Use a ‘wealth compass’ to show the way

Firstly, my sincerest condolences for your loss and I can relate to the financial burden these situations can create after losing my father last year to pancreatic cancer.

For all of my clients I recommend a self-assessment process of “simple, sustainable and scalable” which is intended to act as a compass when approaching your wealth journey.

1. Simple

Your overall financial strategy should be simple, and we break this down into six quadrants:

Plan A

Cash flow – the inflows and outflows along with what should be left over.

Household debts – your current debts and your plan to pay them off.

Lifestyle planning – your lifestyle goals and what you require in terms of income or wealth to make them a reality.

Plan B

Emergency fund – how much you need in case the wheels fall off.

Protection – how you plan to protect yourself against the unforeseen.

Estate planning – how you plan to protect and distribute your estate.

These six aspects will allow you to have a good grasp on what you want, where you are now and what you can do to get where you eventually want to be.

Most of your planning will revolve around cash flow and I advocate you complete a good personal “profit and loss”, not a budget, as this is about working out what your life costs, which is contrary to what people think of when they do a budget, which is cutting costs.

2. Sustainable

Most people don’t consider the sustainability of their plans and as such they never have enough time to allocate to managing their finances. From your situation it seems that your husband was actively managing a direct share portfolio, so you need to ask yourself whether you are confident in managing this yourself and whether you want to sustain this for the long term. This will ultimately require you to either outsource the task to an adviser or simplify the strategy into something you can manage better yourself, such as a diversified portfolio of index funds or exchange traded funds.

3. Scalable

Although you have endured an extremely difficult situation you still want to be able to give your kids a leg-up in life and help create a nest egg for them, which may require you to scale your strategy. This will require you to ensure the previous steps have been completed to give you head space to start visualising your goals and what you want to achieve. In these difficult times we tend to fall into a scarcity mindset, just trying to make ends meet, and batten down the hatches to weather the storm. But we need to try to switch to an abundance mindset to help push us forward.

Take the time to ask yourself what you want and, more importantly, why you want it so we can define the destination and then reverse-engineer this into a plan. This will hopefully give you the steps you need to take to turn these dreams into goals and help you work out how much income you need to bring in to make this a reality.

Your situation has many complexities, such as the defined benefit pension and other moving parts that require expert advice. I urge you to ensure that you reach out to a specialist before you take action to avoid making any decisions that may lead you astray.