Your happiness is more important than money

Today I want to talk about my clients, Lorna and Gordon. Eager to leave their day job and follow their dream retirement to Scotland, they wanted to renovate a property with enough land so they could build a small holiday let business. Their accountant had said it seemed to make sense, but recommended speaking to a financial planner, and here I am! 

There’s no doubt Gordon and Lorna knew themselves, their way around a spreadsheet, and had experience with this sort of project, but they wanted the reassurance of a second opinion from someone who might see their blind spots and challenge their assumptions. 

When I crunched the numbers, and looked for suitable financial levers to pull, it became clear that the smart thing to do was for them to bring forward the sale of an existing small holiday let they owned on Loch Lomond; it wasn’t making them much money, and they had no say over how it was managed. 

We met and they interrogated the data, then ran through a series of documents and visuals, using a cashflow forecast to the grave to demonstrate the financial viability of the plan, and explaining how the sale would improve their finances and give them a bigger budget for their new home. 

The plan was sound, it withstood Lorna’s worst-case scenarios. Wanting evidence and confidence rather than blind faith, we factored in delays to renovation, higher costs, reduced rents, stockmarket setbacks and more.

At first, they were excited to get started, they could see how this would help them to get where they wanted to be and were fully on board with the case I’d set out. They put the property on the market. They even started adding beautiful handwritten cards in each of the bedrooms informing guests that the property was up for sale and encouraging them to get in touch if they wanted to buy it. 

However, their excitement subsided when they went up to Loch Ness to stay in the property themselves one last time. I received an emotional email shortly after saying that they’d done a lot of soul-searching, shed a lot of tears, and were having second thoughts. 

It was where their souls were at peace, they’d written their wills stating that they wanted their ashes scattered at the house. The property used to be a place for them to escape and get some peace and quiet, but over time it had become more of an investment opportunity. Inevitably, they’d forgotten how happy it made them at the start. Now that they’d been back and had stayed in it themselves, they were reminded of that and no longer wanted to part with it. It was more than just a property.

What’s it all for?

Many people turn to a financial planner with certain desires in mind – for example, some will ask for help building as much wealth as they can. Many have become stuck in a comparison trap and want help achieving the same life goals as their friends, or something that just sounds good. Others will ask for help to make huge life-changing decisions regardless of the impact these choices have on their health, wellbeing or overall life satisfaction. 

I often have to pull clients aside and ask: “What’s this all for?” Selling the Loch Ness rental would’ve been a smart move for another couple. But Lorna and Gordon didn’t want to let it go nor did they need to let it go. The benefits of the sale were purely financial. 

What do you need?

Almost half (48%) of UK adults worry about running out of money in retirement, according to a survey from Investec. It’s a valid concern, but I like to remind my clients that passing away with millions in the bank is a bad outcome too. Your loved ones may be grateful for the inheritance, of course, (as will the tax man!) but wouldn’t it have been nice to spend the money with them?

Unfortunately, not only is it hard to figure out exactly how much we’ll spend in retirement, but it’s also virtually impossible to know how long we’ll live. Even the world’s best actuaries can’t tell you how long you’ve got — although they’d love to know. 

If you worry that living past 90 will have you choosing between heating and eating, The Retirement Living Standardscould provide some comfort. Based on research from Loughborough University, it shows us what life in retirement can look like at three different income levels. 

The table below focuses on a couple’s income requirements. A single person would need less: £14,400 a year for a minimum standard of living, £31,300 a year for a moderate standard of living, or £43,100 a year for a comfortable retirement.

The standards above won’t be right for everyone. They’re certainly not right for me. You may need to add other costs such as mortgage, or tax on pension income, for example. This data does provide us with a good starting point, though. Once we know what we need, it becomes easier to say what we want. 

Needs and wants

Let’s imagine I evaluate your portfolio and explain that you’re on track for a moderate standard of living in retirement. If two holidays a year and a £720 gift budget sounds insufficient, we’ll find ways to maximise your pension income. 

My clients are often surprised at just how much easier this process is than they imagined. They might have come to me in a state of panic, equipped with a list as long as their arm of complicated financial problems they want me to solve. In my experience, these problems usually need managing, rather than solving. 

What needs solving is the mystery of how much they’ll need in retirement. To solve that mystery, we need to figure out what you actually want out of life and what you’ve been working so hard for. Most importantly, though, I need you to master the art of prioritising happiness over money - and that’s usually the biggest challenge of all.