Financial planning against all outcomes
At the heart of financial planning for clients is cash flow modelling. Cash flow modelling is the process of reflecting on your current financial position in respect to your preferred position, along with incomes and expenditures, to establish a detailed picture of your finances both now and in the future. A cash flow model is only as good as the information available and it must be kept updated with any changes to your circumstances.
Whilst important to focus on financial planning based on current and expected circumstances, it is also invaluable to ascertain the impacts of unforeseen events and to address important financial dilemmas.
- Will my pension alone be enough to support me in retirement?
- What age will I be able to retire?
- Should something happen, do you have enough protection for your family?
- Investment growth rates
- Can I afford expenses such as cars?
- Can I afford for any of my investments to be unsuccessful?
- Contingency plans
Using this information can help the client to make well informed financial decisions. While people may think cash flow modelling is best suited to manage the position of those with accumulated wealth, it is arguably more beneficial to those looking to reach long term goals, being able to arrive at decisions on how much to invest and returns required to meet the projected objectives.
All decisions are based on what is specified within the cash flow, how much to save and spend, to how capital should be invested in order to achieve the required returns. There is a lot that needs to be managed with cash flow modelling and the client should be fully involved.
Lifetime cash flow plan
For those looking to become and remain financially organised, determining lifetime goals and controlling their tax liabilities, lifetime cash flow is aimed at these individuals. Certain assumptions have been made in making the plan. The plan is only as good as the information provided, regular reviews and reassessments are required to ensure the client remains on track.
A lifetime cash flow plan should enable you to:
- Produce a clear and detailed summary of your financial arrangements
- Work towards your future goals
- Steer you towards financial independence
- Put provisions in place for financial consequences such as death
- Minimise your tax liabilities
- Estimate future cash flow
- Develop an investment strategy
The more clear and precise your goals are, the easier it will be to develop a plan to achieve your personal aspirations.
Please note cash flow modelling uses a number of assumptions regarding growth, inflation and investment cycles, all of which may not play out accurately in reality.