Money is just a means to an end, it is never an end in itself.

We all know the saying “There’s no point in being the richest person in the graveyard” right?

Whilst I don’t disagree with leaving a legacy to future generations, personally I don’t believe that one should do so at the expense of missing out on living their own life to the full.

So here is a summary of the only 3 uses of money as I see them.

Investing

If you don’t yet have enough wealth to achieve your life goals, then investing is clearly something you should consider. Evidence shows that leaving it in the bank is highly unlikely to be the right strategy for wealth building. If cash returns 1% and inflation runs at 3% then you are eroding your wealth.

If you do have enough money for the rest of your life, then things such as tax efficiency and preserving the real value of your wealth may be your key concerns – investing can help with this too.

Investing is a topic within itself, which is why I cover it in greater detail for you HERE.

• The value of investments can fall as well as rise. You may get back less than you invested.
• Moving money into investments involves a) a potential risk to capital; and b) you must have the ability to invest for the medium to long term.

Spending

I went to see some clients recently who have a substantial amount of wealth. Ok, they aren’t quite up there with The Rockefeller’s – but they most certainly have more than enough money to see them through the rest of their lives.

Mr Client is 73 and Mrs Client is 67.

They were telling me about a potential 6 week jaunt to Australia towards the end of the year, they feel that it is potentially their last opportunity to do this with any measure of gusto before Mr Client (in particular) becomes a little too old for this sort of long haul trip.

“I hope you are flying business class” I said, hoping they would reply with the affirmative, but also knowing that Mr Client is a fiscally prudent chap.

“Absolutely not!” replied Mr Client

“Why ever not?” I enquired

There was a slightly awkward silence before Mrs Client explained that she would love to fly business class and believes that they should, but Mr Client is not prepared to pay that sort of money purely on principle, which is fine – but I wanted to show them something. So, I opened their Financial Masterplan which I had built for them using my Financial Planning software, and I created a ‘What if’ scenario to show them what would happen to their projected future financial circumstances if they spent the extra money.

And what impact did it have? It barely even registered on the graph!

In fact, I showed them that they could afford to spend the extra money every year for the next 10 years and they would still leave a substantial estate to their only daughter, even if they were to both live to be 100! (Based on prudent assumptions, of course).

As we drew the meeting to a close, I summarised my thoughts on the matter with the following statement: “Mr and Mrs Client, whilst I fully appreciate your strong principles around spending that sort of money on a plane ticket, I hope you will acknowledge the paradox which is that, the financial prudence which is prohibiting you from spending such an amount of money is the very same financial prudence that has lead you to a position where you have the option to comfortably do so. And let me tell you this; if you don’t enjoy your money whilst you can, I will guarantee you one thing, that when you shuffle off this mortal coil and leave all this money to your daughter – she will be the one who flies business class to Australia.”

They fly to Sydney business class on boxing day.

Giving

What do Bill Gates, Mark Zuckerberg & Warren Buffett all have in common?

Yep ok, they are all billionaires, but they also have something else in common too – they have all stated that they plan to give most of their fortunes to charitable causes on their death.

Whilst I agree that it is unlikely that their children will be left penniless, the point remains that they will be giving money away to a good cause when their time is through, and you could too.

Until next time…

If you are looking for a charlatan or a financial sycophant to nod along and agree with everything you say, then unfortunately I am not the Financial Adviser you are looking for. But if you are looking for a collaborative partner to help you and your family succeed financially, then hit me at planning@claritylfp.co.uk and let’s see if we get along!

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