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Drawing up a financial lifeline

We look at a novel way to help with planning your finances, and how our advisers can help.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

We all love it when a plan comes together but it’s often hard to draw up that plan in the first place. None of us have a crystal ball and there will always be ‘what ifs’ and ‘maybes’ to think about. If you need help with financial planning, an adviser can go through a simple exercise called a lifeline. This can help you identify realistic goals and which pots you can access at different points to help meet those goals.

The lifeline exercise is simple but effective. Your adviser will take a blank sheet of paper and draw a simple chart to map out your financial life. Taking into consideration life milestones, goals and financial resources.

Getting value out of your lifeline

You may think you’ve got it all worked out. But getting a different perspective on things can help you see your plans in a new light. If you can’t answer these questions, it’s likely that drawing up a lifeline with an adviser will help:

  • Do you have a financial strategy that’s aligned to your life objectives?
  • Are you only saving or investing ‘just in case’?
  • Is your risk profile for investments tailored to achieving your goals?
  • Have you earmarked the source funding for each of your milestones?

What’s the point of drawing up a lifeline?

Lends perspective – You may have an idea of how you’re prioritising your own lifeline. You may also be worried or excited about various things coming up. An adviser can help you address your worries, work towards your exciting goals and highlight anything else you should be thinking about.

Gives a new perspective – You’ll often have an idea in your head about what life is going to look like and how you’re going to pay for it. By drawing up a lifeline, and adviser will look at your plan, ask questions and bring a different aspect of experience. Your eyes could be opened to options you might not have thought about.

See the bigger picture – If you get too close to the detail, sometimes you miss out on the bigger picture. Drawing up a lifeline can help you see a more holistic view of your financial plan and help you understand how individual details fit together.

Remove limits – It’s easy to play it safe or think about the pessimistic aspects of financial planning. But when you draw it all out you may find that actually, you can afford to be a bit more liberal with your spending or that you can squeeze more out of an allowance or fund. The lifeline exercise helps map all this out to give you some clarity.

How does an adviser build a lifeline?

As with any planning, you’ve got to be methodical. Our advisers go through a tried and tested method to make sure your lifeline is as thorough as possible.

Step 1: Assess what you’ve got and where

We’ve got to know what we’re working with. When an adviser starts drawing up a lifeline, they’ll ask about the pots which are to be used to pay for some of the life milestones you’ve got coming up.

Step 2: Split out the time line into four core areas

You can categorise a financial life in to four broad areas; family, career, property and lifestyle. Your adviser will encourage you to think about what you foresee happening to each of these elements of your life as time goes on. As the conversation goes on, it’s likely you’ll uncover things to plan for that hadn’t occurred to you before.

Step 3: Dream a little bigger

During step two, the likelihood is you’ve been fairly conservative and you’ve listed out the main things you’ll need money for in the future e.g. money for your children’s education. Now it’s time to make it interesting and add in the stuff that really makes life worth living. Think: an extra holiday a year, other luxury items etc. All within reason of course.

Step 4: Earmark assets

Now your adviser will refer back to the info they found out about your assets. It’s at this point we’ll start to put values on your objectives and identify where that money is going to come from.

Step 5: The big reveal

The million dollar question is, “is it all doable?” At this point when your adviser will be able to tell you how realistic your plan is. Better still, your adviser will often be able to identify areas where you can ‘unlock’ more money to help you achieve your goals. The flip side is that your adviser wouldn’t be doing their job if they didn’t tell you where you’re likely to come up short. In this instance, your adviser will work with what you’ve got to put you in the best position possible.

For many of our clients, drawing up a lifeline is a eureka moment. It really brings financial planning to life and gives purpose to all that hard saving you’ve been doing. Sometimes, our clients are able to realise that they can dream bigger than they originally thought and that’s the sort of news we love giving out.

If you’re already a confident investor but you’re not sure about how you’re going to use your wealth using an adviser to help you plan your financial life could be of huge value to you. To get started and find out if advice can benefit you, call our helpdesk. They’ll ask you a few questions about your current financial status, point you in the direction of an appropriate advice service and put you in touch with one of our advisers. No financial advice will be given during this call.

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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