Effective cash flow modelling must begin with detailed knowledge of your current assets, income and expenditure.
Then, using advanced software and statistically-tested assumptions about the possible variables – including things like interest rates and inflation – a useful picture of the future can be created.
This will show how your assets, investments, debts, income and expenditure are likely to change, year on year, going forward, ideally encompassing your entire remaining life.
Cash flow modelling is a crucial stage in the life planning process. Our view is that financial planning cannot be done professionally without it.
Obviously, a cashflow model is only as good as the information that is used to build it and so that information must be updated regularly to keep pace with the inevitable changes in a client’s circumstances.
This demands ongoing communication between client and adviser, which is one of the reasons we place such a high priority on keeping in close touch with our clients.
Having access to a properly prepared lifetime cash flow plan permits you to achieve a number of positive outcomes:
- You are able to systematically work towards the lifestyle you have decided you want.
- You can make adequate provision for the financial consequences of the death or disablement of you, or your partner.
- You can plan an investment strategy for spare capital or surplus income.
- You’re able to foresee tax issues that may arise on your own demise, or that of your partner.