So, how much money is enough? It’s an interesting question, and the amount of money is different for everyone.
I had an interesting meeting with a couple this week – Shaun and Mel. They were looking for some help because they have recently retired and are concerned that they don’t have enough money to do the things that are important to them. Their biggest worry is that they will run out.
This is not an uncommon concern, and something I regularly see.
In the case of Shaun and Mel though, they needn’t to be concerned. In fact, when we looked at their situation and their needs they have more than enough in investments that if they sold everything and stuffed their cash under their mattress they wouldn’t run out of money if they lived to be 150!
Even the interest they’d earn by putting the money in the bank would mean they’d earn enough to more than cover the costs of all of their plans, and they wouldn’t eat into their capital.
It took a while for them to grasp how comfortable they were. Like many people, they had spent their entire working lives saving and sticking to a budget so they could build a big enough pot of money to be financially secure. There was always the need to save more because of the fear not having enough. To be told they no longer needed to be worried about that meant trying to overturn forty years of conditioning in an hour or two.
We spoke about their plans, and the things that interested them. We spoke about what they would do if money was no object (which it largely isn’t anymore), but they are happy with their life as it is, and don’t want to just go and spend more money because they can.
The problems with having more than enough money (they’re nice problems)
So money is no longer a worry for them, but it also means there will be a significant amount left when they ultimately die. This realisation created a very different set of problems for them than the ones they had initially been concerned about.
Unfortunately they no longer have any children to leave their money to, their only daughter having died several years ago. They have no grandchildren either, and there are no other people they would like to be able to assist now, or leave money to after their death.
But Mel had devoted 30 years of her working life to helping sick and disabled children. When they understood how secure their financial position was, they realised they might be able to continue assisting these children by using their money, rather than their skills, and that the impact of this could continue long after they have gone.
To simplify their affairs we have split their assets into two pools. The first one is to provide them with the income they need for as long as they need it for, and to ensure this the funds have been invested quite conservatively. The second pool though is earmarked to make a difference to sick and disabled children, and the funds have been invested prudently but with a focus on maximising the return and so increasing the size of the donations they can make.
Dividing their funds in this way has changed their relationship with their money. No longer are they concerned about running out of money for themselves, and the emphasis on building funds to make a difference in the lives of others has allowed them to relax and be more comfortable with their good fortune.
When was the last time you stopped and considered your overall financial position? If you haven’t done so for some time I invite you to complete our 9 Point Financial Health Check. Upon completion we will email you a personalised report, together with a suggested course of action if we feel it is warranted. Click here for your checkup.
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