What is Cash Flow Modelling?

Cash flow modelling is a way of providing a valuable insight into your potential future financial situation based on your current position. Assumptions are built in to consider factors such as future inflation and client specific investment returns.

This is an essential tool to help you to understand how your finances might progress over time, illustrating when you might have either a shortfall or a surplus in money, allowing you to make informed decisions about your saving, spending, and investing goals.

Many of our clients find the inclusion of cashflow modelling particularly useful as part of their retirement planning journey, but it can also be invaluable when considering taking on potential significant spending, for example school fees, and will help you to understand the impact this may have on your longer term financial position.

WHAT GOES INTO A CASH FLOW MODEL?

There isn’t a definitive list of input requirements as every model is bespoke to each client, but we would usually expect to see factors such as:

• Income: salary, dividends, pension, rental etc.

• Outgoings: mortgage, rent, household bills, food, school fees, car costs, holidays etc.

• Savings & investments: cash, ISA’s, pensions, investments etc.

• Liabilities: mortgage, loans, other finance

• Capital injections: inheritances etc.

• Planned capital expenditure: car purchase, house renovations etc.

CONSIDERATIONS

• Be realistic – don’t over-estimate income and/or under-estimate expenses.

• Update regularly – things change so it’s important to revisit cashflow on a regular basis and adjust your plans accordingly.

TO SUMMARISE

With a robust cashflow model as your starting point, you can make informed decisions to assist you to achieve your financial ambitions and provide you with peace of mind.

Let us know if you’d like us to provide you with further information regarding cashflow modelling.