We have received some money and it has made us rethink our priorities. We would very much like to downsize, change our lives and not work so hard. Is this feasible?
It is not unusual that receipt of an inheritance means that life’s priorities are reconsidered. Adrian’s mother died and her estate has taken some time to sort out, as the main part of the inheritance was a valuable property. Once this was sold, a sizeable inheritance was achieved which was divided between Adrian and his sister Louise.
Adrian is a successful chartered accountant and has worked at full pelt throughout his life. But in my recent reviews, his outlook was changing as he realised that his children were growing up very fast and he wants to enjoy some of the years with them before they fly the nest.
Adrian’s wife Sarah is a graphic artist and also brings in a reasonable wage to the household.
One of the first things Adrian and Sarah did with the money was pay off their mortgage entirely. They now have a London property that is unencumbered as well as a holiday home in France. This means that they have disposable income that they can save and their income requirements are also less.
Sarah’s wish is that she should be able to stop work and paint. She paints part-time and there has been a degree of interest in her artwork but
she cannot devote the time that is needed to make her career take off properly while she is working for her current firm.
One of their objectives therefore was that Sarah should stop working now and devote her time to her painting. Adrian has said that he is prepared to work at his current rate for another five years but after that he really wants to take a back seat, if not retire entirely or work in some
It is hard for Adrian to imagine a reduction in income of this nature as it is far removed from his life now. He envisages a portfolio of work, probably some non-executive work, as well as some pro-bono.
They both also have a philanthropic side and would like to use either their time or funds to help other people.
The children’s education fees are taken care of by a trust fund which Adrian’s mother left. This means that their inheritance, plus other resources that they have built up over time, can be devoted towards their own personal requirements.
They also envisage in five years time changing their lifestyles and selling the property in London to move to the country in the UK while also retaining their property in France.
Their instructions to me were to look at the planning aspects of this based on their current net income and assets that they have, including
releasing equity from their London property in five years’ time.
One of the problems with couples whose earnings are high is that there is a certain lifestyle that is taken for granted. Even those who consider their income requirements relatively modest do not realise that a big amount of capital is needed to sustain that lifestyle.
The first priority was to consider whether their current lifestyle would be sustainable over the coming years. Once I started to work on the lifetime cashflow, I could see that they would need to save very big sums of money over the next five years to make their future plans come true. This is notwithstanding the reasonable amount of assets they have already built up, their inheritance and the release of equity from the
The original drafts are not encouraging for Adrian and Sarah. They are faced with a decision on whether they postpone Sarah’s artistic career for at least five years, trim their income expectations after five years or make different property arrangements.
The value of the comprehensive cashflow planning means that they know today that they need to consider alternate options and to consider what their priorities are before I can take the planning to the next stage.
There is a degree of flex in their future plans but the same pound cannot be spent twice. It is better to be aware of the limitations of their hopes and dreams and plan an acceptable alternative now than to dream the dream and have it dashed when reality looms too late to make amends.
Amanda Davidson is a director of Baigrie Davies