How would you define financial security?

How are you defining success? Is success a financial destination or is it living the life you want and being who you want to be for as long as you can?

It could be argued financial security is a destination but sustaining it is a journey, a tough journey that many do not manage well. I’m sure many of you know of those who once had millions and now have not very much left, we make mistakes, we are taken advantage of, we chase returns we do not need, we lose focus on what our short life is about and before we know it we are ‘old’.

Let’s say you’re 50 years old, in 240 months’ time you will be 70!

Time and tide wait for no man

It can be difficult to know what to focus on. If you’ve not heard of The Four Burners Theory then this is a must read. https://thenaturaledge.com/fourburners/ It’s about life being based around a set of trade offs and suggests an alternative solution to the work-life balance problem.

Many business owners might have an affair with their business over many years, a business to be super proud of and go on to achieve financial security without even exiting their business, yet some of these owners might not consider themselves successful in life.

There are a whole host of reasons and many are not financial but for now let’s focus on the fact that there is not much you can do on an ongoing basis without having some form of financial security in place.

Financial Security, your ‘£’, is a sum of money that will generate sufficient net income to meet your lifestyle objectives for years to come AND also gives you access to enough capital (cash) to cover the cost of;

• life’s curve balls (costs you did not see coming)
• treats (we all need to let our hair down)
• monetary gifts you would like to make or set aside (kids house deposits)
• lifestyle assets that are non-income producing (holiday home)
• speculative investments you don’t need to make
• nice cars, if that’s your thing
• big celebrations
• Rushes of Blood (ex-business owners can be unpredictable )

The thing is, IT IS POSSIBLE TO WORK OUT YOUR NUMBER. We are doing it all the time for clients. It can take a few months, for some a year or two but we get there.

Stress-testing your Number is important, making sure you have a robust plan in place significantly reduces the risk of running out of money.

Having too much life left at the end of the money is not a good place to be.

As part of the exercise of calculating your Number we often talk to clients about their Income Pot and their Excess Pot. These are notional Pots that certain assets they own or future business sale proceeds are allocated to. Assets can include investment property, financial investments, pensions, shareholdings in unlisted companies etc.

The Income Pot contains ‘the number’, ie, the assets in this Pot should be sufficient to provide income for the remainder of your life. The Income Pot has an imaginary Tap on the side. The Tap is turned on and all the income from different sources after tax meets your regular lifestyle needs but you cannot turn that Tap on full blast from day one, that would prove to be very problematic in the long run.

Start dipping into the capital in the Income Pot, then the Tap gets turned back a little as you can’t have your cake and eat it. Well, you can in the short term but you’ll pay a hefty price in a few years time.
Assets or cash savings you have that do not need to be allocated to the Income Pot can live in the Excess Pot.

Unlike the Income Pot which has an imaginary ‘padlock’ the Excess Pot is there to meet the ad-hoc capital needs identified in the list above. The timing of some of these events can be predicted and some cannot but allocating capital to the Excess Pot in our experience is crucial if a plan is to work.

If all of your assets have to be allocated to the Income Pot and the Excess Pot is empty then you need to revisit your plan. Your lifestyle objectives are probably unaffordable over the long term, it’s best to know this sooner rather than later.

So, what’s your number?

In my experience this number is much higher than most people expect.

Inflation is a big factor, it is a silent Ninja who creeps up while you’re asleep and takes a very thin slice of your wealth away every year.

As individuals, we are a risk to ourselves, we can lack clarity around what we want to achieve in life, not just our career, who we want to achieve it with, what we want to enjoy, who we want to be and what do we want to be remembered for.

Reflecting on these questions can help build a picture of what future you aspire to. If you are honest with yourself, your partner, your business partner(s), your adviser and these goals are identified as Negotiable or Non-Negotiable then identifying the number is absolutely possible.

Those who do not want to be the richest in the cemetery do not need as much as those who want to leave it all behind for their kids.

Those who wish to maintain a standard of living they have got accustomed to will probably need more than they think is enough.

Those who want to have a long period of semi-retirement will need less than those who want to retire young and never work again.

It is very powerful as a business owner to know what you need financially to tick all your boxes.

If you and your business partner(s) know your respective numbers then that’s pretty powerful.

I wonder how many deals didn’t cross the line in the run up to the Covid crisis over issues that were at the thin end of the wedge. Knowing your number and knowing what your number means to you and those you love gives clarity and therefore clarity of thinking.

Kevin Deamer

Chartered Financial Planner
Managing Director & Founder

The post Business Owner? What’s your ‘£’ number? appeared first on Pinnacle Financial Services & Wealth Management.

It can be tricky to think of genuine motivational goals – for example ‘I want a level of financial independence by my mid 50s that means I can semi-retire’ – if you can’t work out how this could be achieved.

Logic says that if we can’t fathom how we could do something, the tendency is then not to commit to it. This thinking holds people back from fulfilling their goals. But this thinking is wrong.

The way to get over this hurdle is to completely ignore the HOW. Simply focus on what it is you want to achieve. By that I mean the things you want to do with your life, who you want to become, the levels of financial security you aspire to, places you want to visit and who you want by your side as you tick these goals off.

Build this list and keep revisiting it. My tip is: if you’re in a partnership, complete this list independently of each other. As it starts to take shape, write ‘N’ or ‘NN’ against each item. N are the goals you’re prepared to compromise. NN are NON-NEGOTIABLE.

Then over a glass of wine, share your list with your partner. Together work on a combined list, refine it, be more specific about your goals and let it be a source of motivation and focus. Don’t allow any ‘we’ll never be able to do xyz’ thinking to creep in.

When armed with that Goals List, your Trusted Adviser will be able to look at your current and future financial resources and help you understand what it’ll take to achieve your NON-NEGOTIABLES.

This is proper goal planning – it’s motivating, meaningful and it’s about you making the most of the rest of your life!

Kevin Deamer

Chartered Financial Planner
Managing Director & Founder

The post Focus on the goals not the how appeared first on Pinnacle Financial Services & Wealth Management.

I’ve been reflecting on this and realise that my focus always comes back to individuals, not firms. As a financial planner, I’ve collaborated with many professionals over the years and they do seem to fall into one of two camps.

First, those who are just as client centric as I am. Driven to go the extra mile and keen to bring in other expert professionals as needed. They will happily take a call outside office hours to mull over a client’s situation and are enjoyable to work with. The fact that they have all the required qualifications is, naturally, a given.

The second type of individual I’ve come across is the really technically focused. Typically niche, they can provide the perfect solution to a very specific need. However, sorry if this sounds a little unfair to say so, but possibly not always equipped with good personal communication skills.

Despite evidence of proven experience and technical qualifications, perhaps ‘good’ is actually measured by your ability to get onto someone else’s wavelength. Being able to tune into their concerns, identify their preferred terminology and use both empathy and, if necessary, techniques to really draw out what is on their minds. When this is done well and underpinned by genuine interest, it’s clear that they can tell you absolutely ‘get’ them, their situation and their needs. And it’s this combination where I believe they find the ‘magic’. It takes real skill and is something you acquire over many years.

In conclusion then, I feel that what I enjoy experiencing when working with particular professionals is probably the same for a potential client. What they need and need to feel is that the person they’re engaging with is a very good listener. So if that can be demonstrated professionally, it’s a truly valuable and defining skill.

Kevin Deamer

Chartered Financial Planner
Managing Director & Founder

The post What does ‘good’ look like? appeared first on Pinnacle Financial Services & Wealth Management.

So what are the key pieces of information we need when everyone is separated? As a business owner, I think the ‘Desert Island Approach’ is a good start point. Imagine you’ve been forced to live on an island for six months. You’ll receive just one update a week from the team running your firm – restricted to five items of information.

You’ll want evidence that the business is safe. Data demonstrating whether it’s going forward or back. Confirmation that your team is OK. Another relating to your clients. You may find that narrowing it down proves to be harder than you think.

Once you’ve got your five, ask your leadership team the same question. Refine the list to identify and agree the five core items of management information you need on the dashboard – at the same time, each week, without fail.

When everyone is separated, you can feel slightly adrift, so this is a good way to anchor the fundamentals. Because we can’t manage what we can’t measure.

To get a real feel for how well your business is doing week on week, what five numbers would you choose?

Kevin Deamer

Chartered Financial Planner
Managing Director & Founder

The post Got a desert island dashboard? appeared first on Pinnacle Financial Services & Wealth Management.