Cashflow modelling can help keep your financial plans on course, even as your life circumstances and objectives change.
It’s a tool used in financial planning which helps predict your future incomings and outgoings, so you’re better prepared to manage them effectively.
Cashflow modelling uses factors like income, savings, investments, inflation, and expenses to project your financial future. It helps assess if you're on track to achieve your goals, whether that’s in relation to major purchases or retirement objectives. These models are flexible and enable you to make informed financial decisions.
Many use a lifestyle financial planner or relevant software to account for important factors such as returns on investments, changing life stages and inflation, which can affect predicted sums.
If you’re visualising financial future goals so you can live your best life, you’ll need your cashflow modelling to be as realistic as possible. Cashflow modelling uses your current circumstances and known events to bring to life your future financial position, using some set assumptions, to help you be as prepared as you can to achieve those goals.
Models typically depict predictions using visual resources, including graphs, to show you clearly what’s likely to happen to your finances in different situations.
Why use cashflow modelling?
With so many different situations and events that can play out throughout your life, so many variables, predicting what will happen to your finances isn’t straightforward. Cashflow models make it easier to envisage what events could happen in your future and how your assets are likely to be affected.
Planning your financial future means you’re prepared for all eventualities. For example, hopefully, you’ll live a long and full life. You’ll therefore need to plan so you have enough money to live comfortably, even in later life. Are there dreams you’d like to fulfil? Travelling? A particular hobby? You’ll need to consider your preferred long-term care solutions too. Contemplating these things in advance helps you plan for the future you want.
When to use cashflow modelling
Cashflow modelling should be used throughout financial planning and in particular during major life events.
Typically, it is used for retirement planning, career path changes, estate planning and major life event preparations – the more uplifting anticipated changes, such as home buying or getting married, and unexpected curveballs, such as redundancy or serious health issues.
Big changes in your life can have a huge impact on your finances.
Continually monitoring your cashflow model can help you ensure your strategies are still suitable for you and your evolving life circumstances.
Flexibility
Flexibility is one of the greatest things about cashflow modelling. As your life goals evolve, cashflow models can be modified so they align with these adjustments.
Financial advice
Professional planners can be invaluable in helping you create a personalised, accurate cashflow model.
Our advisers ask the right questions to identify your goals and timelines within which you’d like to achieve them. They may even enable you to achieve them sooner than anticipated.
Speak to an Ascent Financial Planning adviser to create a personalised cashflow model tailored to your goals.
