Why Financial Planning Cashflow Modelling is Imperative

What is Cash Flow Modelling?

Cash flow modelling is an exercise we carry out for all our clients. We map your financial journey from today all the way to your expected mortality. and include all the various milestones and financial hurdles along the way. We can then calculate whether there will be shortfalls or gaps in your finances. We ensure that this is realistic by increasing and decreasing expenses at certain points along the way and also including other important factors such as inflation, growth rates and your likely tax situation. Growth rates are set in line with your attitude to risk and asset allocation of your investments to ensure the assumptions used are realistic.

The visual aspect of cash flow modelling is what people find the most beneficial. The exercise will clearly illustrate gaps in the financial plan if there are not enough provisions in place to meet life goals. It also gives clients an idea of the sort of income they can expect in retirement if they continue with their current pattern of saving and spending. Steps can then be taken to try prevent any shortfall through various means such as budgeting, saving, clearing debt, pension planning, investing or putting financial protection in place.

Most people have a number of pension pots and investments held in various places and dont have any grasp of what sort of incomes these will translate into. They also do not have any plan as to the most appropriate time to draw down the various pots of money taking into account pension rules and as well as avoiding unnecessary tax liabilities.

Cashflow modelling allows us to develop a clear path for you ensuring all components of the plan are working in unison to achieve various goals you have set. This is a base plan to allow you to make informed decisions now, however, it is a living continuous plan which will change from year to year as circumstances change which will invariably happen through changes in jobs, new children etc.

 

 

 

 

Who is Cash Flow Modelling for?

There is a misconception that cash flow modelling is only for the extremely wealthy which is simply untrue.

Cash flow modelling is for anybody who wants to plan for retirement. It can give reassurances to people who have been diligent in their savings and can allow themselves to spend some of this money today in the safety of knowing it won't have a detrimental impact on their overall financial plan.

On the other hand, it can kick-start others who haven't been as proactive in their financial planning into making necessary changes to avoid issues in later life.

Cash Flow modelling is effective when clients have a big decision to make and want to know the financial outcomes of whatever decision they make as we can use it to compare different scenarios. One such important scenario is planning for long-term care costs, where the fair deal scheme can play a crucial role. Understanding how to integrate such schemes into your financial planning is imperative to ensure you are adequately prepared for any future medical or care necessities.

Cash Flow modelling is effective when clients have a big decision to make and want to know the financial outcomes of whatever decision they make as we can use it to compare different scenarios.

 

 

What sort of scenarios can we map out?

• What will happen if I can no longer work?
• When can I realistically retire?
• How long will my ARF sustain based on expected spending?
• Should I purchase an investment property or invest in a diversified portfolio?
• Will I need to rightsize the family home in the future
• Will we be able to afford a long term care in later life?
• Will I be able to achieve my desired retirement lifestyle?
• What will sort of inheritance taxes will my children be faced with? How can I reduce this liability?

 

Want to find out more?

Contact us if you would like to find out more about putting a financial plan taking account of your personal circumstances and goals in life.