The Art of Investing: Time in the Market vs. Timing the Market

Introduction

The world of investing can be a labyrinth of complexities and uncertainties, often tempting investors to try their hand at “timing the market” – predicting the perfect moment to buy or sell assets. However, for investors in the UK, a more prudent approach is to focus on “time in the market” rather than attempting to time it perfectly. In this blog, we will explore the advantages of adopting a long-term investment strategy and the benefits it can bring to investors in the UK.

The Pitfalls of Timing the Market

Timing the market is the act of trying to predict the best moments to buy or sell investments based on short-term fluctuations in the market. While some investors may seem to have mastered this art, the reality is that market timing is fraught with pitfalls and inherent risks. Predicting market movements consistently is a challenging task even for seasoned financial experts, let alone individual investors. Common pitfalls of market timing include:

Emotional Decision-Making: Attempting to time the market often leads to emotional decision-making driven by fear or greed. This can result in hasty and irrational choices that may negatively impact investment performance.
Missed Opportunities: By staying out of the market in anticipation of a better time to invest, investors risk missing out on potential gains during market upswings.
High Transaction Costs: Frequent buying and selling of assets result in higher transaction costs, which eat into overall investment returns.
Tax Implications: Capital gains taxes may apply to profitable trades, further reducing an investor’s net returns.
Complexity: Market timing requires constant monitoring and analysis, making investing a stressful and time-consuming endeavor.

The Benefits of Time in the Market

In contrast, a “time in the market” strategy advocates for a long-term investment horizon and a steadfast commitment to staying invested through various market cycles. Here are the benefits of adopting this approach:

Compound Interest: Long-term investors benefit from the powerful concept of compound interest, where earnings generate additional gains over time. This compounding effect can significantly enhance the overall return on investment.
Diversification: A long-term strategy allows for a diversified portfolio across different asset classes, sectors, and geographic regions. Diversification can help mitigate risk and reduce the impact of market fluctuations on the overall portfolio.
Reduced Stress: By focusing on the long-term, investors can avoid the stress associated with constantly monitoring market movements and making reactive decisions.
Time to Recover from Losses: Markets are inherently cyclical, and short-term downturns are not uncommon. Staying invested over the long run provides ample time for the market to recover from downturns, potentially regaining any temporary losses.
Aligning with Market Trends: The stock market has historically trended upwards over the long term. By being invested in the market for extended periods, investors can align themselves with this upward trend.

Conclusion

In the UK, as in any other country, adopting a “time in the market” approach is a more rational and practical investment strategy compared to trying to time the market. The unpredictable nature of financial markets makes timing the market a risky endeavor, prone to emotional decision-making and missed opportunities.

Instead, focusing on a long-term investment horizon allows investors to harness the power of compounding, diversify their holdings, and potentially reap the benefits of steady market growth over time. By embracing patience and discipline, UK investors can set themselves on a path towards a more prosperous financial future. Remember, successful investing is a journey, not a sprint.

Managing your money during difficult times

In uncertain times like this, thinking about your financial situation can be stressful. But there are things you can do that may help.

Fears over the spread of coronavirus are causing people uncertainty and real worry in different areas of their lives, from their health and wellbeing to work and finances. If you’re feeling any stress around your financial situation or future, read these tips to find out what you can do.

Look at your budget
If you’re ill, you’ve had your working hours reduced or have had to take unpaid holiday it can be a big financial shock. In order to find out how that’s affecting your finances, you need to know what you’ve got coming in and what you spend.

As well as making sure you’re claiming what you’re entitled to – including benefits and sick pay (read on for more on this) – you may need to see if you can cut back on your outgoings. Depending on your spending and needs, that might not be easy. But it’s an important first step.

Cutting back may mean seeing if you can do without things you’d normally buy, as well as getting a better deal on regular spending, such as gas, electricity, phone and broadband.

Review any debts or loans
Debts that may have been affordable a few weeks ago could now be causing you to worry if your income has dropped or might do so. Some banks have offered to defer mortgage and loan payments for a limited period for people affected by coronavirus. Contact your lender to see what their policy is around repayments, along with taking into account how any actions might affect your credit rating.

Some have also offered extra temporary support like increases in limits for credit card borrowing and cash withdrawal – again, check with your bank what they’re providing. If you do need to use a credit card to pay for essentials while things are a bit tight, make sure you plan how you’re going to make the repayments and be clear on what the restrictions are..

If you’re worried about debts or struggling to repay them, debt advice charities like StepChange or National Debtline offer free support and guidance.

Check if you’re entitled to sick pay
If you’re an employee earning at least £120 a week you’re entitled to Statutory Sick Pay (SSP), which gives you £95.85 a week for up to 28 weeks (in the 2020/21 tax year). If you’re on a zero-hours contract you can also claim SSP, as long as you meet the condition above.

Usually you need to be off work for four days in a row before SSP kicks in, but if your absence is related to coronavirus it will now be paid from the first day. You could also get extra sick pay from your employer – these schemes are often more generous than SSP so it’s worth checking your contract or asking your HR department.

See if you can claim any benefits
If you’re self-employed, a contractor or a freelance worker it’s very likely that you won’t receive SSP. If you become ill, you may be able to claim Employment and Support Allowance, or if you need help with childcare or housing costs you may be entitled to Universal Credit.

If you need them, check if you’re eligible for any benefits as soon as possible and don’t put off making a claim as it can take a while to process – the benefits calculator from financial support charity Turn2us can help you to work out what you’re entitled to.

Review your insurance policies
If you can’t work, check to see if you have any insurance policies that could help with your income or mortgage payments. If you do, make a claim as soon as you can – check the terms and conditions of your policy to see if and when you might be able to claim.

Spend less, save more
You may not be able to build up savings if your income has dropped, but if you’re able to save, it’s worth building up a cash buffer for emergencies. Even saving a small amount is better than nothing.

If you’re working from home rather than commuting to work, you’ll be spending less on travel and possibly things like lunches and coffees – you could consider putting this money into a savings account instead.

It’s also worth reviewing regular subscriptions like gym memberships that you may be able to freeze or cancel if you’re not going to use them for a while – just remember to check any terms and conditions beforehand to see what your options are and when (or if) you can make changes.

Don’t panic about your investments
If you have a pension (or an investment product), try to not panic if you see the value going down. It’s important to remember that pensions are long-term investments – and it’s normal for the value of investments to go up and down.

While it might be tempting to move investments now, it could be worth taking more of a long-term view, depending on what stage of life you’re at. If you’re thinking about switching anything or taking money out of your pension, let me know and we can discuss your options.

Watch out for scams
Fraudsters often take advantage of uncertain situations like the coronavirus outbreak to scam people out of their money. Make sure you’re clued up on the different types of scams out there, how to recognise and report them, how to protect yourself and what to do if you think you’ve been the victim of a scam.

Our next article will include more help on scams, check it out on Friday.

Coronavirus scams – how to spot and avoid them

Scammers are exploiting fears over coronavirus to target consumers. Follow our tips to avoid being scammed.

There’s been a worrying increase in the number of scams since the coronavirus (Covid-19) epidemic. The National Fraud Intelligence Bureau has received over 500 reports of coronavirus-related fraud since the start of the outbreak, with victims being tricked out of £1.6 million.

How to spot a scam
Scammers are always coming up with new ways of tricking people, and fears over coronavirus have given them a perfect opportunity. But although the scams vary, there are some things they have in common.

Here are some of the main scams, and tips from the financial regulator, the Financial Conduct Authority (FCA), on how to avoid them:

Pension scams
Be wary of fraudsters who claim they can help you access your pension before 55. If you do, you’ll incur massive tax charges of 55% of your pension pot in addition to the scammers’ fees which could be up to 30% of the value of your pot. In some cases you could lose all of your money. There are only very limited circumstances when you can legitimately access your pension pot before 55, such as if you are in serious ill-health.

Also watch out for offers of free pension reviews which come out of the blue and offers to help you move your money to a safe haven. Your money will be invested in high-risk and unregulated investments or will disappear altogether.

Pension cold calls are illegal so if you get one, just hang up – it’s a sure sign that it’s a scam. Ignore any offers you get via email, text or online adverts too.

Before making any changes to your pension, check that any firm you deal with appears on the FCA’s Register https://www.fca.org.uk/firms/financial-services-register. Then call the FCA’s Consumer Helpline on 0800 111 6768 to check the firm is allowed to give pension advice.

Advance loan fee fraud
This scam involves being asked for an upfront fee in order to get accepted for a loan. The fee can be between £25 and £450 and you may be asked to pay it by bank transfer, Western Union or even iTunes vouchers. No matter how much you pay, the loan never materialises.

Warning signs to look for include being contacted by text or email out of the blue, or being put under pressure to pay the fee quickly. You can protect yourself by checking that the firm that asks for an upfront payment is authorised by the FCA. Simply type the firm’s name into the FCA’s Register. https://register.fca.org.uk

Good cause scams
Criminals have also been targeting people with a number of scam emails asking for donations to good causes. For example, one convincing-looking email pretends to be from the government, and asks for money for the NHS. Others appear to come from an organisation that claims donations will go towards the production of hand sanitiser or protective equipment for the NHS.

To avoid being scammed, don’t download attachments or click on links in emails unless you’re sure who sent them. Even if the email is from an organisation you know, if the email itself is unexpected or asks you to click on a link, it could be a scam. That’s especially true if it asks for personal or financial information. Your bank will never ask you for personal information in an email.

You can reduce the risk of being scammed by only donating to legitimate charities. You can search for a registered charity in England and Wales on the Gov.uk website charity register https://www.gov.uk/find-charity-information. If you’re in Scotland, check the Scottish Charity Regulator’s website https://www.oscr.org.uk/about-charities/search-the-register/register-search/. In Northern Ireland, it’s the Charity Commission for Northern Ireland https://www.charitycommissionni.org.uk/charity-search/?pageNumber=1.

Number spoofing scams
Number spoofing is where a scammer sends a text message that looks like it’s come from a genuine organisation, such as the government, HM Revenue and Customs or your bank. These scams are very hard to spot especially as the messages will sometimes appear in a chain of otherwise genuine text messages. The best advice is not to click on any link in a text that appears to come from a legitimate source. HMRC doesn’t issue tax rebates by text, and banks don’t ask for personal information this way.

Clone firm scams
This is where scammers pretend to be from an FCA-authorised firm to try and convince you they are genuine. A firm needs to be authorised by the Financial Conduct Authority to sell, promote or advise on the sale of shares or investments (including pensions) in the UK.

These fraudsters set up websites that use names similar to those of legitimate firms, and typically cold-call you to promote worthless or non-existent shares, property or investment opportunities.

Protect yourself by checking the FCA register to see if the firm is authorised. Always access the FCA’s Register directly from register.fca.org.uk rather than from any links sent to you by the firm itself.

The FCA also recommends using the switchboard number given on the FCA Register to call the firm back rather than the one the firm gives you. If the firm claims the number on the register is out of date, contact the FCA’s Consumer Helpline on 0800 111 6768.

Lookalike websites
There’s been a sharp increase in the number of people visiting the websites of debt advice charities since the government introduced coronavirus measures, and scammers are taking advantage of this. They are advertising websites that offer debt advice. These sites have very similar names to the genuine services and charities. They’re not illegal, but you could end up paying for debt advice that you could get for free. And you may end up sharing your personal details with a company you don’t know anything about.

If you’re visiting a website to get debt advice, always check the website address to make sure you’re not clicking on a ‘lookalike’ site by mistake.

Cold call and doorstep scams
Not all scams are online or over the phone. Some people have reported that scammers have been going door-to-door offering ‘coronavirus tests’. To avoid being scammed, ask to see the identity badge of anyone who comes to your door and claims to be from a company or organisation.

If you’re not 100% comfortable, don’t let them in, and don’t give away financial information (such as your bank account details) either.

Other scam warning signs
The FCA is also warning that scammers could use any of the following tactics during the coronavirus pandemic. The fraudsters may:

play on worries you have about your investments falling in value and advise you to invest or transfer your investments into investments they recommend.
contact you claiming to be from a claims management company, insurance company or your credit card provider. They’ll tell you they can help you make a claim for the cost of a holiday or a cancelled event and will ask you send them some money or your bank details.
send you messages telling you your bank is in trouble due to the coronavirus and to transfer money to a new (bogus) bank account.

Action Fraud, which is the organisation to report fraud to, is warning about fraudsters who claim to be able to give you a list of people affected by coronavirus in your area. To access the information you have to click on a link (which will then steal your personal details) or provide an upfront payment. It has also seen examples of fraudsters writing articles about coronavirus with links to a fake company website where you’re encouraged to subscribe to daily updates.

Product providers will never cold call you and ask for personal details or try to get you to make alterations to your plan.

If you’re contacted in this way, please don’t provide any personal or banking information, end the call and contact them on their main customer service number if you have concerns.

If you’ve already provided information and you’re worried it might be a scam, please alert your bank and contact Action Fraud. https://www.actionfraud.police.uk

More help
For more information on scams and to keep up-to-date with the latest ones, see Action Fraud and ScamSmart.

For more information on pension scams, see The Pensions Advisory Service and The Pensions Regulator.

Business Support – Furloughing Employees including Directors

Check if you can claim for your employees’ wages through the Coronavirus Job Retention Scheme [source]

If you cannot maintain your current workforce because your operations have been severely affected by coronavirus (COVID-19), you can furlough employees and apply for a grant that covers 80% of their usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and pension contributions (up to the level of the minimum automatic enrolment employer pension contribution) on that subsidised furlough pay.

Any employees you place on furlough must be furloughed for a minimum of 3 consecutive weeks.

You cannot ask your employee to do any work that:

makes money for your organisation or any organisation linked or associated with your organisation
provides services for your organisation or any organisation linked or associated with your organisation.

Your employee can:

take part in training
volunteer for another employer or organisation

Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme [source]

Individuals you can claim for who are not employees

As well as employees, the grant can be claimed for any of the following groups, if they are paid via PAYE: office holders (including company directors), salaried members of Limited Liability Partnerships (LLPs), agency workers (including those employed by umbrella companies), and limb (b) workers.

Company directors

As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.

Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, i.e. they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

This also applies to salaried individuals who are directors of their own personal service company (PSC).

For more information check https://www.gov.uk/coronavirus/business-support

Business Support – Furloughing Employees

Check if you can claim for your employees’ wages through the Coronavirus Job Retention Scheme [source]

Any employees you place on furlough must be furloughed for a minimum of 3 consecutive weeks.

You cannot ask your employee to do any work that:

makes money for your organisation or any organisation linked or associated with your organisation
provides services for your organisation or any organisation linked or associated with your organisation.

Your employee can:

take part in training
volunteer for another employer or organisation

Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme [source]

Individuals you can claim for who are not employees

Company directors

This also applies to salaried individuals who are directors of their own personal service company (PSC).

The Plan is the Path

None of us planned for this.

But your financial plan does have mechanisms in place that will help you get through this tough patch with the coronavirus and the financial market volatility. The key is not letting heightened emotions and bad headlines steer you towards decisions that could have a negative impact on your finances long after this crisis has passed.

Easier said than done, right?

These three steps will help you remember why you have a plan in the first place, what it’s designed to help you accomplish, and how we can help.

1. Acknowledge your emotions.

Worry. Anger. Uncertainty. Nervousness. Maybe even a disbelieving chuckle or two at the craziness of it all.

Whatever you’re feeling right now is OK. We understand that your financial concerns are just one part of a very complicated and very personal situation involving your family, your work, your health care, and your basic needs. Add in the anxiety we’re all feeling about the situation in the wider world and you wouldn’t be human if your emotions weren’t a bit jumbled right now.

So please understand that when we advise you to take emotions out of your financial decision making during a crisis, we’re not advising you to ignore what you’re feeling. On the contrary, we encourage you to talk through your feelings with your spouse, children, co-workers, and other close friends or family. Burying your emotions only makes stressful situations more stressful. Our human capacity for empathy, understanding, connection, and mutual concern is going to help us all weather this storm. It’s also going to lead you towards healthier and more productive outlets for your feelings, such as charitable giving and finding creative ways to support local businesses.

2. Tell yourself your story.

Once your feelings are out in the open, it will be easier for you to think about the financial part of your situation with a clear head.

Try, for a moment, to set aside the market swings that may have been dominating your news feeds for the past few weeks. Instead, think about the reason that you started working with us in the first place.

In those first few meetings, we didn’t talk about how to time your investments to world news or market fluctuations. Instead, we talked about you. About the life you desire for you and your loved ones.

And finally, we discussed how our Life-Centered Planning process can help you get that best possible life with the money you have.

3. Prioritise Now, adjust for Soon, stay on track for Later.

Because we plan for clients’ lives, not just their money, we always take in a wide view of financial progress. Today’s big market dip will look like a blip with a thirty or forty-year panoramic perspective. But “stick to your plan” doesn’t mean we don’t do anything during a major market correction, especially if you’re at or nearing retirement age. It means that the moves we contemplate are based more on your upcoming lifeline transitions than they are on unpredictable market movements.

To keep yourself focused on things you can plan for, grab a sheet of paper and sit down with your spouse. Divide that sheet into three sections:

Now: Financial concerns that need to be addressed as soon as possible, such as paying next month’s bills, a necessary home repair, or a health care issue.
Soon: Important items 6-12 months out that you still have time to prepare for.
Later: Everything else.

Most of these items will already be things we’ve discussed and planned for over the course of our work together. But it’s possible that recent events have filled up your Now’s and bumped some Soon’s into Later’s. We deliberately designed your Life-Centered Plan so that it can be responsive to these changing priorities and transitions while still being sensitive to larger economic realities.

To remind yourself of what you’re truly planning for, it might be a good idea to revisit your most recent Plan. The current crisis might alter your path a little bit. But your destination may still be the same.

If you haven’t got a Lifestyle Financial Plan, why not talk to us about how we can help you, as we do our existing clients.

Financial Planning is About Making Your Life Plan a Reality

Many people who have just begun working with us are surprised by how our planning process starts. We don’t begin by talking about your Pension, ISAs, or how much you’re saving. Instead, we begin by talking about you, not your money.

Putting your life before your financial plan.

As Life-Centered Planners, our process begins with understanding your life plan. We start by asking you about your family, your work, your home, your goals, and the things that you value the most.

Our job is to build a financial plan that will help you make your life plan a reality.

Of course, building wealth that will provide for your family and keep you comfortable today and in retirement is a part of that plan. So is monitoring your investments and assets.

But we believe maximising your Return on Life is just as important, if not more so. People who view money as an end in and of itself never feel like they have enough money. People who learn to view money as a tool start to see a whole new world of possibilities open in front of them.

Feeling free.

One of the most important things your money can do for you is provide a sense of freedom. If you don’t feel locked into chasing after the next pound, you’ll start exploring what more you can get out of life than just more money.

Feeling free to use your money in ways that fulfill you is going to become extremely important once you retire. Afterall, you’re going to have to do something with the 40 hours every week you used to spend working! But you’re also going to have to allow yourself to stop focusing on saving and start enjoying the life that your assets can provide.

Again, having money and building wealth is a part of the plan. But it’s not THE plan in and of itself.

The earlier you start thinking about how you can use your money to balance your vocation with vacation, your sense of personal and professional progress with recreation and pleasure, and the demands of supporting your family with achieving your individual goals, the freer you’re going to feel.

And achieving that kind of freedom with your money isn’t just going to help you sleep soundly at night – it’s going to make you feel excited to get out of bed the next morning.

What’s coming next?

So, when does the planning process end?

If you’re like most of the people we work with, never.

Life-Centered Planning isn’t about hitting some number with your savings, investments, and assets. And we’re much more concerned about how your life is going than how the markets are performing.

Instead, the kinds of adjustments we’re going to make throughout the life of your plan will be in response to major transitions in your life.

Some transitions we’ll be able to anticipate, like a child going to college, a big family holiday you’ve been planning for, and, for many of you, the actual date of your retirement. Other transitions, like a sudden illness or a big move for work, we’ll help you adjust for as necessary.

In some cases, your life plan might change simply because you want something different out of life. You might start contemplating a career change. You might decide home doesn’t feel like home anymore and start looking for a new house. You might lose yourself in a new hobby and decide to invest some time and money in perfecting it. You might decide it’s time to be your own boss and start a brand new company.

Planning for and reacting to these moments where your life and your money intersect is what we do best. Talk to us about how Life-Centered Planning can help you get the best life possible with the money you have.

3 Ways to Know When You Are Ready to Retire

There’s a pretty good chance that your parents and grandparents retired just because they turned 65. Today’s retirement is a bit more complicated than that. While age is still an important factor, your ability to connect your financial resources to your lifestyle goals is what will truly determine if you’re ready to retire.

Here are three important markers to cross before you crack open your nest egg:

1. You’re financially ready.

The most common question we field from our clients is, “How much do I need to retire?” While there’s no magic number to hit, a few key checkpoints are:

You have a budget. Many clients who are preparing to retire tell us they’ve never kept a budget before. Time to start! If you have any big plans for early in your retirement, like remodeling your home or a dream holiday, let us know so we can discuss options.
Your debts are paid. No, you don’t necessarily need to pay off a fixed-rate mortgage before you retire. But try to reduce or eliminate credit card balances and any other loans that are charging you interest.
Your age, retirement accounts, and State Pension plan are all in-sync. If you’re planning on retiring early, be sure that your retirement accounts won’t charge you any early withdrawal penalties for which you’re not prepared. Also keep in mind how much your State Pension might be worth, and importantly when you might receive it.

2. You’re emotionally ready.

We spend so much of our lives working that our jobs become a large part of our identities. Rediscovering who we are once we stop working can be a major retirement challenge. To prepare for this emotional transition:

Talk to your partner ahead of time. Don’t wait until your last day of work to discuss how both of you feel about retirement. What do each of you imagine life will be like? What are the things you’re excited to do? What are you afraid of? What can each of you do to make this new phase of life as fulfilling as possible?
Make a list. What are the things you’re passionate about? Something you’ve always wished you knew more about? A skill you’d like to develop? A cause that’s important to you? An ambitious business idea that was too ambitious for your former employer?
Check that your estate plan is in order. It’s understandable that many people avoid this part of their retirement planning. But putting together a legacy that could impact your family and community for generations can have tremendous emotional benefits. The peace of mind that comes from knowing the people you care about are taken care of can empower you to worry a little less and enjoy your retirement more.

3. You’re ready to do new things.

Ideally, the financial piece of this conversation should make you feel free enough to create a new retirement schedule based on the emotional piece. Plan your days around the people and passions that get you out of bed in the morning. Some ideas:

Work at something you love. Take a part-time job at a company that interests you. Turn that crazy idea you couldn’t sell to your old boss into your own business. Consult. Teach. Volunteer.
Keep learning. Brush up your high school French by enrolling in an online course. Learn some basic web design so you can showcase your photography portfolio or create an online store for your crafts. Sign up for cooking classes and get some new meals in your weekly rotation.
Get better at having fun. What’s the best way to lower your handicap or perfect your backhand? Take lessons from a pro. The second best? Organize weekly games with friends and family.
Travel. Planning out a big holiday can be a fun project for couples to do to together. And while you’re looking forward to that dream trip, take a few weekend jaunts out of town. Stay at the new bed and breakfast you keep hearing about. Visit your grandkids. Go on the road with a favorite sports team and enjoy the local flavor in a different city.

If you’re nearing retirement and struggling with these issues, working through the Return on Life tools with us might provide some clarity. Let’s discuss how we can help get you ready for the best retirement possible with the money you have.

The Purpose of Money is NOT Just to Make More of It

Imagine that you’re living in a tent on an open plain.

One day you plant a tree. For the next 40 years, you water it. You protect it from harsh weather and animals. You never pick its fruit. You don’t climb it for fun. You don’t take a break and rest in its shade. You don’t even cut down some branches to build a house. You never go anywhere or do anything else because you’re focused solely on growing that tree bigger and bigger.

Finally, one day, just after your 65^th birthday, the tree stops growing.

You look up at its enormous trunk and wide spread of branches and say to yourself …

“What was that for?”

Many of us treat our financial planning in a similar fashion. We become so caught up in the work that goes into “growing the tree” that we never think about harvesting the apples or timber to make a better life for ourselves. As long as our tree keeps getting bigger, we keep putting in the work of growing it, even if that work doesn’t engage our interests or put our unique talents to their highest purposes.

Then retirement rolls around.

Faced with the prospect of no longer working, some soon-to-be-retirees feel lost. Their sense of purpose was so connected to working hard to make more money that they never stopped to ask themselves what that next pound was really for.

Some of these people push off retirement as long as they physically can to keep chasing after more money that they don’t really need and will never actually spend.

Others become so concerned about running out of money that they live too conservatively and never enjoy their retirement.

And others potter aimlessly around the house re-arranging the furniture for the 10^th time.

A better sense of purpose.

There is a purpose to having money and growing your wealth. But what money can’t do is create purpose in and of itself.

Because eventually, your tree is going to stop growing. You’ll be able to live comfortably off the money you’ve saved and the income that your investments will continue to generate. After a lifetime of working hard and following your financial plan, your return on investment will be financial security in retirement.

That’s when it’s time to stop worrying about the tree and start harvesting.

That’s when it’s time to stop focusing on your return on investment and start enjoying a better Return on Life.

But here’s the thing—the earlier you’re able to make this shift into a ROL mindset, the sooner you’ll be able to live the best life possible with the money you have. Don’t wait until you’re 65 to start harvesting that tree and enjoying life. You can trim that tree a bit each year, enjoy life today, while still growing it for the future.

Enjoying life along the way will make your eventual transition to retirement even easier. Instead of struggling to replace work with leisure, you’ll be ready to pour even more of your time and energy into the activities that really matter to you.

Start by asking yourself, “What is my money really for?”

Is it for going on dream holidays with your spouse? Is it for taking classes that enrich your mind and body? A second house in the country for weekend getaways? As much golf or tennis as you can squeeze into a day? The freedom to volunteer your time and professional expertise at an organisation that’s making your community better? Finishing a major home renovation you’ve been putting off? Seed money to grow your own business?

Your life will take on a brilliant luster when you start to use your means in a meaningful way. Let’s talk about the interactive tools and exercises we use to help people like you find that meaning and put their lives at the center of the financial planning process.

A Holiday Family Meeting Can Ring in a Productive New Year

The holiday season might not seem like an ideal time to have a serious conversation with your immediate family. All that shopping, decorating, cooking, and celebrating can be time-consuming and stressful enough. But if you’re nearing retirement age and your children are becoming more independent, the holidays might be your best shot at getting everyone to sit down, open up, and plan for the year ahead.

Besides, a family financial meeting doesn’t have to be an all-day event. After dinner, pour some coffee, pass around a plate of cookies, and talk about these three important topics. The holiday atmosphere might just set the perfect mood for a positive and productive discussion.

1. Clarify everyone’s goals for the year ahead.

One reason that money can be such a contentious topic is that families don’t often discuss their financial goals. That can lead to misaligned expectations and resentment.

So, go around the table and ask your family members what they want to accomplish in the year ahead. What are some individual financial goals? Even if your children are independent, openly discussing goals together can create an added level of encouragement and accountability. If your son knows mum and dad might ask how saving up for that mortgage is going, there’s a better chance he’s going to ramp up his savings and hit that goal.

Then, what are some things the family can pitch in on together? Is it finally time for everyone to invest in that summer cottage? Should you stop putting off that dream Caribbean cruise? Is there a favourite charity or cause you want to start donating to in a more impactful way?

2. Review the family budget.

Parents are only obliged to share as much financial information with their children as they are comfortable sharing. However, every member of your family who benefits from things like club memberships, mobile phone plans, video subscriptions, or shared vehicles should be aware of the costs. If your children are old enough to be working, they’re old enough to be contributing. And if they’re old enough to be on their own, it’s probably time for them to get their own plans.

You also might discover that no one is reading those magazines piled up on the coffee table or going to the gym. Are you getting enough use out of the things you’re paying for every month?

You and your partner can review more personal budget items in private, like your grocery bills, health care premiums, or insurance on that second car neither of you are driving anymore. But If you’re thinking of a major cost reduction, such as selling the family home and downsizing, broach that subject with your family well in advance to minimise potential shock or hurt feelings.

3. Discuss your estate plan.

There’s never an ideal time to discuss your estate plan. No one likes thinking or talking about what’s going to happen after we’re gone. But your loved ones need to have a broad idea of how you want your estate to be settled should something unexpected happen.

You don’t have to delve into every little detail of who gets what. At the minimum, explain to your family whom you’ve designated as your executor, where all your important documents are filed, how you want to be cared for if you become incapacitated, and whom they should call at your financial advisor’s office if you pass.

Your adult children should share their own big picture estate details as well. And if they haven’t drawn up a will or health care directives, hopefully this conversation will encourage them to do so.