Who would want to be a millionaire?
According to new research, more Brits are becoming millionaires but is this as great as it sounds? Here, Financial Planner Ben Rogers examines how financial security comes down to advice and sound planning – not how much you have in the bank.
Journalists have poured over recent figures from the Office for National Statistics (ONS) which shows the number of millionaires in Britain has risen by a third when comparing the period 2012-14 and 2014-16. And naturally headlines begin shouting; “More Brits become millionaires”, “..millionaires ride wealth boom” and “another 800,000 millionaires are created”.
But what does it really mean to be a millionaire. After all it’s just a number. But it’s a number that holds a lot of significance for a lot of people. People often associate being a millionaire with financial security, financial freedom or even financial extravagance.
But a millionaire today is not worth the same as a millionaire 10, 20 or 30 years ago. £1 million pounds today is the equivalent of £763,809 in 2008. Flip that on its head and ten years from now your £1 million pounds could have fallen by nearly a quarter.
In essence, inflation is a measure of the general increase in prices for goods and services over time. As a result the ‘purchasing power’, the amount of goods or services you can actually buy with your money, reduces over time.
The best description of inflation I have heard came from Sam Ewing, a former Baseball player in 1970’s America; “Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair.” Fifteen dollars today buys one haircut compared to three haircuts when Sam was younger.
Over the very long term becoming a millionaire becomes meaningless. If inflation grows at the government target of 2.5% for the next 55 years, the average millennial’s grandchild will be a millionaire.
But for the majority, the real value of money isn’t found by seeing it sitting in a bank account or filling a swimming pool like Scrooge McDuck. For most people, money is what you get for it. The real value is found by feeling financially secure, free or even a little extravagant.
So it doesn’t really matter that there are more millionaires now than there were two years ago. The more important thing is how these new found millionaires are making their money work towards their financial goals.
How do you fulfil your financial goals?
It may seem simple but it all starts with making a plan. Before you even think about looking at what bank offers the best rate, what to invest in or whether to utilise an ISA or Pension, you need to know where it is you’re trying to get to. After all, if you don’t know what you’re trying to achieve how you will know whether you’ve got enough?
Whether your goal is to buy a bigger house, retire at 55 or leave more for your children after you’re gone, establishing a financial plan early on will help you make informed decisions about what it is you actually need in order to secure the financial future you hope for.
Seeking financial advice is more than buying products like a pension or an ISA. It is about partnering with a trusted professional who can help you identify where it is you are going, what it is you want to achieve and work with you to develop a reasoned plan to direct you in the best ways to achieve them. The ongoing process ensures your financial plan adapts as you encounter changes in priorities, responsibilities and goals throughout your lifetime.
Take the first step and talk with your financial adviser about making sure your money is working for you. At Equilibrium Asset Management, we consider it our role to steer our clients towards long term financial confidence and freedom through our specialist financial planning, investment management and tax planning services. You can visit our website; www.eqllp.co.uk or call 0808 156 1176 to find out more about the financial planning help available to you.
The information provided through the Equilibrium website is based on our opinion and is for general information purposes only. It is not, and should not be construed as financial advice.