22 December 2017

A Carbon Christmas Carol

A Carbon Christmas Carol

In Charles Dickens’s timeless story, the protagonist Ebenezer Scrooge is visited by three ghosts of Christmas Past, Present and Yet to Come. These three ghosts highlight the mistakes that Scrooge has made in his past, his present and how, if he continues down his self-serving path, he will ultimately face a lonely future.

In keeping with the season, I have prepared warnings from our three ghosts of ‘financial’ Past, Present and Yet to Come.

The Ghost of Financial Past

In our first ghostly visit, we are shown the mistakes of our financial past.

With rising tuition fees, the largest contributor to student-debt in England, Wales and Northern Ireland, average student debt has exploded in recent times, with Sebastien Burnside, a senior economist at NatWest, predicting that the UK’s student debt will double to £200bn over the next six years.

This level of debt is less a mistake than a ghostly, ominous warning from our financial Jacob Marley. With the cost of education spiralling, a very serious look will have to be taken by those entering higher education at the associated costs, as well as at possible alternatives, such as apprenticeships and vocational training.

This dual education system has long been the preferred method in Germany, known as Duales Ausbildungssyetm, and, with the UK government very much in favour of promoting this, it is becoming an increasingly attractive option for those wishing to learn whilst receiving an income.

For those attending university or college, taking on unnecessary student debt is a definite ghost of our financial past, with the National Union of Students (NUS) providing the estimated cost of living for students as £12,056 per annum. If the entirety of this cost were to be met from student loans – which receive an interest rate of 4.6% p.a. whilst the borrower is studying – you would leave university after a five-year course with a debt (not including tuition fees) of £66,086.

The effect of older generations, such as parents or grandparents, helping meet some or all of this cost cannot be overestimated. With the Institute of Fiscal Studies estimating that three-quarters of graduates will be paying off their student debt into their 50s, avoiding this financial millstone through assistance from family members could prove invaluable.

The benefits and impact of having a rich benefactor might be slipping more towards Great Expectations than A Christmas Carol in our Dickensian look into our financial past, so our journey must jump ahead a couple of years now, to where we are in employment and beginning to see our expendable income on the rise. Now we value our net pay as sacrosanct. But then, our second financial mistake occurs: we look at our pension contribution and think, “I’d rather have the money now”, and we select the lowest contribution total, or even worse, we opt-out of the pension scheme all together.

Financial decisions for the future should not be taken at the expense of impacting on your current standard of living without careful consideration, but the UK is forecast to be sitting on a £23 trillion gap in retirement provision by 2050, forcing many to work well into their 70s. So the best way to avoid this is by starting your pension from a young age, even if your pension contribution is relatively small at the outset. Missing out on the compound effects of investing early and maximising the period of tax-free growth would be the biggest mistake of your financial past.

The Ghost of Financial Present

The ghost of our financial past has left and, whilst still shaken by our decision to take a ‘refund of pension contributions’ from our first job, we are now joined by the ghost of our financial present.

As with our earlier pension contributions, every financial decision should be a consideration of plans for the future versus things we want to do now. However, as we get older, our wider financial aspirations come into sharper focus. The question to answer at this stage in our financial journey is – do I have enough?

By mapping out a financial plan, you can monitor your progress whilst answering a number of ‘worst case scenario’ questions, such as: is my life-cover sufficient to meet my family’s need in the event of my death; how would I cope if I became unable to work due to accident or illness; can I afford private education costs; could I afford to retire early; or, how will I pay for my sickly child’s (Tiny Tim’s) expensive medical costs?

Regularly reviewing this plan and updating it as your circumstances and objectives change is also another important aspect. No first draft of your financial journey should be set in stone and understanding that your plan should evolve with you is an important point to understanding the financial planning process as a whole.

The construction of a wider financial plan to help balance current enjoyment against moving towards our financial objectives is key at this stage and not doing so would be the biggest ‘ghost of our financial present’.

(Corporate Director Mark Christie will be writing in depth on the Financial Planning process and its benefits in the New Year so please look out for this.)

The Ghost of Financial Yet to Come

We are now at the darkest part of the tale; our youthful indiscretions have made way for our middle-aged apathy and we have the ghost of our financial future staring back at us.

As with Scrooge’s bleak future, being the richest man in the cemetery does not interest us and brings us to the first ghost of our financial yet to come – not enjoying the wealth that we have worked so hard to accumulate.

A number of Carbon financial planners can recount stories in which clients, after going through the detailed construction of a financial plan, have gone out and bought that sports car they always dreamed of but never thought they could afford; or, gone on that once-in-a-lifetime trip round the world.

The enjoyment of spending your money, as opposed to leaving a sizable inheritance tax liability upon death, should not be underestimated.

Alongside this is the desire to offer financial assistance to future generations and have our loved ones avoid their own ghosts of financial past. However, it brings us to the next ghost of our financial future – not putting in a succession of wealth plan early enough.

A study done in 2015 gave a statistic that 2.2% of all UK homeowners are ‘property millionaires’ and with house prices expected to rise following Philip Hammond’s budget pledge to scrap stamp duty for first time buyers, more and more of our nil-rate bands will be used up by the family home. With no adequate Will or Power of Attorney in place, your beneficiaries could be faced with the daunting prospect of having to pay an inheritance tax bill before the assets of your estate can be released.

Perhaps the most daunting ‘ghost of financial yet to come’ is the thought of leaving an (avoidable) financial burden on our loved ones upon death. Being able to track the affordability and ability to distribute wealth without ‘running out of money’ well ahead of our expected mortality is the best way to avoid this ghost of our financial future.

* * *

Bleary-eyed, we awake from our phantasmal financial journey with the realisation that by putting in place a Financial Plan, and regularly reviewing it, we can avoid this bleak Dickensian future. We run to the window and shout to the nearest passing child to hurry along to the Carbon offices and arrange a meeting for us with one of their financial planners.

Or… you can contact Carbon via the Contact Us page here or send an email to

Seasons Greetings from all of us at the Carbon offices.

Jonathan Young is a paraplanner at Carbon. You can view Jonathan’s profile by clicking on his name, or contact him via email on

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