On 5 July 1996, scientists at the Roslin Institute in Scotland achieved something that was once thought impossible and consigned to the realms of science fiction: they successfully cloned a sheep from an adult cell.
Dolly the Sheep, as she came to be known, marked a significant turning point in scientific research, showing for the first time that cloning was possible, and more importantly, repeatable.
While that breakthrough was certainly a marvel of modern science, the same idea doesn’t necessarily apply to financial planning.
Cloning someone else’s financial plan might be reassuring in the short term, but it can also lead to problems that only become apparent later down the line.
Meanwhile, a bespoke financial plan designed around your goals, circumstances, and lifestyle choices is far more likely to serve your long-term wellbeing – continue reading to find out why.
Everyone has unique goals for the future, and another’s plan might not serve your needs
Planning for your financial future can feel overwhelming at times. You might need to think of several complex factors, such as:
- What you want to do in retirement
- The kind of safety net you need in case of illness or loss of income
- How much you should keep aside for a rainy day.
With so many moving parts, it’s somewhat understandable that you might feel tempted to copy what someone else is doing, perhaps a friend or family member who seems to have everything figured out.
Yet, this approach can be highly risky, especially if your life circumstances differ.
Imagine, for instance, you ask a single friend how much they’re saving for retirement and decide to clone their plan.
The Pension and Lifetime Savings Association suggests that a single person would need around £43,900 a year to support a comfortable retirement. For a couple, that figure rises to £60,600.
If you’re married, modelling your retirement savings on a single friend’s target could leave you with a considerable shortfall later down the line.
This might affect your ability to maintain your standard of living in the next phase of life, or even make it challenging to afford later-life care if your health deteriorates.
The same issues can arise when you’re building your emergency fund.
Your single friend might suggest saving enough to cover between three and six months’ worth of essential household expenses.
While this is a good rule of thumb, their figure will likely fall short of the amount you need to save. If you have several dependants or are self-employed, for example, you may find it prudent to save as much as 12 months’ worth of expenses.
This could mean that a sudden car repair or boiler replacement causes you to exhaust funds earmarked for other purposes or turn to high-interest debt, derailing your progress towards your long-term goals.
Even protection decisions might come with unintended consequences if you copy someone else.
You may find that the levels of cover a friend has chosen suit their situation perfectly, but wouldn’t be adequate to meet your family’s needs.
If a sudden illness results in a loss of income, inadequate levels of income protection could mean that your household income drops.
Or, if you passed away unexpectedly, an insufficient payout from life cover could leave your loved ones struggling to maintain their standard of living.
Following the crowd when investing could also result in unintended consequences
Your broader financial plan isn’t the only area that could suffer from cloning. Investment choices are another factor where copying others, especially in the age of social media, can lead you off course.
Today, you don’t even need to ask your friends what they’re investing in. You often see it talked about extensively on social media, where “finfluencers” offer tips on everything from trendy stocks to obscure cryptocurrencies.
With so many people promoting the same assets, it might seem harmless, or even sensible, to follow the crowd.
Yet, this behaviour – known as “herd mentality” – can have significant consequences.
You could find yourself investing in high-risk assets that don’t align with your time frame. For instance, if you’re planning for retirement 20 years away, but you copy someone who’s attempting to generate quick returns, your portfolio could become too volatile.
You may even choose investments that don’t align with your personal tolerance for risk. In this instance, market movements could result in anxiety, prompting you to react emotionally and attempt to time the market.
A tailored investment strategy will reflect your attitude to risk and long-term goals, ensuring you feel comfortable investing your wealth.
However, it is challenging to consider your needs when you’ve simply cloned someone else’s choices.
Professional advice can make a significant difference
Even when you have the best of intentions, it can be challenging to avoid the mistakes of copying others.
Dealing with financial issues can be complex, and when someone close to you seems confident in their approach, you might want to follow their lead.
This is why you might want to work closely with a financial planner.
During the planning process, we will sit down with you and have a comprehensive conversation about your situation. This will help us understand your goals, aspirations, and tolerance for risk.
We then employ a holistic, “top-down” approach that first considers these goals, using them as the guide to help shape your financial decisions.
We can then work inwards, forming a plan that helps you identify your current financial situation, how close you are to achieving your goals, and any actions you need to take both now and in the future to reach milestones.
Since financial planning focuses on your motivations, rather than just how much you might need to save, this can help you clearly picture the road ahead.
While Dolly was certainly a scientific marvel, cloning might only lead you down the wrong path.
To find out how bespoke financial planning could help you confidently reach your goals, please contact us by email at info@investmentsense.co.uk or call 0115 933 8433.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). Investments carry risk. The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested. 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.
Note that protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
