When management accountant Serena Humphrey shared a story of some bad advice on LinkedIn back in April, she wasn’t expecting the post to gain much traction.
For one, the event had taken place more than a decade before. And secondly, the underlying message was a simple one: the importance of thinking long term.
When a senior colleague asked Serena, “When are you going to get a decent car, one befitting your position?”, she was understandably upset. Her car was a relatively new Golf convertible so why the toxic message that outward appearances mattered more than Serena’s ability to advise clients? And why the focus on such a short-term view?
Keep reading to find out what Serena did next, how her message went viral, and how her near-£90,000 pension boost could provide a lesson for your retirement.
“The worst advice not taken”
Serena chose not to take the advice of her senior colleague. More than a decade later, she still owns and loves the same car, and it still “does its job of getting [her] places”.
The LinkedIn post, meanwhile, quickly went viral, racking up more than 675,000 views.
Over the last 10 years, rather than spending money on leasing a new car and upgrading every three years – to keep appearances – Serena saved an extra £89,000 into her pension. Over the next 20 years, she calculates that this figure, growing at 8% and compounding, could see her retirement fund boosted by more than £440,000.
Focusing on outward appearances rather than financial security could’ve been extremely damaging.
3 simple financial lessons to take from this viral story into your own successful retirement
1. Pay your future self first
Your future financial security is incredibly important. A solid financial plan should allow you to achieve this while still being able to live the life you want now, albeit with some careful budgeting.
This is where paying your future self comes in.
Maybe, unlike Serena, you’d love a flashy new car. And the team at Fingerprint are here to tell you that you can have one, as long as it doesn’t leave you struggling in the present or harm your future.
You’ll need to think carefully about what you want your future to look like and how much your dream retirement might cost. From there, you’ll have something to aim for.
Each month, begin your budgeting by putting some money aside into savings or your pension, say, and then budget with what remains. This ensures that your future financial security takes priority.
But remember, your plans aren’t set in stone, and there’s always wiggle room. Throughout a decades-long plan, adaptability is key, so always speak to us if you think your budget or plans need revisiting.
2. Focus on your own goals
Outward appearances can convey status, but they can also be incredibly misleading, not to mention unhelpful.
It’s a problem exemplified by an American comic of the 1910s that first coined the phrase “Keeping up with the Joneses”. A century later, it’s the issue has been given worrying new life by social media.
Your neighbours – or a senior colleague – might have the latest car or a new extension, but the vehicle may be leased, and the extension might have required an expensive remortgage.
Without the full facts, you can’t make a true comparison, and trying to do so is meaningless anyway.
Your long-term plans are based on your circumstances, your attitude to risk, and your goals. In this context, comparing yourself to others is unhelpful as their lives have nothing to do with you, your family, or your future.
Perfectly curated lives on social media rarely bear any resemblance to reality, so focus on your own goals and you’ll stand a much better chance of success.
3. Realise the power of long-term growth and compounding
At Fingerprint, we will always advise you to invest only with a long-term goal in mind. You need to understand your time frames and your attitude to risk to ensure your portfolio aligns with your end goal and your capacity for loss.
Throughout a retirement investment, say, you could witness multiple periods of short-term volatility over decades.
Patience and a calm head are key. Emotional decision-making and knee-jerk reactions can lead to a huge opportunity cost when markets recover.
Short-term dips in investment markets are usually followed by longer recoveries (hence the overall upward trend of markets. Not only that, but opting to sell during market downturns means you might also miss out on the effects of compounding.
This is effectively growth on growth, and you can see your funds rise exponentially over time.
Geopolitical noise has been loud of late, but we’re on hand to offer reassurance, so get in touch now if you have any questions.
Get in touch
If you have any questions about your long-term retirement plans, speak to us now. Get in touch by emailing hello@fingerprintfpco.uk or calling 03452 100 100.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.