Why financial planning is like baking a Christmas cake

It’s that time of year when we’re mixing dried fruit, cinnamon and brandy to create the perfect cake to enjoy with our loved ones on Christmas day. There’s a seasonal lesson in the ritual of preparing a Christmas cake that can be really helpful when thinking about planning for your financial future. If you can’t see the similarities, read on….

The basics of baking

If you’re planning to make a Christmas cake, there are some key steps you need to follow. First, don your apron and dust off your family’s favourite recipe. Then you check you have the ingredients, mix the right amounts together in the right order and pop it in the oven for exactly the right amount of time at the right temperature. The result should be the perfect Christmas cake.  

How does this relate to financial planning?

Financial planning may appear daunting – we know that many people feel like a deer trapped in headlights when it comes to thinking about their financial future – but  the right recipe and ingredients can help you plan with confidence.

Just like baking a Christmas cake, the key is in the preparation. You wouldn't begin baking a cake without a recipe and the necessary ingredients; similarly, a financial plan serves as your guide to achieving the financial future you want by outlining the steps needed to reach your objectives.

First, you gather your ingredients – income, savings, investments and goals – then you follow steps to make it all come together. Just as each ingredient plays a crucial role in the cake, different financial planning services – such as investment planning, protection planning, estate planning, retirement planning and intergenerational wealth planning – all contribute to achieving your goals.

Start early and take your time

Like a Christmas cake, the earlier you start, the more options you have.  Christmas cakes can require weeks or even months to allow the flavours to develop and mature. Similarly, investments take time to compound and grow. So being prepared and starting early means you can let your investments ‘bake’ over time.

If you weren’t planning on having a Christmas cake and you suddenly get wind just before the big day that your guests are expecting one, it doesn’t mean there are no options open to you, but your choice of recipes will be restricted and you will have to rule out anything that requires lengthy soaking.  Similarly, if you leave your financial planning until later in life, there will still be solutions open to you, but the scope will have narrowed.

Follow the recipe

Once you have established your goal – whether it’s saving for retirement, buying a house, paying schools fees or leaving your estate to your loved ones in a tax-efficient way – you need a clear strategy that is easy to follow and optimises your tax efficiencies.

The good news is you don’t have to do this alone. Much like a recipe is there to guide you, financial planners are there to help you devise your strategy to give you confidence in your financial future.

What’s more, unlike the trial and error needed to perfect a Christmas cake recipe to your taste and the vagaries of your oven, a financial planner will work with you to review your plan and refine it over time as your needs change.

Choosing the right recipe

Of course, there are many, many different recipes for Christmas cakes. With or without alcohol? Iced or with glace fruit on top? Traditional or a contemporary alternative?  How do you choose which one to bake to best match your family’s tastes on Christmas day? Ultimately, you need to look at what you want the end result to be and find the right recipe to get you there. If Aunty Flo hates marzipan, that will influence which recipe you pick.

Similarly, when choosing a financial planner, you need to work with someone who is understanding, empathetic, listens to your requirements and has the depth of industry knowledge required to help you achieve your goals.

At Amanda Redman Financial Planning, we are fortunate to have three financial planners. While we all adhere to the same values and deliver the same quality of financial planning advice, we specialise in supporting different types of clients, so we can offer tailored support for whatever your goals and stage of life:

Founder Amanda Redman mainly works with High-Net-Worth clients and people with complex pension planning requirements.

James Turner has a passion for working with families and business owners, especially in Sussex.

Louise Gerrish works with a broad range of individuals, couples and families, especially first-time investors.

If you’d like confidence in your financial future, get in touch and let us help get you started.

The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up.  You may get back less than you invested.