The 4 stages of your life where cashflow forecasting could be invaluable

Category: News & United Kingdom

In November last year, you may have read about four key benefits of cashflow forecasting in a previous article we published. 

 In this follow-up piece, you can now find out in more detail about the importance of cashflow planning over your lifetime as your priorities and lifestyle change. You can also find details of two videos to look at that will give you some insight into how cashflow forecasting can help you.

You may wish to read the previous article before starting this one to bring yourself up to speed with an important aspect of your financial planning. 

Cashflow forecasting can help you see your financial future

When it comes to helping you plan your financial future, cashflow forecasting is one of the most effective tools we have. 

In very simple terms, by inputting data about your finances, it allows you to project what your financial future may look like.

You will initially be able to view a snapshot of your current position and we can then use external data, such as projected inflation rates and investment returns, to forecast how this could change over time. 

By analysing all your key financial information – income, pension savings, other investments, and so on – and your goals for the future, you are provided with a detailed report outlining your projected future wealth. This can then be used to help you make informed decisions about your future. 

Forecasting plays a key part in your annual review

Once your original cashflow forecasting report is prepared, we will then update it as necessary so that it provides the basis of each annual review meeting going forward.

Updated forecasts will help you confirm you’re on track to meet your stated financial goals, or if changes need to be made, and what those changes should be.

Cashflow forecasting can provide invaluable data to support your decision-making during each of the four key stages of your financial journey.

1. Your early years as you move from education to employment

Once you’ve started working and earning a regular income, it’s never too soon to start planning your financial future. 

A lot of the planning at this stage is likely to be relatively straightforward. Ensuring you’re saving a sufficient amount into your pension and super fund is likely to be a top priority, along with setting money aside to get on the housing ladder. 

However, even with such a long-term planning horizon as your eventual retirement, it can be useful to get some insight on how much you ought to be saving, and the pros and cons of various financial strategies.

Cashflow forecasting can provide this and help inform your choices and priorities. 

At bdhSterling, we use the Voyant forecasting tool. To get an idea as to how it can help you, take at look at this short video that illustrates the planning needs of a young couple with children, through to retirement. 

It also shows how cashflow forecasting can help answer questions you may have and map out any “what if” scenarios. 

2. The subsequent period of change and potential consolidation

The first Voyant video gives you useful insight into how cashflow forecasting can be used to help your financial planning decision-making during the the next key phase of your financial journey – the years of potentially big changes in your life.

These could include major milestones such as:

  • Starting your own business
  • Having children, and paying for their education 
  • Your journey up the housing ladder.

It can also provide useful data if you need to go through a period of financial consolidation. This could include stabilising your position after significant upheaval, such as being out of work or dealing with a notable financial commitment.

Then there are happier circumstances, such as receiving a windfall or moving to a much better paid job, where forecasting can give you a steer as to how you could amend your financial planning arrangements. 

3. The period as you approach retirement

The second Voyant video you can take a look at shows the changing concerns of a couple as they near retirement.

The five years or so as you approach the time when you’re planning to stop working and start living on your pension or super fund and other accrued assets are a key period in your life.

For one thing, you are likely to have some understandable concerns that your timing is correct as your retirement gets closer and starts becoming a real prospect, rather than something theoretical and a long way off.

At a basic level, cashflow forecasting can give you a very decent steer in terms of when you’ll actually be able to retire.

The output and projections may suggest that you can retire comfortably sooner than you’d expected. Alternatively, it can flag up that you have a shortfall and it may be prudent to continue working or boost your savings to ensure you can enjoy the retirement you’ve planned for. 

4. During your retirement itself

A common misconception is that your financial planning ends once you stop work and enter retirement. 

In reality, it is still crucial to review your financial position regularly once you’ve retired and continue to make use of cashflow forecasting during this time.

For example, your circumstances could change, so it’s always reassuring to know you’re still on track when it comes to your future income, or whether you need to adjust your investment and income strategy to ensure you don’t run out of money. 

It can also help to inform your legacy planning. This will include longer-term arrangements such as the inheritance you leave for beneficiaries, but also provide you with shorter-term reassurance that your spouse or partner will continue to be living the lifestyle they are used to once you pass on. 

Get in touch

As a financial advice firm 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 your plan before you decide to move from the UK to Australia, or vice versa. 

Get in touch to find out how we can help you. 

Please note

The value of your investment 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 ATO and HMRC legislation, which is subject to change.