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How to prepare for financial success

4 min read
David Little, Senior Financial Planning Director03 May 2024

Building a long-term plan for your wealth should be as easy as you’d like it to be. The hardest step – and most important – is to decide how much or little you would like to get involved.

There’s no right or wrong here, and it should be entirely up to you. Some people are more practical and prefer to get into the nitty-gritty of how their money is being managed, while others would rather spend their time doing something they enjoy more than financial planning. What matters in the end is that you’re happy with your decision and that you have the reassurance your wealth is in good hands.

Whichever road you choose to take, the only requirement is to define what financial success looks like to you. And however you define success, when it comes to building wealth, it takes three simple, concrete, straightforward steps.

1. Wealth accumulation

In the accumulation stage, the main focus is on maximising growth based on your chosen level of risk.

Building something always takes time and effort, so arguably some individuals might find this step of the journey the hardest one. And they shouldn’t be blamed for it; at this stage of the wealth journey, many would be seeking to develop some of the first stages of their estate planning: putting a deposit on a first home, paying down their mortgage, or even buying a second home. For those growing a family, they’re also factoring in school and university fees for their children if private education is on the cards.

All of this on top of planning your financial future. At this stage, where typically you would be building your portfolio for long-term growth, it’s important to always make use of your tax allowances, keep the regular drumbeat of pension contributions, and also even look into other investments that could benefit you in the longer term.

In one of our previous articles, we touched on some of the essential areas of focus to ensure you’re building your way into your financial success in the most robust way. To make sure we’re giving our clients a complete picture of their wealth journey, we’ve built the Lifetime Wealth Model. In the wealth accumulation stage, this powerful tool, which uses proprietary technology, provides a detailed view of your finances, including a cashflow projection (what you would need to save to reach your financial goals), offers insights on your estate planning, all while helping you to manage your assets in a tax-efficient way.

2. Wealth enjoyment

In the wealth enjoyment stage, some of the burdens of the accumulation stage have been left behind, which means it’s time to enjoy a bit more some of the hard work you put into building your financial future.

With some more (financial) freedom than in the previous stage, it’s time to think about making some of the hobbies you’ve been dreaming about come true. Whether it’s travelling, doing a new sport, studying a new subject – you name it – it’s time to enjoy it.

At this stage, some individuals will also find themselves in a position to want to help their children buy their first home, financially help their grandchildren with school fees or simply contribute to their financial future through a junior ISA.

It is also an opportune time to start thinking about retirement.

Regardless of what stage you are in your journey towards financial freedom, it’s always prudent to understand how your financial decisions could affect the overall picture. Asking key questions such as when you might have enough to retire, or the impact of financially helping your children, is the genesis of the Lifetime Wealth Model. By running a cashflow model based on your financial goals, your Financial Planning Director should give you the knowledge and confidence to make the right decisions as you ask these questions.

3. Wealth decumulation

In the wealth decumulation stage, it’s time to reap all the benefits from all the effort you put into creating and growing your wealth.

The focus at this stage is to ensure you’re still drawing on your income in the most efficient way, while still growing what remains invested in your portfolio.

Concurrently, individuals should consider any succession plans, which could encompass gifting, reviewing their inheritance tax structures, as well as thinking about their long-term care needs.

But the main focus here is to enjoy your life, making sure you’re happy with your decisions, financial or otherwise.

During the decumulation stage, we’re often asked by clients what succession looks like, as well as how long their income could last. 7IM’s Lifetime Wealth Model can provide a picture of the present and model the future based on different assumptions. By showing where each road leads to enables clients to choose the best road to take.

If you’re interested in talking about your financial freedom, get a little (financially) fitter, or simply review your investments, we’d love to talk to you too. Our advisers will take the time to listen to your financial ambitions and then show you the ways to get there, so you can be confident in your financial decisions.

Please note that this article is intended for educational purposes only and should not be taken as investment advice. Tax rules are subject to change and taxation will vary depending on individual circumstances. The value of investments can go down as well as up and you could get back less than you invested. Investment in funds will not be suitable for everybody and you should make yourself aware of the risks before investing and if you are unsure, you should seek professional advice.
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