Alvin Hall

25/08/2009

Money guru says start planning for better future NOW!

Increasingly people are living longer and if you haven’t planned well for retirement it will make it much harder to stop working when you want to.

Spend now, worry about the future later is a very common attitude. But you can do both at once. I tell people to divide their money into two groups. Spend now on things that will make you happy, but select them wisely: look in your closet and around your house at those things that really give you pleasure, and those things that were temporary and fleeting pleasures. If you took that money from the fleeting pleasure and allocate it into your longer-term future happiness, you can have the best of both worlds. I call this financial multi-tasking.

It’s really easy to focus on the here and now, saying ‘what if I die tomorrow? I’ll have wasted the cash I saved’. But nobody ever gasped their last breath in life saying ‘I should have spent more time in Marks & Spencer!’ What they really need to think is ‘what if I live to be 80? If I have to take care of myself – who’s going to pay my bills? Who’s going to save me?’ 

Look at those pensioners who are having problems paying bills, can’t afford to heat their house in winter – that could be you. You have to carefully plan a strategy for your long-term happiness so that whatever happens, you will have an income that will let you choose what sort of life you want when you are older.
 
You know that you will have your government state pension; also make sure you’re involved with an occupational pension scheme if one is available; and make sure you have a personal savings plan.

People look at all the dark things that have happened and use the economy to justify doing nothing at all. Many have lost trust in banks and financial system. They bought into the concept that property prices would only ever go up, that the stock market would only go up. Expectations had gone way beyond the reality of the economic cycle – we thought we’d discovered the magic potion to make property and economy grow forever. 

But all economies are cyclical, every up-turn is followed by a downturn, and we are in a severe downturn now because we’d such a period of prosperity. People have to be much more realistic – no market could sustain property prices going up by 15 or 20 per cent per year.

But there will be a recovery, and banks are always a safer place to have your money than under your mattress. You have to trust somebody.

You need to have two relationships – one with your financial manager, and one with your money. Like any relationship, it changes from year to year, so speak to your advisor regularly. The better you know yourself, the better you are able to financially multi-task, to look at the future and the past, and deliver your dreams.

If you don’t have a financial advisor, it would be easy to assume they will make all the decisions on your behalf, but that’s the wrong assumption. This is not like Sleeping Beauty, some day when I’m 65 I’ll wake up with all this money. You participate, talk every year, track it to see how it’s done every six months; you’re involved in this process, you never give them total control. It’s like a good marriage, there is a lot of give and take, and you have to talk to them to make sure they understand your position.

The best way to get started is to go to your local bank for advice or ask friends who have used a financial advisor they trust.

Everybody wants to retire rich, but you have to say ‘I expect to retire in 25 years and want X-amount per month, I don’t want to take extreme risks’ and answer all the questions that will enable the advisor to work out how you can achieve that. In my book I have a series of questions that will help you look into the future and work out how to reach that amount.
 
When we’re in a recession, it’s easy for people to say ‘I don’t have money to save’, but this is the time you need to conserve your money, so that when the markets do turn round, whether you want to put it into property or the stock market, you can re-enter it again. Every downturn is followed by an upturn, so if you don’t conserve money now you’ll miss that opportunity when it comes back along.

Alvin Hall’s book Plan Now, Retire Happy is out now
(Hodder and Stoughton)