£45,000 a year can buy you happiness

https://www.flickr.com/photos/doug88888/The cost of happiness? Around £45,000 a year, it seems.

New research presented to the American Psychological Association found feelings of happiness and wellbeing rose with higher incomes – but only to a level equivalent to £45,000 a year.

Beyond this point, the feeling of wellbeing stalled, with frugal behaviour and a move away from materialism resulting in greater happiness.

Dr Miriam Tatzel, from Empire State College, State University of New York said:

Emotional well-being rises with income, but there is no further progress beyond an annual income of about $75,000 (£45,000),

“A society in which some people are idolised for being fabulously rich sets a standard of success that is unattainable and leads us to try to approach it by working more and spending more.

“Cooling the consumption-driven economy, working less and consuming less are better for the environment and better for humans, too.”

It’s for these reasons that Financial Planning is about more than just, well, Financial Planning.

If you’re looking for some reading material this weekend, to start your quest towards working less and consuming less, here are a few of my favourite websites on the theme:

-The 4-Hour Workweek

-The Minimalists

-Zen Habits

-Mark’s Daily Apple

-Lifehack

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Worried about equity market valuations

Worried about equity market valuationsIs now a good time to invest in equities?

This is the perpetual worry for investors, who struggle to pick a time when equity market valuations are ‘good’ or even just ‘fair’.

According to the latest CFA UK Valuations Index, investors are increasingly concerned that developed market equities are ‘overvalued’.

The Index is based on the responses of 584 analysts and investors towards the end of last month.

It found that 55% of Chartered Financial Analysts currently think developed market equities are overvalued. This is up from 49% in May.

33% believe developed market equities are fair value and 9% said they are very overvalued.

Respondents were a little more optimistic about the valuations of emerging market equities; 50% said they are currently undervalued, compared to 57% the previous month.

7% said they thought emerging market equities are very undervalued and 28% claimed them as being fair value.

Do these opinions matter to investors?

It’s a fundamental rule of investing that you cannot accurately and consistently time the investment markets. It is therefore better to be in the market for the long-term, rather than risk missing gains and being exposed to falls by dipping in and out at various times.

Views on whether different equities might represent fair value or not could be used to create a short-term tactical adjustment to a strategic asset allocation model for long-term.

They are just as well added to the wider body of material which seeks to inform investment decisions.

Focus instead on defining your goals as an investor, creating the right asset allocation model to meet those goals and populating that model with suitable funds or stocks.

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Significant confusion around care funding

Significant confusion around care fundingIt was interesting to read the Third Care Index from insurer Partnership, which has found significant confusion around care funding.

Partnership has tracked views and attitudes towards the forthcoming shakeup of the Social Care System, concluding that 72% believe needing care in later life is ‘something that happens to other people’.

These people, over the age of 45, say it is not likely they will go into a residential care home in later life. The facts suggest otherwise.

The report explains there are currently 426,000 older or physically disabled people living in residential care settings in the UK.

With over 65s due to represent more than a quarter of the UK population by 2046 (the Baby Boomers are coming!), this number is only likely to get bigger.

The Third Care Index found that most people have not thought about care or spoken to their families about the issue.

78% of over 45s are burying their heads in the sand when it comes to the need for care in later life.

Nearly half of people surveyed in the Third Care Index were adamant that care was not something they would need to consider; ‘it just would not happen to them’.

Also within the report were figures which suggest the average stay in a residential care home is around two years.

However, for a self-funder, this duration of stay is typically longer at 3.5 years.

Of course in both cases these are average figures and a stay in a residential care setting can be much longer, resulting in higher total care fees.

There remains a big gap between perception and reality when it comes to the cost of care.

The Third Care Index found the actual cost of care in 2014 was £28,600, compared to an anticipated cost of care of £27,203, with 63% anticipating a cost of under £25,000.

Looking at sources of funding for care, in the South East the report found 39% believe people should sell their homes to pay for care.

Regardless of opinions, selling their home was the most popular option for funding care fees, with 35% saying they would sell their home, 34% saying they would use pension income and 29% using savings.

Considering family involvement in care provision, the majority (78%) of over 75s do not want their children to take care of them in later life.

Women were more reluctant than men to have their children involved in care provision across all age groups, with 53% of men compared to 59% of women not wanting their children to be involved.

When the subject of the new Care Act was raised, respondents to the survey were confused by the plans for care funding.

61% of people said they were confused, with a range of opinions about how much financial support the state should offer towards care fees in later life.

As a Financial Planner who works with people to plan for the cost of care in later life, it is always interesting to read these reports and see how people view the various aspects of care funding.

What is essential is to seek expert and independent financial advice to ensure all of the options for funding care are properly considered before important decisions are made.

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Plans to build new homes in Cranleigh

Plans to build new homes in CranleighFollowing rumours that a BBC film crew were lurking in Cranleigh High Street yesterday afternoon, a short film has appeared this morning on the BBC News website:

Plans to expand Cranleigh, England’s biggest village

The two minute clip is worth watching if you’re a local resident or business owner, or if you live in another village threatened by greenfield development.

By way of background, Cranleigh is (technically) a village, nestled at the foot of the Surrey Hills between Guildford and Horsham.

According to the latest Census, the civil parish of Cranleigh has a population of close to 11,500 people.

We have a bustling High Street, on which Informed Choice is based, along with three supermarkets, five pubs, a variety of restaurants and cafes, many independent retailers and (some would say too many) charity shops.

The village of Cranleigh has changed a great deal since we moved here in the early 1980′s.

Gone is the Regal Cinema, several pubs, one of the petrol stations, Village Video and more recently Blockbuster Video, and (not during my lifetime) the railway station.

So Cranleigh has changed dramatically over the past thirty years.

There have been several new housing developments around the village and currently there are plans, either submitted or about to be submitted, for several more.

It is these proposals, all of which are on green field sites, which are causing such consternation among local residents.

Berkeley Homes have submitted proposals to build up to 425 homes on the green fields south of Stocklund Square (pictured), just off the High Street.

This is a beautiful set of fields, prone to flooding, with access onto tiny country lanes.

Another development at Amlets Park is proposing up to 150 homes, on green fields right at the foot of the Surrey Hills, another site prone to flooding and with access onto country lanes which are in a poor state.

Other developers have put forward plans at exhibitions for as many as 325 more homes at two other sites, behind the High Street and off Horsham Road.

Leaving aside the obvious environmental concerns, the local residents we have spoken to about these proposals have big concerns about the impact on local infrastructure.

Building more homes, whether on green or brown field sites, means more people putting pressure on health care services, schools, water and the roads.

Without a rail link to Guildford and London, people living in Cranleigh are left with little choice but to drive for work.

Driving the 9 miles from Cranleigh to Guildford during rush hour in the morning can often take an hour or longer, because the A281 through villages like Bramley and Shalford cannot take the weight of existing traffic, let along another 1,000 or more commuters.

With thousands of additional residents in Cranleigh, getting an appointment to see a GP or a primary school place would become more of a Herculean task than it currently is.

Imagine what extra demands these new homes would place on an already creaking water and electricity supply in the village; every winter in living memory we have had lengthy power cuts and water supply problems.

This is not to see that we are opposed to change and growth; in fact, we support it.

What is particularly needed is affordable housing for first-time buyers and homes of a size which reflect the reality of how families live today; more one and two bedroom properties, not five bedroom McMansions.

This development needs to be gradual, rather than a village like Cranleigh to have 400, 500 or 900 new homes dumped on its greenfield sites in a short space of time.

Instead of mass development on sensitive greenfield sites, developers and the local authorities should be proposing and supporting plans to identify brownfield sites each of which could accommodate a couple of new properties, and add these to the village gradually year on year.

Local brownfield sites, such as Dunsfold Park, should be used to take the pressure for new housing off villages like Cranleigh, assuming any large-scale developments there could with all of the required infrastructure to make them self-sufficient, and address the road capacity problems associated with the A281.

Of course, sensible as this alternative sounds, it won’t happen.

Cranleigh doesn’t have a ‘Local Plan’ yet, so developers will no doubt find a way to weasel past local politicians and get their plans approved at a national level.

Of the four greenfield site proposals currently in motion for Cranleigh, we believe two-thirds of the proposed housing, around 600 properties, will eventually be built – it would not surprise us if the Dunsfold Park development then proceeds, throwing a further several hundred (or more) houses into the local mix.

Until then, we can keep voicing our concerns and suggesting viable alternatives to crazy planning applications which would decimate green spaces and exacerbate already serious flooding risks.

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Choose life

Choose lifeChoose life. Choose a job. Choose a career. Choose a family. Choose a f***ing big television. Choose washing machines, cars, compact disc players, and electrical tin can openers. Choose good health, low cholesterol and dental insurance.

And so the unfortunately concluding diatribe from Trainspotting character Renton, played by Ewan McGregor in the movie, goes.

Junior Foreign Office Minister Mark Simmonds MP resigned from government this morning, telling the BBC he had to “put family life first”.

50 year old Mr Simmonds is married with three children.

He lashed out at the remuneration and expenses system for Members of Parliament, explaining these made it impossible for him to spend quality time with his family in London.

Simmonds said: “The allowances that enable Members of Parliament to stay in London while they are away from their families – my family lives in Lincolnshire in my constituency – does not allow me to rent a flat which can accommodate my family, so I very rarely see my family and I have to put family life first.”

He said that spending another five years rarely seeing his children and staying in a different hotel room each night “fills me with horror”.

And who can blame him?

Leaving aside the widespread criticism of the explanation behind his resignation, it appears that Simmonds decided to choose life over career.

We all have to make choices from time to time, giving priority to different aspects of our lives.

There’s a lot of talk about work/life balance, which in reality is often one and the same thing; our work lives and entwined with our actual lives in the majority of cases.

Where Financial Planning can play such an important role is to ensure we can support our goals in life financially, without having to make compromises or make career decisions which detract from our overall happiness.

What Mark Simmonds appears to have done with his resignation is place his family first; leaving aside the politics of the decision – or the headline figures about his salary, allowances and expenses – I’m not sure any of us could argue that was a bad decision.

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Investing for income in 2014

Investing for income in 2014Yesterday afternoon I delivered an enjoyable presentation to the local Cranleigh U3A Collectives group.

They had formulated an agenda which covered a number of investment topics; items in which they were all interested and wanted to learn more about.

One of the areas we covered looked at the tricky subject of investing for income in the current market and economic environment.

I say ‘tricky’, because income investors have had a pretty rough time of it of late.

My slide on the subject simply listed a series of figures – 0.5%, 1.9% or 2.6%, 2.46%, 3.2% and 4.5%.

After (rather cruelly) asking the group to guess what each of these figures represented, I explained they were the Bank of England Bank Rate, CPI inflation or RPI inflation, the 10 year Gilt yield, the average FTSE 100 dividend yield and UK commercial property yield respectively.

What I was trying to illustrate by sharing these figures was how tricky it is to invest for income right now.

In an environment where cash is paying 0.5% and gilts are paying 2.46% (they have been paying much less than this in recent months), it is unrealistic to expect to generate a particularly attractive income from your investment portfolio.

Once you take price inflation and investment charges into account, it’s not unreasonable to expect a very low or even negative yield.

So what steps can investors take to redress the balance?

One option to consider is investing outside of the traditional income generating assets. Investors might consider areas including global bonds, Asian equity income funds or even infrastructure funds.

Of course the hunt for a higher yield comes with greater risks to capital. There is always a trade off between risk and reward.

Another option is to invest for capital growth and withdraw capital from your portfolio, rather than rely on the natural income yield.

This can even be advantageous from a tax perspective, as it can result in using your annual capital gains tax exempt amount, rather than seeing yield subjected to income tax where the personal allowance is often already used up by earned income.

Investors still need to set realistic expectations when it comes to the potential total returns, and there is the risk of capital erosion should returns fail to meet expectations, but it is an alternative to natural income to consider.

What income investors must do in the current market and economic environment is consider carefully the purpose of their portfolios, how it supports their overall financial goals and how much pressure they need to place on their capital to meet income needs.

We live in extraordinary (economic) times; income investors need to respond accordingly.

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‘Pay before you die’ inheritance tax

'Pay before you die' inheritance taxHM Revenue & Customs are considering introducing an ‘accelerated payment’ scheme for inheritance tax.

This would result in some people paying inheritance tax before they die, if they are suspected of trying to avoid the death tax by using complex planning schemes.

HMRC are consulting on the plans in response to a growing number of families who are using potentially illegal tax avoidance schemes to avoid paying inheritance tax on the value of their estates.

It would introduce a system similar to that recently created for aggressive tax planning using film schemes, which resulted in investors paying their tax bill in advance and receiving a refund should the scheme prove valid following a court case.

Conservative pledge

Inheritance tax is currently charged at 40% on the taxable value of an estate, with a nil rate band of £325,000.

Couples can also use any unused nil rate band from a deceased spouse or civil partner, which creates an effective nil rate band of up to £650,000 in many cases.

It was a Conservative party pledge ahead of the last general election that this nil rate band should be increased to £1m, but the policy was not adopted by the coalition government.

Seeking views

According to HMRC: “We are seeking views on tackling inheritance tax avoidance schemes. This is an ongoing consultation and no final decisions have yet been taken.

“The proposals in the consultation paper will only affect a small minority of wealthy individuals who actively seek to avoid inheritance tax.

“Couples would still be able to leave up to £650,000 tax free to benefit their children or grandchildren.”

Simple & effective

In our experience, the most effective tax planning steps tend to be the simplest.

Using complex and often untested tax avoidance schemes can result in delaying rather than avoiding tax bills, with the (usually expensive) costs of professional advice rarely recouped when schemes fail.

Do speak to us to find out how we work with clients to quantify the amount of inheritance tax your estate will suffer, understand your Financial Planning priorities and recommend suitable and effective tax planning strategies.

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Cranleigh. Home of Informed Choice.

Cranleigh. Home of Informed Choice.Cranleigh, Surrey is famous for two reasons.

First it is of course the home of award winning firm of Chartered Financial Planners Informed Choice.

But it is probably more famous for being England’s largest village.

Why not spend a weekend here? If you did the following might not be a bad agenda for a couple of days.

30 years ago Andy and I drove into the village by accident when we were house hunting.

We fell in love with the place, there and then, and it is just as nice today as it was all those years ago.

Where might you stay?

The Richard Onslow, smack bang in the middle of Cranleigh High Street has some very comfortable, clean and quiet rooms.

I know this because my Mother has stayed there and frankly she cannot tolerate anywhere that isn’t spotlessly clean and quiet. If she thinks it’s good, trust me it must be!

An indicative price for a double room for Friday and Saturday nights in late September shows up at £143. Well worth checking them out.

For Friday night perhaps eat in the The Richard Onslow and enjoy a drop of locally brewed beer from Firebird Brewing, a local micro brewery based in the former brickworks just down the road in Rudgwick.

Get in an early start on Saturday morning and after breakfast choose a bicycle ride along the Downs Link, previously the railway line.

A ride west out of Cranleigh will take you towards Guildford (via Bramley) where you will link up with River Wey and enjoy the water meadows that run alongside this canalised river.

Two hours there and two hours back at a reasonably steady pace will not exhaust you.

Alternative you could go in the opposite direction and head towards the South Downs; peaceful surroundings with plenty of opportunity to spot wildlife along the way.

If you discover mounting your bike that it needs some attention we are fortunate enough to have a specialist bike shop in the heart of Cranleigh, so pop into Pedal & Spoke for a tune up or any spare parts you need.

Either way you could be back in Cranleigh for late lunchtime or early afternoon.

Cranleigh High Street benefits from a number of independent shops and in Cranleigh independent doesn’t necessarily mean small.

In fact we have no less than two department stores; Manns of Cranleigh is a very long-established shop based inside a Tardis.

You will see what I mean if you take a visit the shop front gives no indication of just how large it is inside!

The other side of the High Street will bring you to One Forty and as I always joke with people a quick trip through ladies lingerie will find you at the entrance to a rather nice café so that you can revive yourself after all the shopping in those independent stores.

After an early evening aperitif in one of the many nice pubs in the village for example back to The Richard Onslow or possibly The Three Horseshoes or slightly out of the village to The Park Hatch, its time to think about supper.

Its not just pub food in Cranleigh because for pasta and pizza lovers we have a choice of ASK and Pizza Express and are also spoiled by  having three Indian Restaurants.

Time your supper right and you might then choose to enjoy an evening at the Cranleigh Arts Centre with a comedy performance some more serious music or even a film.

After your comfortable nights rest maybe wake yourself up by a swim at Cranleigh Leisure Centre.

And maybe it’s time to venture further afield because within striking distance, no more than a 40 minute drive, are two brilliant National Trust properties to visit; Petworth House and Park (unsurprisingly in nearby Petworth) or Polesden Lacey at Little Bookham are well worth a visit.

A similar time and distance is Denbies, a famous vineyard nestling at the bottom of Box Hill and well worth a trip not just for a bottle of their rather good Rose but also the views from the top of the Surrey Hills.

We haven’t been able to scratch the surface of what makes Cranleigh a great place to visit and even if you haven’t got the time for whole weekend visit this lovely English village for a day even if you spend most of the afternoon watching the cricket on the village green.

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Life’s a beach. If only you were on it.

Life's a beach. If only you were on it.Frustrating, isn’t it?

Hot weather, it’s holiday season and you’re stuck in the office wishing you were on the beach enjoying a Mr Whippy.

There is probably a very good reason you are in the office; your boss expects you to be or perhaps you are your own boss and your client is relying on you.

Perhaps you are due to be on the beach very soon and your mind is drifting off there already.

I’m not advocating you take leave of your responsibilities and bunk off early but what if you could go to the beach (or anywhere you wanted to), when you wanted to because you are financially independent?

How great would that be?

The problem is for many that point is further away than it should be.

Why, because they are ‘hitting and hoping’ with their financial planning.

There is no forethought, no planning for the future, simply going through the motions hoping everything will be OK.

There may be a pension plan in place but there is no strategy to it, no idea of whether it will be enough when they decide they’re done working and decide to retire.

So how can you make sure your life is a beach?

Follow these simple steps:

1.    Start NOW. The sooner you start the easier it will be.

2.    Give yourself a target to work towards. By what age would you like to be financially independent?

3.    What is your current financial position? How much do you own and how much do you owe? If you still have debt you are not financially independent so how are you going to pay it off as quickly as possible?

4.    What is your annual expenditure? Are you spending money on items that aren’t truly valuable to you where the savings could be used to fund your retirement lifestyle?

5.    What do you want your retirement lifestyle to look like? What areas will you spend more on and where will there be reductions?

6.    If you have a pension plan what is it projected to provide for you in retirement? Have a look at your last statement and it will give you a forecast. Not enough? Then you will need to find ways to build the fund up. This may be by making higher contributions, taking more investment risk or a combination of the two.

7.    Do you have savings and investments? Is this money working hard enough for you? If all of your spare money is in a savings account you are probably forgoing the opportunity to get higher returns over the long term by not having some of it invested.

8.    Take free money when it is offered to you. It’s there if you look for it, either via pensions (employer contributions, Government funded tax relief and tax free growth) or tax free savings and income within ISAs.

9.    Work out what an appropriate degree of investment to take is. Too little and you miss the opportunity for a higher income in retirement, too much and you may suffer losses that you have to work longer to recoup.

10.    Map out what your future wealth may be. By working out your net worth and disposable income and by making certain assumptions about the future you can forecast what your financial future may look like. This will help you determine whether you will have enough to be financially independent when you want to be (see point 2).

If the forecast suggests you are not on course you can decide what to prioritise; make changes now to bring forward your financial independence date or accept this to be at an older age to maintain your current lifestyle.

11.    Keep your financial position under regular review to make sure you remain on track and can adapt to changes that occur.

12.    Get expert advice. We would love to talk to you so do get in touch here.

Once you get to the beach just make sure you don’t get sand in your sandwiches (literally and metaphorically!).

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Does your financial adviser still wear a tie?

Does your financial adviser still wear a tie?The adviser forum LifeTalk is currently hosting a thread about whether or not financial advisers should wear a tie to client meetings.

As I haven’t worn a tie to a client meeting for a very long time my contribution was to suggest that client placed more value on what we do for them than how we look.

Our office operates a smart casual dress code and it is exceedingly rare that anyone in the building wears a suit and tie.

Andrew sometimes wears a suit when he is going out to see clients, but this is an exception rather than a rule.

Of course we want to make sure that we are clean and tidy looking but fewer and fewer people are dressing in the traditional manner.

Does this casual dress code mean in any way that we take what we do casually? Absolutely not.

We know how important our clients are to us and we are absolutely not casual about the planning and advice services that we provide to them.

Bottom line is we know they buy us for our skill, knowledge and experience and not for how we look.

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