When some of our clients approach us, it is because they have suddenly found themselves in receipt of some unexpected capital. Family deaths can often result in loved ones receiving an inheritance, which can prove to be confusing and overwhelming, especially at such a sad time.
This was the exact situation where one of our clients, Jenny, found herself. Tragically, both of Jenny’s parents died in the same year, leaving her with two lots of inheritance, which she didn’t really know how to utilise. To compound this further, Jenny had recently sold a property, but couldn’t commit to purchasing a new home, as her husband was in the forces, and she was unsure where he may be posted.
One of Jenny’s main concerns was that the cash she held was being exposed to potential tax implications and erosion. She knew that she wanted to maximise her money through investing, but also needed flexibility, so that her and her husband could buy a new home, when the right time arose.
A secondary concern was about the future. Jenny questioned whether she and her husband would have sufficient wealth to comfortably see them through their retirement, so that they could both eventually stop working and enjoy their time together.
I think it’s a misconception that by investing you are locking all of your money away for a protracted period; this isn’t always the case. We looked at Jenny’s situation and decided that a diverse and flexible strategy would be best, so that she could safeguard some of her cash against tax, but also have access to a lump sum when she was in a position to buy a property. However, we also recommended that committing some of the cash to longer-term growth would be beneficial, to help provide a future income by getting her money to work harder.
To help ascertain what amounts to commit, we utilised Lifetime Cash-Flow Forecasting. This visual tool helps to hypothesise various scenarios, such as market crashes, large purchases and holidays, so that we can see what could happen to the overall wealth of our clients. This tool was crucial for Jenny’s situation, as we knew a large purchase was on the horizon, and we didn’t want to tie up too much money. Equally, we wanted to look at what long-term growth could provide for her and husband.
Lifetime Cash-Flow Forecasting helped Jenny to understand how much she needed to keep in a flexible investment, and how much she could afford to commit to longer term growth. However, even more importantly, it gave her confidence and clarity over her future. Jenny and her husband have now purchased a new home and are both looking forward to a comfortable future.