When it comes to helping you plan your financial future, cashflow forecasting is one of the most effective tools we have, and one we utilise with all our clients.
In very simple terms, it allows you to project what your future may look like, and the evidence and data you glean from it can be tested and validated.
By creating your base plan we can produce a snapshot of your current position and are then able to then forecast how this will change over time. It is based on a number of assumptions such as inflation, performance of assets and tax wrappers but is absolutely tailored to your circumstances.
By assessing your key financial information – income, investments, pension savings and so on – and your goals for the future, you are provided with a comprehensive report detailing your wealth. This can then be used to help you make informed decisions about your future.
So, find how out how cashflow forecasting works, and why it’s such a helpful method for steering you when making decisions about your future wealth.
1. It’s a great way to view your financial position
A cashflow plan is simply a way of forecasting your future financial position, making predictions for your income and expenditure, and then using this information to make decisions about your wealth.
A forecast of your expected income and expenditure, provides you with a visual report of your finances. You can then see exactly how far your money is likely to go in supporting your lifestyle and make decisions over any necessary changes as to how your wealth is organised.
It allows you to put your future aspirations at the centre of your planning process, supporting your desired lifestyle and helping you achieve your goals.
You can then mange your finances to achieve your goals, which is an invaluable aid when it comes to planning your retirement, given how significant a time this will be.
2. You can see how certain “what ifs” could affect your financial situation
As well as providing you with valuable insight into your future finances should your circumstances remain the same, cashflow forecasting can also help you model what might happen if you decide to make changes to your life.
Retirement planning will revolve around your personal goals to help calculate your potential expenditure, but what if you change your mind about what you want to do?
Fortunately, a cashflow plan can show you the financial impact of changing your goals, allowing you to make more informed decisions with your wealth.
Some of the changes you might need to think about could include:
- Selling your business
- Moving to a smaller property
- Providing financial support for family members
- Ensuring you have sufficient protection for you and your family
- Legacy planning for your wealth and beneficiaries.
The ability to forecast these different outcomes can be hugely beneficial, ensuring you always have an accurate picture of your finances.
This also applies to external factors. For example, while you can forecast your expenditure, potential volatility in the stock market could reduce the value of your pensions or investments, temporarily affecting your income.
So, being able to plan for events like this in your cashflow model can help you to navigate these circumstances, should they arise.
3. Cashflow forecasting can give you valuable peace of mind
Perhaps above all other benefits, cashflow planning provides you with invaluable peace of mind for the future and brings the facts and figures to life with visual oversight. Knowing that you have enough money to live your desired lifestyle, even in the event of financial market upheaval, can be hugely reassuring.
You will also know that, even if your personal circumstances change, you’ll still be able to enjoy the retirement you’ve planned for.
Ultimately, it will give you the freedom to focus on the things you enjoy, rather than continually having to worry about the pounds and pence.
4. Planning your financial future
With a clear idea of how your financial position may look further down the road, it’ll make the planning process that much easier. It will also give you some insight into what your life may look like once you’ve stopped working.
Indeed, you may actually realise that you’ll be able to retire earlier than you had previously believed. Or, on the other side of the coin, you may start to appreciate you need to save more in order to stay on target to achieve the retirement you’d planned for.
It will also give you peace of mind and valuable insight when it comes to providing financial support for other family members, such as giving your children the means to get onto the property ladder, or helping your own parents meet the cost of any care needs they may have.
Having all the financial information cashflow forecasting can give you to hand, means you’ll be able to make informed decisions about both your current and future financial position.
Get in touch
As Financial Advisers with a strong presence in both Australia and the UK, we’re very much aware of the benefits you can gain from cashflow forecasting.
For example, if you have assets in both countries, it can give you a clear overview of all of them in a single report. This means you can pull together all your finances and look at them holistically.
Cashflow forecasting can also be a great help when used as part of the planning process before you decide to move from the UK to Australia, or vice versa.
Get in touch to find out how we can help you.
The value of your investments can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances. All contents are based on our understanding of HMRC and ATO legislation, which is subject to change.