Our emotions are closely linked to our money. When we feel we’ve got enough, we feel good. When we don’t…well we can feel worried and sometimes stressed. It’s normal to become financially emotional from time to time.
Financial calamities aside, for many people the elevated emotions they feel about money and their financial life are often aligned with not knowing or not fully understanding their actual financial circumstances, or not feeling in control of their financial situation. In this article we discuss the financially emotional matters often felt by clients.
As financial advisers our goal is to help our clients experience the most positive of emotions, and for the most part, they tell us they feel happy, in control and satisfied with their financial outcomes.
Even so, as they travel their journey to financial contentment, most people experience moments of doubt, confusion and worry. For those with a well-considered financial plan these emotions are usually short lived, however if they linger it’s important to discuss these concerns and get further advice.
It’s as corny as it’s old, but when it comes to the phrase failing to plan is planning to fail, there’s quite a bit of truth in it.
In our experience, those with a financial plan and a strong financial understanding feel freer, more fulfilled and more positive about life in general.
Conversely, those without a financial plan worry more and often miss out unnecessarily as opportunities can be passed up for fear of not being able to afford them even when there is adequate financial means available.
When it comes to retirement, it’s very common for pre-retirees to grapple with a range of emotions. These are mostly caused by unanswered questions about whether they are ready to give up work, what they will do when they retire, what will be their purpose, and the big one… “will I have enough to live my retirement life of my choice?”
These are reasonable concerns, especially in context of the rising cost of living, fluctuating share and property prices and global influences that affect our superannuation, investments and retirement savings.
Knowing your lifestyle expenditure now and how it projects in future dollars is important for planning your retirement lifestyle.
If you need $100K per year to live your current lifestyle, then you may not be satisfied with a $60K per year lifestyle when you’ve retired.
The Association of Superannuation Funds of Australia (ASFA) has issued a report that says a couple will need $690,000 for a ‘comfortable’ retired lifestyle. There are a range of important assumptions built into coming up with this number. The report describes comfortable as covering daily essentials, private health insurance and a range of exercise and leisure activities.
However, it also suggests an ‘occasional’ restaurant meal, and an annual local holiday would be affordable, but overseas travel would be possible once every 7 years.
Given Australia’s eligibility age for the Age Pension is now 67 and the ABS indicates an average life expectancy of 81.3 years for men and 85.4 years for women, this may not represent the retirement life you’ve been dreaming of.
As financial advisers, we’re very aware of our clients’ lifestyle requirements and our role is to help them to implement a retirement plan that reflects the retirement of their choice. This involves a multi-faceted approach that aims to build retirement savings, contribute to super, make the most of tax efficiencies and create retirement income streams that will fund how they wish to live when retired.
Similarly, those with investments often feel emotional as they ride share market volatility.
Understanding your risk tolerance and knowing your investing approach reflects it, will help you to stay the course and resist the urge to sell when share prices fall.
Strategies including dollar cost averaging can also alleviate much of the worry for investors.
Building a valuable share portfolio through a discipline of buying or selling shares at regular intervals over time, can provide an overall better outcome than settling for the share price of the day when shares are bought or sold in a once only transaction.
For those with financial obligations and responsibilities for others, a well-considered insurance strategy will do much to relieve the day to day angst of what happens if.
Our approach to insurance is pragmatic: If you can’t afford to lose it, insure it!
While the television ads might suggest personal insurance is easy and straightforward, tailoring a personal insurance strategy is anything but. This is because there’s no one size fits all policy.
An effective personal insurance strategy requires a clear understanding of individual requirements, a fair and affordable policy cost, clarification of the fine print including definitions and knowing the insurer is sound and a has a good claim reputation.
As you’ve read in this article, ‘knowing’ is the underlying pillar of healthy financial emotions.
When you feel concerned about your financial circumstances, don’t delay in talking to your financial adviser.
Never skip your six monthly or annual financial review meeting, and make sure you discuss any changes in your circumstances.
To discuss your financial planning requirements or if you have a family member, friend or colleague who is worrying about their financial future, please encourage them to contact Brett Cribb, Steve Nicholas or James Marshall on +61 (0)7 3007 2007, alternatively email firstname.lastname@example.org, and let’s make it happen.
Stratus Financial Group helps professionals, executives, business owners, families and retirees manage their complex financial affairs and coordinate their professional advisers.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This is general advice only and does not take into account your objectives, financial situation or needs, so you should consider whether the advice is relevant to your personal circumstances. You should also read the relevant Product Disclosure Statements (PDS) before making any financial decisions.