While he’s too ill to work, the cunning plan was to relocate to a seaside town in Western Australia, where life is less expensive. True to form, he immediately ran into the business end of a stingray. On the face of it, it seems a bit unlucky, but that’s only one way of looking at it.
Luck plays an enormous role in our lives and our finances. And while there are some accidents of chance you can’t do anything about, you can take steps to improve how lucky you are.
I’m not saying that you make your own luck entirely. That’s a massive over-simplification. Where you’re born and who your parents are, have an overwhelming impact on your career and earnings. The Social Mobility Commission found that 7.8 per cent of people from working class backgrounds are in professional jobs, compared to 30.9 per cent of those from professional backgrounds. There’s a huge geographical element too. The Commission looked at measures of innovation and growth, and found persistent advantages in London and the Home Counties and entrenched disadvantages in a handful of areas, including Barnsley and Doncaster.
However, wherever you find yourself, there are things you can do that will improve the amount of good fortune that comes your way. The stoics used to say that luck was where preparation meets opportunity. The best preparation anyone can make for their finances is to get to grips with the basics as soon as possible – so they can capitalise on any opportunities.
This means understanding things like budgeting, borrowing and saving before there’s a chance for anything to go awry. This can be tough in a world where financial education in schools is thin on the ground, so older family members can play a key role. The right advice means anyone can be lucky enough not to make any mistakes in their early years that hold them back financially.
It also means developing an understanding of investments and pensions. This isn’t a nice-to-have. In an era where people have far more responsibility for building their retirement savings, knowledge is absolutely essential. You may not be fortunate enough to have a final salary pension, but you can still be lucky enough to enjoy a decent pension income, because you’ve consistently understood how much you need to contribute and the impact of the investments within your pension.
Some people will have family and friends who understand and can work through the investment basics with them, but if not, your workplace may offer workshops, or you can seek out videos, podcasts, guides and articles from reputable publishers and regulated businesses that are designed to make learning about these things much easier.
It’s also far easier than you think to get a lucky break with investments. You don’t have to chance upon a super-successful share or fund that doubles overnight. You can drip feed money into the markets every month, so your good fortune builds over the years as you take advantage of the long-term growth of the markets.
My kids are from the Child Trust Fund era. One received their government money just before the financial crisis, so their investment started by plunging. The other received it as the market was about to recover. Technically one was more fortunate than the other, but 18 years after investing, they both saw significant investment growth.
The stoics were also big fans of resilience and bouncing back. They claimed that it wasn’t what Fortuna threw at you that mattered, but how you responded to it. In the investment world, it can mean staying strong during market downturns. If your portfolio or pension loses significant value, it can be easy to panic, which risks you selling up and crystalising a loss – in which case you’d feel decidedly unlucky. However, if instead you checked your strategy meets your needs, made any small tweaks you needed, and then committed to the long-term, eventually you’d be fortunate enough to be part of the market recovery.
Bouncing back doesn’t just mean picking yourself up after a disaster. It can also be a case of staying flexible when things change. If, for example, you have your sights set on a promotion that’s given to someone else at work, are there other opportunities – either within the company or elsewhere – that allow you to use all the skills you developed for that promotion? If you have been saving to buy a home and mortgage rates rise, is this an opportunity to build your deposit for longer and possibly take advantage of your Lifetime ISA in another tax year, so when they drop again you can actually take on a smaller, cheaper mortgage?
It can help if you make an effort to notice the good fortune in your life. It can encourage you to see the positives, which will help you stay the course, bounce back from upsets and grasp opportunities. It also gives you the courage to do the things that put you in a position for good things to happen. Someone who thinks of themselves as lucky is more likely to start on an investment journey, or take on a property that needs work but could be perfect for them. Someone who assumes the worst could decide it’s not worth the risk.
All this comes with a major caveat, however. Falling on your feet is never guaranteed and there’s no such thing as a lucky streak. You can put yourself in a great position to capitalise on whatever life throws at you. Just don’t assume that this means you can take risks you can’t afford not to pay off. It’s with all this in mind that my son’s encounter with a stingray was a piece of good fortune. It only happened because he’s lucky enough to be in Australia, and got a break when he found affordable accommodation somewhere beautiful. He was fortunate to have lovely people staying at the hostel who drove him to the hospital. And frankly, he’s lucky it wasn’t a shark.
New figures from HMRC have revealed that in the last financial year, inheritance tax receipts hit a new record high of just under £8.5 billion. This has more than doubled in the past 20 years, which owes a great deal to the decision to freeze the nil rate bands. Rising house prices and investment values have automatically pushed more estates into paying this tax every year, and driven up bills for anyone caught by the net.
It’s why it can make sense to consider lifetime gifts if you’re likely to have an inheritance tax bill. You can use your annual inheritance tax gifting allowances and check whether you can afford to make regular gifts from income, which come out of your estate for inheritance tax purposes immediately. For some people it will make sense to think about making larger gifts that pass out of your estate for inheritance tax purposes after seven years. However, the key with all of this is not to be in a rush to give away too much, too soon, or you could face a shortfall later in life.