Financial Wellbeing

The first thing to say about Nicholas Lee is that he’s an accessible and affordable financial coach, who will help you to take control of your finances and avoid the high fees associated with financial advisors (who incidentally have an entirely different job description and role to play).

Bethan Cole

Your objectives and goals

Nicholas begins by helping you learn to be financially literate – to talk about what you want to do with your money, what you want to save up for, your objectives and goals to have a happy and fulfilled life. “Start by thinking about what makes you happy, “ says Nicholas. “Write down on a piece of paper five things that make you happy. And then write down five things that you would like to do, but don’t currently do. Don’t hold back, allow yourself to dream.” Once you’ve done this you can start to think about why you want to do these things and how they express your personality and character. Rate each thing from 1 to 10 in terms of priority. Then once you’ve done this you can start to make a plan.

Creating a plan

Once you know what your dreams are, you can start to take stock of your financial situation. Think of this as a personal money audit. Write down your income, which may or may not be a pension and write down your expenditure. Take into account any property, investments mortgages and loans. “Now ask yourself some questions,” continues Nicholas,

Can I retire early?
Can I afford to give money to my children?
Can I repay my mortgage early?
What would be the impact of a divorce settlement?
How would paying for long-term care fees affect my finances?
Am I likely to inherit any money?
How will downsizing my home affect my financial position?

“These figures and the answers to your questions become the basis of a ‘lifetime financial cashflow’ showing you how your finances are likely to play out over the next 5 / 10 /15 years,” explains Nicholas. Then you can start to factor in things like dream cruises, holidays and trips and investing for your grandchildren.

Control of daily finances

Financial well-being tends to be predicated on what you are doing with your finances on a day-to-day basis. Are you very careful or are you an impulse buyer? Do you have tight control over your daily expenditure or do you splurge on unnecessary treats? First, think carefully about income and expenditure. “Guaranteed income is income that carries on as long as you do,” observes Nicholas, “this may include the state pension, occupational pensions and annuities.” There are two types of expenditure: fixed and discretionary spending. The former, fixed, is the priority from your guaranteed income – mortgage (if you still have one) or rent, council tax, energy bills, food, car running costs, wifi and mobile phone. Then there is discretionary expenditure, which is less essential, and includes holidays, clubs, hobbies etc. “Set up separate pots for holidays and other big-ticket items like Christmas and birthday gifts and car replacement,” Nicholas advises. “Then set up an emergency fund to deal with any financial shocks that come your way – death, illness, investment losses, redundancy. Ideally, you need six months of income in an accessible savings account. This alone reduces worry – you know you can cope if something unexpected happens.”

Investments

You need to be aware of both risks and charges. “Risk is fundamentally about the relationship between time and stock market returns,” explains Nicholas. “The stock market has consistently produced better returns than cash over any five-year period … but it takes time” Nicholas says to opt for a broadly diversified fund, a tracker fund and to let the stock market do the work.

In terms of charges, bear in mind that “an annual charge of 2% on your investment will eat away 20% of your returns over 10 years.” He recommends finding investments with low charges (0.5% per annum) and avoiding high platform and investor charges.

Scams

These are currently proliferating – so be aware as they can catch you off guard. Do not take any notice of emails purporting to be from friends in distress asking you for money. They may have been hacked. Avoid responding when people on social media ask you for money too. Be wary of phone calls saying they are from your bank or asking for card or bank details. Be careful of fake TV Licensing and bank emails asking you for bank details, card details or passwords.

Investment scams are also rife says Nicholas. “All of us want certainty and a good return on our money but if it sounds too good to be true, it probably is,” he states. “Avoid any investment that has the word ‘cryptocurrency’ in the title. Do not deal with any ‘investment adviser’ who cold calls you. If you decide to use an adviser check with Vouched For and ask friends who have had a good experience. Make sure you understand the charges and the service being offered and ask for testimonials.”

Nicholas recommends for further reading and advice: The Financial Wellbeing Book by Chris Budd, LID Publishing, 2016.

You can find more tips from Nicholas on his website: https://www.makingsenseofmoney.co.uk