Why both your wealth and your health could benefit from Know Your Numbers! Week

29/08/2024

Know Your Numbers! Week is a blood pressure awareness campaign running from 2 to 8 September. Find out why "knowing your numbers" could also benefit your wealth

From 2 to 8 September, Blood Pressure UK is running “Know Your Numbers! Week”, a campaign designed to encourage everyone to get their blood pressure checked and know their blood pressure numbers.

High blood pressure is common but often symptomless. Yet, it can lead to serious health consequences, such as heart attacks and strokes. By getting your blood pressure checked and knowing your numbers, you can use this valuable information to make informed lifestyle choices that could protect your health.

Interestingly, this informed approach of knowing your numbers can also be a useful way to approach your wealth.

So, with Know Your Numbers! Week coming up, find out why we encourage you to take this same vigorous approach to your finances at Douglas White Financial Planning (DWFP).

It’s just as important to know your numbers when it comes to your wealth

When you work with us at DWFP, we likely used the phrase “know your numbers” in one of your early meetings with us. It’s a core tenet of our approach to planning: you need to know the facts and figures of your wealth so that you can make informed decisions.

There are many different figures that can matter with regard to your finances. For example, you might need to think about your:

  • Income
  • Expenditure
  • Debts and other liabilities
  • Savings, investments, and pensions.

Knowing all these different numbers and how they relate to one another is crucial.

You might use your blood pressure numbers to make lifestyle changes such as eating less salt or exercising more. Knowing your financial numbers can help you adjust your approach to how you manage your wealth – or even reveal that you’re more financially secure than you thought.

Creating a budget can help you get to know your numbers

The word “budget” can sound worrying, as it can come with the connotations of having to cut back on your spending and the lifestyle you enjoy.

In reality, your budget is simply an overview of your entire financial situation. It details your total income and expenditure, showing where your money goes each month.

Knowing these numbers can offer immense peace of mind – if your income exceeds expenditure, you know you’re financially sustainable. Equally, if expenditure exceeds income, you can see that you may need to reconsider your spending.

As part of your budget, you can also include how much you save, invest and contribute to your pension each month.

You can also think about how much you have in cash. At DWFP, you might know that we often talk about having three pots of cash:

  1. Emergency fund, designed to give you quickly accessible cash for short-term needs, such as home repairs.
  2. Planned capital expenditure, for achieving higher-cost goals such as holidays or buying a new car
  3. “Stuff-it” fund, a pot of money for achieving those spur-of-the-moment goals without having to worry about jeopardising your wider financial plan.

Looking at these numbers, if these pots are all sufficient for your needs, you can have total reassurance that you can meet your financial obligations while also enjoying your lifestyle.

Knowing your numbers could vary depending on where you are in your financial journey

As you progress throughout your career and financial journey, the numbers you need to be aware of could change over time.

Young professionals need to know that they’re making sensible choices, for both now and the future

As a young professional, knowing your numbers could revolve around questions such as:

  • Are you saving enough for the future?
  • Could you save more?
  • Can you afford to spend on the luxuries and non-essentials that you want now, without disrupting your plans for the future?

If you don’t know your numbers, you might not be able to answer these questions. In turn, you might be putting yourself in a difficult financial position, overspending your income now or neglecting to save enough for the future.

Meanwhile, by understanding your income, expenditure, and liabilities from the start of your career, you’ll easily be able to answer these questions. This will give you confidence that you’re making sensible decisions that allow you to live the lifestyle you want, both now and in later life.

Knowing your numbers could help ensure that you don’t run out of money in retirement

These questions and considerations will likely change as you get older. Indeed, as you approach retirement, not knowing your numbers could mean something slightly different.

Being at this advanced stage of your career and thinking about giving up work, you’ll be aware that your wealth will need to last for the rest of your life.

Perhaps the most obvious danger that this could lead to is the risk of running out of money. As you start to draw on your pensions and access other savings, you might be excited to start achieving those goals you had always had in mind.

However, if you don’t know what you can afford to use, you could spend this wealth too quickly. You might then run out of money in retirement sooner than you thought, leading you to have to cut back on spending and downgrade your lifestyle, all because you didn’t know what you could afford to spend in those early days.

In particular, this is important if you plan to retire early. You may share the common goal of many to retire and enjoy your wealth from say age 60, rather than working to the State Pension Age (66 in 2024/25, rising to 67 by 2028).

Yet, that means funding six or seven additional years without your working income. If you haven’t planned for this extra outlay, it could put significant strain on your retirement savings as you reach your later years.

Simply put, you don’t want to retire early only to find out down the line that you can’t afford it. Knowing your numbers can help prevent this from happening.

You could end up working longer than you need to if you don’t know your numbers

There’s another, just as important side to not knowing your numbers at this age, too: deferring your retirement because you think you can’t afford it, even if you could.

You might end up working for longer than you need to because you haven’t calculated what you’ve already saved, and what you actually need to live your ideal retirement.

In this case, knowing your numbers could be an exercise in realising that you could retire sooner than you thought. You could start enjoying your savings and achieving your goals, safe in the knowledge that you’ve done the calculations and will be able to afford it.

It’s also worth remembering that your retirement income will likely fluctuate over time. We’ve talked about this in a previous blog, in which we discussed the concept of the “retirement smile” and explained why your income needs could start high, dip in later life, and then climb again as you reach an age when you may have more healthcare requirements.

This really underlines the importance of knowing those numbers. By having that understanding of what you have and what you might need, you can make informed choices about the retirement you want.

Working with a planner can help you know your numbers and give you the peace of mind you need

As with knowing your blood pressure, learning and understanding the figures for your wealth can be hugely powerful for your financial health. You can use this knowledge to make adjustments to your plan, giving you the confidence that you’ve taken steps to ensure you’re as financially healthy as possible.

This is where we can really add value at DWFP. We can help you know and understand your numbers, and build a plan with you that ensures you’re able to reach your financial goals, both now and in future.

If you’d like to find out more about knowing your numbers and how it could help you achieve your ambitions, please do get in touch with us.

Email info@douglaswhiteltd.com or call 0151 345 6828 to speak to us today.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.