you identify what matters most to you.

Life Goals asks you four questions:

  1. What matters most to you?
  2. What matters most to your family?
  3. What matters most in your life?
  4. What matters most in your legacy?

Use the app to select the statements that resonate with you the most.

Life Goals helps us frame initial conversations with you. We ask every new client to go through the questions and think about what they want to achieve in life. It’s also a useful exercise for couples who may not have had discussions at this depth before.

It’s a good way to check you agree, because people can have very different life objectives, and different visions of what the future might look like.

When we sit down to talk, you know what you’re looking to achieve, and so do we.

…and build a plan to help you achieve your goals

Once you have a clear idea of your objectives, we use cash flow modelling to help you visualise your goals and aspirations. The interactive technology allows us to plan and adapt real life events before, during and after they happen.

Together we can use all the information we have to answer every "what if?" scenario and create a strategy to help you meet your goals.

This stage will answer questions such as:

  • How much is it going to cost?
  • What do you need to do to get there?
  • How much do you need to save?
  • What level of return do you need?
  • When is it realistic to fulfil the dream?

But it doesn’t stop there. We also look at the things you don’t need.

If your goal requires you to save a certain amount of money by a specific time, it may be necessary to avoid wasting money on things you don’t need, or stuff which doesn’t fit in with your plan.

We’ll work with you to understand what matters and how best to get there.

We help you organise and gain control over your finances

Most people know what their overall income is, their salary is, and their net income is. When it comes to expenditure, things can be a different matter. The majority of people have a reasonable handle on monthly bills, but discretionary expenditure is often usually wildly inaccurate.

One of the small but vital jobs we do is get you organised.

We help you establish:

  • Your assets – where’s your wealth, and what money have you got?
  • Your debts – mortgage, loans or credit cards?
  • Your income – how much have you got to save or spend each month?

Once we’ve established these basics, we look at your expenditure in more detail:

  • How much do you spend on the necessities like food, bills and mortgage?
  • How much do you have for discretionary spending like dining out, holidays and the fun stuff?

Ultimately, do you have more money coming in than you have going out each month?

People tend to worry about money because they've never really engaged with it, so they don't have full oversight of what's going in or what's going out.

And that causes stress and anxiety, so it’s really important to figure all these things out.

Understanding the fundamentals of what’s coming in and going out will help you gain control, which will bring you a step closer to achieving financial wellbeing.

Another thing we look at is direct debits. Many people have direct debits for things they no longer use or get value from. Things like that gym membership you no longer use, or Netflix, which you barely watch. And then there're those things where you don’t know what the payment relates to.

This is the time to clear all the deadwood and get an idea of your everyday finances.

We make sure you can cope with a financial shock

Do you have an emergency fund? We recommend you have at least six months’ cash in the bank to act as a safety buffer. It’s there to help you pay costs over the short term if you lost your job.

If you become unwell and you’re unable to earn an income, you need to know you can cover your living costs. Likewise, if you’re the main breadwinner, you may want to ensure your family can cope financially without you.

With a clearer idea of your income and where it comes from, it’s easy to see what the financial impact would be if you were sick or no longer around to provide for your family. This helps us to make plans to cover potential losses with insurance.

Options we’ll discuss with you include:

  • Life insurance
  • Critical illness cover
  • Income protection insurance

While it’s impossible to know what’s around the corner, having a strategy and making sure you have some money in the bank will help you avoid financial stress should the worst happen.

We work with you to ensure you have financial options

You have goals and objectives in mind, but having flexibility is also good. Ideally, you want to be in a robust financial position, so you have options available to you.

There are different ways to approach the future. You could work until you’re 60 or stop work sooner. That may mean accepting slightly less income, but the control you have over this choice matters.

Or perhaps you find yourself in the enviable position that you’ve made enough money, you know you have enough to provide the level of income you want for the rest of your life and you’re financially secure. This may be an opportunity to stop work and set up a new business.

Clients often come with a vague idea about what the future might look like. And we’ll ask the questions needed to drill down on what really matters.

What would you do if you were financially unrestricted? What would you regret not doing?

These are the conversations we have with you.

Finally, we’ll help you make plans for who you leave behind

Have you thought about what happens when you’re no longer around?

We’ll discuss your wishes and help you organise what you’re leaving behind and to whom.

This will involve setting up documentation so your beneficiaries, and executors, understand where all your assets are. You’ll need to detail savings accounts, investments, property, pensions, and insurance documents and have a safe but accessible way of sharing your passwords when the time comes.

Hopefully, you’ll already have made a will, but, if you have children, have you thought about who will look after them if you die while they are still young? And are you going to leave your money to your spouse? Or do you want to plan for money to be paid into a trust for your children or grandchildren?

These are all questions that you should consider, and we’ll help you set things up according to your wishes and in a way that will helpfully mitigate Inheritance Tax too.

If you have a business, do you have shareholder protection agreement in place? Do you know exactly what will happen to the shares, who is going to get them, and how are they going to be paid for? These are all important considerations to ensure your business and interests will pass to the right people, at the right time, and are paid for in the right way.

And is this agreement written in trust?

Were all busy, and it's easy not to think about these things, or the business implications of failing to plan properly. We often find that a surviving spouse won’t want to be left shares in a business they have little involvement in. Likely, they would prefer a cash lump sum that will give them options, rather than shares whose value they may not be able to realise without a lot of hassle, at an already difficult time.

Another important area we cover is Lasting Power of Attorney (LPA). These are relatively easy to set up, but you need to plan ahead and consider who will manage your affairs if you’re unable to do so yourself.

LPAs put you in control of your finances and welfare and allow you to enjoy the lifestyle you want now, while providing protection against a future change of circumstances.

If you would like to discuss how we can help you improve your financial wellbeing, please get in touch. Email us at 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

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