One of the most important financial questions we can ask ourselves is;
”How much is enough , will we be able to do the things that are really important to us over the course of our life without running out of money?’’
To put context on things, take a non-smoking couple aged 65. Statistics suggest that they have a joint life expectancy of 30 years which means that, on average, one of them will live to age 95. If inflation averages 2.5% pa over the 30 years, their cost of living will rise 2.1 times i.e. it will cost € 2.11 in year 30 to buy what €1 bought in the first year. Inflation is a serious and often under-managed risk. If you don’t have a plan to increase your income by as much as your cost of living increases, then you are much more likely to run out of money! This is just one of the many variables you need to consider when figuring out how much is enough.
The vast majority of people we meet are not sure how much money they’ll need for the rest of their life and whether their current & future income, savings and investments are likely to be sufficient to meet the cost of their desired lifestyle. Many people have never had their personal finances framed in this way.
At iQ Financial, our focus is on helping our Financial Planning clients protect their lifestyle. We do this by helping you to identify your goals, to develop a well thought out Life Centred Financial Plan to help you achieve those goals and by then implementing an Investment Strategy that acts as one of the main drivers of your Financial Plan. It is a much less complicated process than you might expect.
We will leave you with two statistics & one thought that we hope give you a taste of the way we look at things.
• Since 1960, a timeframe that takes in the lifetime of most of us not yet retired, the Consumer Price Index has grown at around 2.50% pa.
• The dividend, just the cash income mind you, from shares in the S & P 500 US Stock Index have grown at 5.9% pa. The S&P 500 is made up of some of the largest, most innovative and profitable companies in the world.
So, the companies in the S&P 500 have been raising their dividends at something close to twice the inflation rate for as long as most of us have been alive.
Here’s that one thought, dividends are an important way that smart people have kept their income growing well ahead of their living costs.
If you want to find out more, get in touch for a no-obligation chat. Coman & Enda Brady www.iqf.ie