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Wealth Planning -
How cashflow modelling can help you plan your retirement
Reaching the golden years of your life and realising that your savings are insufficient to maintain your envisioned lifestyle is not a situation anyone wants to encounter. This is why cash flow modelling is so essential, bridging today's financial decisions and tomorrow's financial security, especially when retirement is on the cards.
What is cash flow modelling?
Cashflow modelling is a form of financial planning that brings together your income, expenses, assets, and liabilities over time, visually representing the long-term effects of short-term financial decisions.
Understanding the big picture
Cashflow modelling does not just show you a snapshot of your financial situation at a single point in time; it plots your financial journey over decades. This big-picture approach allows you to see the potential pitfalls and windfalls of your financial decisions at various stages of your life. In the context of retirement planning, this means understanding when savings might run out or identifying years when your expenses might spike.
Example of a cashflow graph
Fine-tuning your retirement goals
Everyone has a different vision for life beyond work. Some might dream of travelling the world, while others want a more relaxed lifestyle spent with family and friends. Some continue to have business interests.
Cashflow modelling helps you to financially plan to reflect your vision. If your current financial circumstances or choices do not match your goals, you could have ample time to tweak your strategies accordingly.
Testing 'what-if' scenarios
Life is full of uncertainties, and the financial world is no exception. Recessions, unforeseen medical expenses, or sudden windfalls can all alter your retirement plans. Cashflow modelling allows you to play with 'what-if' scenarios, testing how different circumstances might affect your retirement pot.
Stress-free decisions with real data
Financial decisions, especially retirement ones, can often be stressful and uncertain. Although cashflow modelling relies on certain assumptions which are not guaranteed, it helps by turning abstract concepts into a visual representation of how your finances will be affected from early retirement through to the later years. When you see the long-term impact of a decision — be it investment choices, property purchases, or even seemingly minor lifestyle changes — it becomes far easier to make financial decisions with confidence.
Engaging a proactive approach
Cashflow modelling uses a proactive approach to your future rather than reacting to financial challenges as they arise. By seeing potential challenges on the horizon, you can devise strategies to either mitigate their impact or avoid them altogether. This forward-thinking strategy ensures a smoother and more comfortable transition into retirement.
The impact on your retirement
While various tools and strategies aid retirement planning, cashflow modelling stands out for its comprehensive, long-term approach. A detailed roadmap of your financial future allows you to make decisions today that ensure a comfortable and fulfilling retirement. If you are concerned about securing your lifestyle during retirement, it is worth speaking with a wealth planner about cashflow modelling.
Further reading
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Wealth Management • Wealth Planning • Retirement Planning • Investment Management
Author -
Paul Clifton, FPFS
Chartered Financial Planner, Director – Wealth Planning
Paul is a trusted Wealth Planner, who has built a strong reputation for helping clients identify and achieve their life goals, while maintaining the highest standards of personal service. In addition to helping clients in the West of England and South Wales, he is responsible for developing and managing the regional Wealth Planning team at Arbuthnot Latham.
The aim is to deliver professionalism, experience and honesty. Our bespoke solutions cover wealth/tax structuring, estate planning, retirement planning and financial protection. In addition, we work seamlessly with our colleagues to provide investment management, private and commercial banking services.
Paul has over 20 years of industry experience advising individual and corporate clients. He joined Arbuthnot Latham in July 2020 having previously worked for Hargreaves Lansdown and Chase de Vere. Paul is a Fellow of the Personal Finance Society and a Chartered Financial Planner.
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