From the Bellpenny Nest
No one can be sure what the future holds, but with the help of good financial planning it is still possible to secure peace of mind in our retirement or lifestyle choices. For example, we can gain reassurance that there will be sufficient cash to fund our old age or to take that dream holiday without feeling regret later on.
Managing these hopes and expectations requires a financial roadmap through which it is possible to plot the likely impact of all outgoings and income.
Used in conjunction with your Bellpenny Financial Planner, cash flow forecasting is a powerful digital tool that can predict the most likely scenarios based on a client’s current situation, investments and future needs.
A block of blue indicates that all is well, but any sign of red in the charts will reveal that action is needed, perhaps through a review of investments or a change in risk profile. As the saying goes, forewarned is forearmed.
Inevitably, the most common use of cash flow forecasting will be in handling questions of retirement, such as knowing when it is financially prudent to give up work or to decide the most tax efficient way to take your nest egg.
However cash flow forecasting is also a good way of modelling the impact of school and university fees, weddings and family occasions and for revisiting budgets in the wake of a change in financial circumstances such as divorce.
It’s not just at times of major life events that cash flow forecasting is relevant.
Clients should revisit these projections at regular intervals, particularly as in recent times there’s been a sharp jump in the FTSE 100 Index and many investments may have exceeded expectations. This tool will show if now is the time to consider a change in approach in order to secure those lifetime goals.
Higher earners will also see the benefit of cash flow forecasting if the findings signal they may exceed the lifetime allowance for pension savings of £1 million. Inheritance tax is another area where modelling can be useful.
No stone unturned
Cash flow forecasting has the added benefit of injecting a note of hard-headed realism into a client’s financial planning, particularly if they leave no stone unturned when identifying present and future expenditure.
Often, savers will under-estimate the pension pot they might need for a certain retirement income, usually because they fail to factor in care costs and inflation.
The recent sharp rise in the cost of living is a reminder that there are no financial certainties in life, particularly since Brexit and other political events. Discuss your individual circumstances with your Bellpenny Financial Planner for further information.