Mistakes are a fact of life, but it’s fair to say that some hurt more than others. None more so than those to do with money; when it comes to planning your wealth, it’s those mistakes that could cost you the most.
As Eleanor Roosevelt once said, “Learn from the mistakes of others. You can’t live long enough to make them all yourself”. So, let’s take a look at the ten most common mistakes in wealth planning, so you can avoid making them yourself in the future.
What is wealth planning?
Wealth planning, or financial planning, refers to organising your finances over the long term to put you in the best position to achieve your goals.
The clue is in the title; wealth planning is a massive part of what we do here at Balance: Wealth Planning. But why the name? (aside from the obvious!) Here’s how and why Rebecca Aldridge chose it:
I had thought about lots of different names, and balance popped into my head because so much of financial planning is entirely about being well-balanced. We are all looking for a good balance between work-life and personal life. We want to have enough wealth, not too much and not too little. We want to be well-balanced and considered in our approach to making important decisions. So much of what we do as financial planners are about helping our clients find the right balance. It just felt like the right name for the business and still does.
10 wealth planning mistakes that will cost you
To avoid making the same mistakes again and improve your financial situation, let’s identify the wealth planning mistakes we frequently come across:
1. Failing to plan is planning to fail
One of the biggest regrets people have when it comes to wealth planning is not starting early enough. Seeking the advice of a financial planner is an investment in your future, and the value of this advice speaks for itself.
2. Lack of communication
If you have any money worries, the first step to help you reduce or eliminate them is to talk about them. A problem shared is always a problem halved. And the sooner you start to normalise talking about money with loved ones and professionals, the easier it becomes to find a suitable solution.
3. Putting off planning for the worst
Naturally, nobody wants to think of the worst-case scenario. Yet, it’s usually the most difficult conversations that are the most important. We tend to like to focus on the positives that lay ahead in the future, but it’s planning for the unexpected that will give you the most peace of mind.
4. Procrastination to save
If we asked if you could save 20% of your income, you’d probably say no. However, what if we asked if you could survive on 80% of your income? It’s the same thing, but one seems a lot harder than the other.
People often put off saving as they don’t think they can afford it. Yet, they could live off less if needs must.
It’s often a result of people not knowing how much they’re spending, and if you don’t know how much you’re spending, it’s pretty impossible to figure out how much you’re able to save. The best place to start is a budget and working out your income and expenditure. Once you’ve decided your savings goals, and worked out what you have spare, use a savings calculator to help understand how long it will take to get there.
5. Not spending enough
Is there such thing as too much money? Well, we think so! It’s there to be spent and enjoyed, not squirrelled away forever.
We often use the bucket analogy, whereby all of your income comes in at the top of the bucket, and any expenditure drips out of a tap at the bottom. You don’t want an empty bucket, but what people sometimes forget is that it’s also no use when the bucket starts to overflow. Sometimes life is for living and not just for saving.
6. Not understanding what you want
Where do you see yourself in 5 or 10 years? Do you want to move house? Help your children onto the property ladder? Go travelling? Retire early?
Before building your financial plan, you’ll need to consider your financial goals and objectives for the future. The first step in our wealth planning process is looking at where you are now and where you want to be in the future, then we come back to the drawing board to see how we can better organise your finances to move you forward in the right direction.
7. Failing to get appropriate protection
A lack of protection could cost you further down the line. As with most forms of contingency planning, it’s the security blanket needed to protect you and your financial plan. It’s a case of getting the right cover, so when the worst does happen, you can find peace of mind knowing your finances are in good hands.
If you have dependents, life insurance should be a vital part of your wealth planning strategy.
8. Not having a will (or keeping it updated)
Ensuring you have an up-to-date will could save you and your loved ones a lot of time and money further down the line. Although it might not seem important now, you can never be too prepared. Yet, a staggering three in five people in the UK have not written a will.
As well as reviewing your will after any significant life event, such as marriage, divorce, having children/grandchildren, you should also check it every five years.
9. Forgetting to revisit your plan
Life tends to throw curveballs your way, so taking the time to review your plan is essential.
Your circumstances will change as you move through different life phases. So, each time you experience a significant life event, you’ll want to revisit your financial plan and adapt it accordingly.
10. Postponing professional help
It’s hard to know where to start when it comes to your finances, but speaking to a professional financial planner will give you greater clarity and another perspective of your financial picture. And better yet, your first consultation is usually free.
To book your free initial discovery meeting and speak to one of our trusted financial planners about all your wealth planning needs, please do so here.
