First things first. What is cashflow modelling? In short, it’s a technique used to forecast your future finances. It shows you how much money you could have in the future and whether you are on track to achieve your goals. With the UK’s economic uncertainty, rising cost of living and longer retirements, it is more important than ever to have a good view of your finances so you can make smarter, more confident financial decisions. The Financial Conduct Authority (FCA) describes cashflow modelling as a key step in providing suitable retirement advice, reinforcing how valuable this approach can be when planning your financial future. At Narrative, we’re ready to model your cashflow and explain the key points so you can start planning future finances.
How does cashflow modelling work?
Cashflow modelling is usually done on a spreadsheet or financial planning software and includes income (salary, pensions, investments), outgoings (mortgage, bills, lifestyle), and assets and liabilities (inflation, investment returns). With this forecast you can start visualising your financial future. The model can tell you:
- What a visual roadmap of your financial future would look like
- When you might run out of money, or have a surplus
- Whether your goals (for example, retiring at 60, buying a home, paying for education) are achievable
Financial planning with cashflow
Once you know how your finances will look tomorrow, you can plan for life events. These could include retirement, children, education, buying a home, downsizing and inheritance planning. For many people, it’s family financial planning that’s important, what legacy will you leave for your loved ones? In this case, you need to look at your retirement cashflow planning and see how much is left after accounting for your needs. With this information, plus the help of a Narrative advisor, you can work on intergenerational wealth planning and protecting wealth for the future.
Cashflow model benefits
As well as helping you plan for major events, cashflow planning assists with decisions such as ‘what if I retire at 58 instead of 60?’ and ‘what if I decide to downsize?’ When you make better choices today, it benefits your future (for example, increasing pension contributions or reducing debt).
Cashflow forecasting is also good for your blood pressure! When you can see all the figures all laid out over time, it reduces uncertainty and the chance of encountering any nasty financial surprises. In other words, you get peace of mind thanks to your cashflow strategy.
Staying on track
When you have your finances in a clear, comprehensible form, you can see when you’re heading off track. It’s for this reason that cashflow modelling should be re-visited regularly. After all, you may need to factor in life changes such as a new job, a baby, illness or inheritance.
Plan Your Financial Future with Narrative Wealth
If you want the clarity, control and confidence that cashflow modelling brings, we’re happy to help. At Narrative, we assist individuals and families in London, England, and across the UK using advanced modelling tools to model their finances now and into the future. Our advisers bring experience, expert knowledge and an objective viewpoint.
Ready to see your financial future clearly?
Book a free cashflow consultation with Narrative today.