Lifetime cash flow forecasting

Forward planning is the key to managing your money and cash flow forecasting is one of the ways we can help you to examine how your spending, savings, and investing will affect your plans for the future. It’s not a crystal ball, but it is a useful tool in a Financial Planner’s kit bag.

It can help you see how much you need to live on and, importantly, how to prepare for the ongoing costs of your lifestyle – as well as any unexpected expenses.

Number crunching

Using data supplied by you, together we can view a range of ‘what if’ scenarios, for example:

• What if I pay off my mortgage in 10 years’ time using my ISA investments? How will this affect my future finances?
• What if I use my inheritance to purchase a rental property when I retire? How will this affect my retirement income?
• What if I take £40,000 from my savings to build an extension on the house in five years’ time? Can I still afford to retire at 60?

This enables us to see how hard your money has to work in order to achieve your financial objectives and whether the answer to ‘how hard?” is ‘too hard’: if it is we can then discuss the options open to you.

By creating your own timeline and inputting real life events relevant to your own circumstance we can help you see just what can be achieved. It visually helps to bring money to life and this in turn helps manage expectations.

Who can benefit?

Anyone. If you want to take an honest look at your current wealth and see clearly how life decisions made now will affect your finances over any given time frame, we can show you what cash flow modelling can do.

According to the Office for National Statistics (ONS): ‘People are living longer. Improved working conditions, reduced smoking rates and improved healthcare have all contributed to increasing life expectancy from generation to generation.’ Living longer should mean enjoying a longer retirement but these years need financing and many of us aren’t putting enough aside. By planning for your future you could allow for this – and avoid having to work longer than you intended.

Historically cash flow forecasting has been used by businesses to analyse income and expenditure over a set period of time. Allowing for a variety of ‘what if’ scenarios forecasting allows a business owner to see any patterns of growth or expenditure and make any appropriate adjustments to business activity.

Well, it’s no different if you’re an individual. Carrying out such an exercise is essential to keep control of your financial future and the software we use allows your Financial Planner to show you how your circumstances could pan out.

Your flexible friend

We can include bonuses from employment, or dividends for business owners. There’s a family balance sheet (effectively a net worth statement but divided by individual and shared assets) and other useful details like modifications to the method of calculation, which allow us to come up with more accurate projections.

There is also a potential IHT simulation, which allows us to show your potential IHT liability in every year of the plan. And plan calculations can be stopped at any event either before or after the age of mortality.

Among many other facilities, there is easy entry of non-legal partners, as marital status can be specified at entry and easily changed within any plan. In addition, you can also consider any protection to your pension lifetime allowance. This is useful when considering lifetime allowance projections and the potential tax bills associated with larger pension pots.

The software also automatically records potentially exempt transfers (PETs) and chargeable lifetime transfers (CLTs) for transfers into trusts.

We update the system regularly to ensure that any calculations made are based on the most up-to-date information available.

We all know that change happens, it’s how you deal with it that counts. By offering the cash flow planning facility as part of our financial planning process we can help you see the impact on your financial future of any decisions you make today regarding your wealth management.