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The 5 stages of the financial planning pyramid

One of the first things I do when I start working with a new client is figure out where they sit on my Financial Planning Pyramid. It’s not an exact science - it’s possible to find alternate versions of this pyramid online - but I’ve created one that reflects the most common issues that clients experience on their wealth building journey. What I try to do with every client I meet is move them to the next stage within 5 years of us working together. 

Stage 1 - Struggle

At the very bottom of the pyramid, we’ve got the ‘struggle’ stage. Here you’ll find clients who might be in a lot of debt, having issues with cash flow or barely making ends meet. 

It’s not only those on a low income who can find themselves in this category. Even high earners on six or seven figure incomes can have great difficulties managing their finances. 

Perhaps they took out a large mortgage only for a change in circumstances to make it difficult to maintain. Maybe they paid for their first child’s education quite comfortably, only to find their budget overstretched once their second child started school. 

The ‘struggle’ stage can be one of the hardest to snap out of, but we can make things a lot easier by creating a realistic and personal financial plan. 

Stage 2 - Comfort

Just above these clients we have the ‘comfort’ stage. These people are no longer running out of money. They’re living fairly comfortable lifestyles. They have a generous Sky TV package and go on holiday a couple of times a year. 

Their mortgage is manageable, they’re paying off their credit cards each month, and they’re staying out of trouble. The problem is, these people have often become a little too comfortable. They might neglect their pension, have little to no investments, and they’re unlikely to have any life insurance or protection. 

While they might not realise it, their life has become a house of cards. If they lost their primary source of income, received a life-changing diagnosis or experienced the breakdown of their marriage, they could find themselves at the bottom of the pyramid — even if they’ve never been there before. 

When I begin working with clients in the struggle or comfort stages, they often make assumptions about how their life will look once a financial plan is in place. They assume it’ll be plain sailing once they’ve achieved financial independence, but as I’m about to explain, new issues can arise the further you move up the pyramid.

Stage 3 - Growth

Growth is the engine room of financial planning. Steady income, mortgage coming down, capital going up. Everyone in this group should know their ‘financial freedom’ number, they have a plan, and they’re working towards that number. 

Clients in this category need to stay focused and disciplined. There will be many distractions along the way and there will always be the desire to work harder and invest more. Key here is to show clients that if they follow this plan they will have enough. They will find balance. They’ll be able to spend more time with their family and friends, work less, enjoy their wealth and freedom safe in the knowledge that they will achieve each of their aims if they just stick to the plan. 

Sounds easy? You’d be amazed at how many people struggle to follow a plan - there are so many short-term distractions that can be tempting to follow instead - but that’s where a financial planner is so important in helping with accountability, encouragement and focus. 

Stage 4 - Financial freedom 

Next we have the ’financially independent’ stage. These clients have a large dividend-generating investment portfolio and they no longer depend on their income to get by. They could run away to the Bahamas and spend the rest of their lives on the beach if they wanted to, but that doesn’t mean they’re protected from financial worries. 

Whether they come from money or they’ve built a business from nothing, these clients can often find themselves a little… well, lost. They often come to me when they’re at a crossroads. Do they keep building and hustling? Or do they sell their business and sail off into the sunset? And how can they protect everything they’ve achieved? 

It’s my job to help them figure it out - often encouraging them to seek the best of both worlds. If you get fulfillment from work, there’s no need to give it all up. People think they have to follow the rigid paths of those around them. But there are ways to create your own - for example, taking more regular holidays, rather than putting all adventures on the backburner. 

This group often struggle to spend it. What got them to this stage was discipline, but now that mentality needs to shift. People can find this stage incredibly hard. A lifetime of watching the pot grow, it’s time to enjoy your money. 

Stage 5 - Abundance of money

Finally, we have the ‘abundance of money’ stage. When you have more money than you need, it begins to lose its utility. Key here is that the focus should now move away from money - the commodity that’s most important is now time. But often, and without tools like WeathMap, clients don’t realise they’ve moved into an abundance stage. Those money anxieties are still present, butwith support we can help them to see that - and show that they have enough money to last 10 lifetimes. 

I’ve noticed that clients at this stage often struggle to get enjoyment from money. When you’ve got the house, the cars, the holidays and more money than you can possibly spend by 105, what’s next?

When money begins to lose its value, because we physically can’t spend it all, it’s time to think about who would benefit from the money. Afterall, we can’t take it with this. When I explained the stages to a new client recently, they said - “I can’t imagine anyone in the abundance stage having any worries about money.”

In reality, that couldn’t be further from the truth. How do you gift money away that does good and doesn’t cause harm? What’s the best way to help a child in their 30s? Perhaps by helping them, you hinder them?

This stage is often less about the numbers and more about relationships and psychology. Imagine working hard all your life, bringing up a family, only to see your children fall out over money? It can be devastating. Maybe your children have enough and you need someone to say so.

Perhaps, what would really make you happy would be supporting a cause that matters deeply to you. A donation to a large charity like UNICEF is very welcome, I’m sure, but the same donation to a several smaller charity could be more impactful and provide you with enormous satisfaction.

Thankfully, after 20 years of talking to people about their relationship with money, I can help clients work through and understand which stage of the financial pyramid they’re at, how to help them to feel confident about what that means, and explain what needs to happen for them to move to the next stage. 

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