There is a sea stack off this island of ours that is within leaping distance from the cliff edge. It has a green grassy top that slopes handily back towards the mainland. A few years ago, a group of hikers were walking the cliff path and came to the stack. One guy in the group had heard of the stack and decided to jump over to it and back to the group, watching on the cliff edge.
He had heard of the stack but unfortunately, he didn’t understand it. If he had read up about it he would have seen the crucial advice to only jump when you have an ice pick in each hand.
When he landed on the sloping top of the stack, he started slipping backwards down the slope and couldn’t get a grip with his hands on the grassy surface. He continued to slide until he was in free-fall between the 150ft stack and the cliff. He survived but only because the tide was out and he landed rucksack first, like a flipped turtle, on the soft sand bar linking the two bits of rock.
The same rule applies to all the major financial decisions in life. It is easy to get excited about the move to a new house, the purchase of a new car, moving the kids to a different school or resigning to your boss. Setting aside whether the pursuit of ‘more stuff’ is likely to bring the happiness we expect, these decisions to say ‘yes’ are also a decision to say ‘no’ to something else.
Every financial decision to do something has an equivalent trade-off somewhere else in our finances. Very often we think through the immediate cost of the decision in front of us without assessing the opposite choice that we are making not to do something in the future.
This is not a plea to not to make decisions about big purchases in the short-term but just a suggestion to prep before you leap. Adding these big decisions into our Cashflow forecasting software means that we can test the financial flipside for you.
We are currently working with clients who are considering buying a second home in the country. It is a great choice from a lifestyle standpoint but once we were able to quantify the cost in other areas of their lives (working longer in this case), we were able to settle on a better solution of a long-term rental which turned out to be substantially less financially impactful, whilst achieving the same lifestyle benefit.
We are currently advising clients on their cashflow planning in Hampshire, Surrey, Berkshire, Sussex, Kent and throughout the UK using the latest technology.
