The Beginning of Self-Directed Wealth Management

Assets & Liabilities on 15th January 2016

The Beginning

The Beginning of Wealth ManagementThis is where my journey of self-directed wealth management started. The tracking of me and my wife’s long term assets and liabilities. These are our pension investments and my shares in my employers Share Incentive Plan (SIP). It’s a basic form of tracking but it was a start. Although we have been saving and investing in pensions already for most of our lives (mainly in defined benefit pensions), this was when I decided to keep a closer tab on things.

Around a couple of years ago, my employer closed down my defined benefit pension scheme. Not only to new scheme members but also to existing members. That’s something that is happening more and more these days due to the high costs of running the so called gold plated pension schemes. So now I contribute to a money purchase scheme. That means I am now taking all the risk on my investment decisions and not my employer.

My wife also had a couple of personal pension plans and I am also in my employers Share Incentive Plan (SIP). I wanted to take an holistic view of our assets, even if there are a only a few. It helps with asset allocation and also gives an immediate snapshot of where we stand financially. For me personally, it helps to keep me committed and engaged to saving for our long term goal of financial independence or even early retirement.

Reaching Financial Independence

I am 44 years old at the time of writing in April 2017 and my wife is 43. I hope to be financially independent by the age of 57. Why 57 you ask? Well actually I hope to be financially independent by the time i’m 55 as that’s when the current mortgage will be paid off.  However, i’m giving myself a couple of extra years leeway. If I fall short of my target, I hope that with no mortgage, we could stash the cash as much as possible until goal reached.

What Is The Final Goal?

The Goal - Building WealthAnd what does that final goal look like? To be honest, i’m not exactly sure right now. Any financial planners reading this will probably be laughing their socks off. They’ll be thinking that’s something I should have covered, but I disagree. I do know that we would like £30,000 annual income in today’s money. That’s to give us a good standard of living in retirement. Plus we would like 2 nice holidays a year costing approx. £7,000 annually. I believe in aiming high and planning accordingly.

With state pension included, when we are 65, our current combined defined benefit pensions will be enough to give us the £30,000 annual income. However, we need money to get by from when we retire to when we draw our state and defined benefit pensions. I know we could draw our defined benefit pensions from 55 but then the annual payments would also be a lot less.

As well as having enough money to get us to 65, I would also like a decent sized pension draw down fund just for good measure. That’s in case of any emergencies and unexpected expenses in retirement. My current thoughts are to saving as much as possible in tax efficient investments, and use those funds to bridge the gap.

The Wealth Management Journey

I have decided to start from the beginning in order to show you the progress I have made. Approximately 16 months have passed since I first started tracking our assets. I am not afraid to show that I have made many mistakes along the way. I’m not saying there is anything necessarily wrong with the investments or asset allocations that I started with above. But things do get a bit messy as you’ll see.

 


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