Life is meant to be enjoyed, and thoughtful financial planning can be key to ensuring you get the most out of your time and achieve the dreams you’ve always aspired toward.
While it’s always important to plan for the future and prepare for both expected and unexpected challenges, it’s equally essential to live in and cherish the present. However, a fear of overspending may sometimes prevent you from enjoying the fruits of your labour.
Although staying mindful of your budget and expenses is essential, adopting a balanced approach enables you to enjoy today while maintaining confidence in your financial security for tomorrow.
Determining what “enough” looks like for you can be particularly helpful. By defining your needs and setting clear boundaries, you can assuage your fears of overspending and create a plan for enjoying your wealth responsibly.
Of course, this is easier said than done. Fortunately, with the right financial planning, you can map out a future that drives you toward your goals while also finding the time, space, and money to focus on the things that matter in the here and now.
So, read on to discover why good money habits aren’t just about saving.
Balancing long-term and short-term goals can help you enjoy the present while building a prosperous future
Financial planning often focuses on achieving long-term goals, such as building your retirement fund or developing an estate plan. Clear and well-defined targets are essential to reaching these objectives, as significant goals like these typically require longer time horizons and careful planning.
However, it can be challenging to stay motivated when your goals are distant and may be years or even decades away. This is why it can be a good idea to balance your grand, long-term aspirations with shorter-term, more immediate goals.
These smaller milestones provide a sense of accomplishment and enjoyment along the way and could also help you maintain focus and momentum toward your bigger objectives.
For example, one of your longer-term goals may be to retire by a certain age so you can spend more time with your grandchildren. While a shorter-term goal could be to save enough over the year to take your grandchildren (and maybe your wider family) on holiday.
In this instance, your trip with your grandchildren may give you further motivation to save so you can retire at your desired age (assuming the holiday goes well!) and spend more quality time with your family.
If you don’t spend your cash, it may lose its value over time
If you hold a portion of your wealth in cash savings with the intention of spending it but never do, its real value may decline over time.
This happens because unless the interest earned on your savings consistently outpaces the rate of inflation, the purchasing power of your money will erode.
For example, suppose you saved £10,000 in an account offering 1% interest, while inflation averaged 2%. By the end of the year, your savings would have grown to £10,100. However, due to inflation, you would need £10,200 to maintain the same purchasing power your £10,000 had at the start.
Over time, this gradual loss in real value can significantly reduce your wealth’s ability to meet your needs, leaving you worse off in real terms.
Indeed, Forbes reports that between 1928 and 2022, cash outperformed the US market over a calendar year only 12 times.
Despite this, Money & Co reports that there is currently an estimated £1.4 trillion sitting in accounts, accruing little to no interest and struggling to keep up with inflation.
While it’s a good idea to maintain some cash savings, such as an emergency fund, holding onto excess cash instead of spending or investing it can lead to a loss of real value over time.
So, beyond the emotional benefits of enjoying your money, there are also financial considerations for spending your cash rather than holding on to it.
Cashflow modelling can help you map out your future, enjoy the present, and determine how much is “enough”
A financial planner can use cashflow modelling to help you map out your current income and future expenses to help you determine how much is “enough” for you.
Putting a figure on this – even if it’s a wide range rather than a single sum – is important as it can help alleviate your worries about overspending. By setting out a clear long-term goal, you can break it up into smaller targets, ensuring you stay on track and giving you peace of mind to enjoy what’s left over along the way.
Since the definition of “enough” is different for everyone, a financial planner can help you create a tailored plan using cashflow modelling to determine your specific figure.
Cashflow modelling analyses your income, savings, and both current and future expenses to evaluate your potential financial position over time. It also factors in unknowable elements that could affect your future needs, such as market fluctuations and inflation.
This process can help you better understand the range of funds you’ll need to achieve your long-term goals in the future, giving you more freedom and less worry about enjoying the present.
Get in touch
A financial planner can help you create a plan that strikes a balance between striving towards your goals of tomorrow and savouring the moments of today.
To speak to a financial planner, get in touch.
Email admin@stonegatewealth.co.uk or call us on 01785 876222.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
The Financial Conduct Authority does not regulate estate planning or cashflow planning.
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