Keeping up with the Joneses
When it comes to money, it appears that our biggest aspiration is ‘keeping up with the Joneses’.
Researchers at the University of Warwick found that people in the UK are victims of chronic financial dissatisfaction.
People are most happy when they have more money than their neighbours. Levels of absolute income are less important in this context than income levels relative to our peers.
Wealth has never been about what you earn, but instead what you keep.
It is for that reason that we often meet with new clients who would be considered ‘wealthy’ by conventional standards, but are spending every last pound of net income each year or even living vastly beyond their means.
This is why it is possible for a lower earner to build wealth faster than their higher earning neighbour, based on the choices they make about lifestyle and expenditure. The ability to save more of your income each year is what enables you to make progress in terms of building wealth.
A counter argument is that the higher earner, even if they are spending all of their cash, at least gets to experience a more enjoyable lifestyle during their working life. The ability to look beyond day to day expenditure and experiences is another factor which sets apart from the wealthy from the rest.
Building wealth, real wealth, is made easier when you have a plan. A documented financial plan is something used by a tiny minority, but those that do use one are more likely to achieve their financial goals and objectives.
A financial plan does not need to be a complex or particularly detailed document. In simple terms, it can contain a summary of your financial position (income, expenditure, assets and liabilities) along with your objectives and action plan for achieving them.
By making your financial objectives SMART – specific, measurable, achievable, realistic and timely – you will improve your chances of success.
It also helps to keep your financial plan under regular review. We recommend a formal review of your financial plan at least annually. In the first year, you might want to schedule a more regular review to keep things on track.
The financial plans we create, implement and monitor for our clients are a little more sophisticated than the steps described above.
They do become incredibly valuable documents that help our clients to build real wealth in their family and to truly understand both what it is they want from life and how they will achieve it.