Where is your favourite holiday destination?
I’m a big fan of short breaks in the UK with Dorset and East Sussex top of my list.
Clients of ours often have more exotic and far flung destinations in mind; India, New Zealand, Australia and the US seem pretty high on many peoples lists.
Others like the thought of warm beach locations including the Seychelles, Mauritius or a Caribbean island.
Whatever your choice we often find this a subject of high importance when we go through the financial planning process with our clients.
Talking with a couple recently we could demonstrate that they could actually retire now and have the lifestyle that they wanted.
However I sensed that this good news wasn’t being received in such a positive light as I expected. I asked why not and received an interesting reply.
“I think we may have underestimated the amount of money that we would like to spend on holidays during the first decade of our retirement.”
The couple were approaching age 70, about to sell their businesses and retire.
What they wanted to enjoy were two holidays a year abroad and then a couple of long breaks in the UK.
They had planned to spend a quite considerable sum during the next ten years and then expected to scale this down as they got older and potentially less willing and able to take long flights.
In their expenditure forecasts they quite sensibly reduced anticipated expenditure after ten years. They felt they might need to spend more sooner and less later
We re-ran the cash flow forecasts that demonstrated their future income and expenditure and amended the amount spent in the first decade.
In fact we doubled the amount that they had first considered and then ten years later reduced the anticipated spend on holidays.
The good news was that with this adjustment in the shape of their holiday spending their financial position remained strong throughout life.
We find this element of the financial planning process to be of real value to our clients.
Of course the cash flow forecasts need to be based on reasonable long-term assumptions (and reviewed on a regular basis) but is all about giving people the confidence to do what they really want to do – in this case have the same quality of holiday post retirement as they enjoyed pre-retirement.
