Making the most of an inheritance, the sale of property or wealth accumulated over a number of years takes careful planning. Do you opt for steady savings or invest to grow your fund?
Having a large sum of cash at your disposal is a good problem to have. You have choices. Future possibilities are endless. This is especially true if you are approaching retirement and you have fewer commitments.
This often happens to people in their 50s or 60s. The mortgage has been paid off, and the children have finished college and left home.
You probably have most of the material things you need in life. Now it’s time to consider how you spend the next twenty, thirty or forty years of your life.
Regular cruises, that luxury campervan for weekends away, or maybe a holiday home investment?
The main consideration is how do you fund that lifestyle, and also make sure you have enough money to coverall all eventualities.
Spend, save or invest?
If you have just sold your business, cashed-in on a rental property, or been the beneficiary of a family inheritance, you have decisions to make. First, there are a few questions you should ask yourself:
Do you have an adequate pension in place?
Is there a contingency fund in case the unexpected crops up?
Do you have any significant financial commitments over the coming years?
The answers to these questions will help you decide what happens to your new-found wealth. If most bases have already been covered, you will have much greater flexibility.
You will be able to spend some of your cash on holidays, a new car or perhaps gifts for the family. Then, subsequent decisions will depend on what levels of risk you need or want to take you comfortably into retirement.
Investments can go up or down
There’s no one-fits-all solution. Everyone’s circumstances are different. Ultimately, it’s your decision how and where you spend, save or invest the money you have. However, just because you have unexpected funds that doesn’t mean you should be reckless.
Saving surplus cash in a low-risk bank or building society account is an obvious solution. You know what you have, the interest rate is steady and you can make an educated guess how much your savings will be worth in five, ten and twenty years.
If that’s enough and it covers what you need, fine.
However, the value of your savings could fall over time because of inflation and taxation. While interest rates are low, your savings do not grow much. Much depends upon your circumstances, and whether you need your savings to grow to cover future expenditure.
If you do need to see your cash pot increase, one alternative is to invest in shares. This comes with increased risk due to the ever-changing nature of the stock market. It offers a greater opportunity for growth over the longer term, but you could also lose everything!
That is perhaps a little dramatic, and one thing history tells us is that over the long term (i.e. 15-20 years or more) the value of stocks and shares rises.
Wealth and balance
If you have surplus cash and a comfortable contingency fund, you are in a good position. Maintaining this balance is probably a sensible idea.
A cash cushion will always give you peace of mind. You know where you stand. You know you can react to unexpected events and cover unplanned expenses.
Looking ahead, you will also approach future years knowing that you can continue to make choices. That might include helping grandchildren or putting aside monies to cover care costs in later life.
To achieve balance, you must ask what you want to achieve, how and when? In fact, the personal goals of you and your family should always be the starting point for any major financial decisions.
Take independent advice about money
An independent financial adviser is a great way to begin. They can help you gauge your attitude to risk, and also identify what your goals are from money and investments.
It really is important to realise that you must highlight your goals, ambitions and future needs before you consider savings or investments.
Ultimately, it’s about getting the right results to suit your circumstances.
With so many tempting offers on the table, and numerous attractive ways to grow wealth, you should always consider your financial options carefully.
That’s what Logic Wealth Planning offers – impartial advice about money, savings, insurance, pensions and investments.
There’s no hard sell, no pressure, no deadlines. We’ll give you the support you need to make financial decisions that are right for you and your family.
Call us on 0808 1234 321, or email firstname.lastname@example.org to start the conversation…