Using investment growth, inflation, and interest rates assumptions, cash flow modelling creates a comprehensive picture of your current and future financial situation.
Analysing your financial situation
Creating an individual cash flow plan involves thoroughly analysing your financial situation, goals, and future needs.
Gather information about your current financial situation. This includes your income, expenses, assets (property, investments, pensions, etc), and liabilities (such as loans).
Understanding of your net worth
Establishing an overview of your assets. Determine the value of your property, investments, and savings. It’s essential to have a clear understanding of your net worth.
Identifying your financial goals and commitments. Consider short-term and long-term goals, such as saving for a house, funding your children’s education, or planning for retirement.
Achieve financial independence
Creating a lifetime cash flow model. Considering your goals and commitments, this plan should project your income, expenses, assets, and liabilities over time. It will help you estimate your future cash flow and determine if you’re on track to achieve financial independence.
Evaluating your risk tolerance and investment strategy. Assess whether your investment strategy aligns with your risk tolerance and financial goals. Adjust your portfolio as needed to ensure it’s optimised for your needs.
Minimise tax liabilities
Planning for potential risks and liabilities. Ensure you have adequate insurance coverage to protect against unforeseen events such as death or disability. Additionally, consider strategies to minimise tax liabilities for yourself and your beneficiaries.
Developing an investment strategy for inherited wealth, capital, and surplus income. If you inherit wealth or have additional income, develop a plan to invest this money wisely to grow your assets and achieve your financial goals.
Future needs and goals
Monitoring and reviewing your cash flow plan regularly. Regularly update your cash flow plan to reflect changes in your financial situation, goals, and market conditions. This will help you stay on track and adjust to maintain your financial independence.
By following these steps, you’ll have a comprehensive cash flow plan that provides a clear picture of your current financial situation and helps you plan for your future needs and goals. This will enable you to make informed decisions about your finances and ensure you’re on the path to achieving and maintaining financial independence.
Here are some benefits of creating a cash flow modelling plan when managing inherited wealth
Clarity on financial goals
Having s cash flow plan helps you identify and prioritise your short- and long-term financial objectives, such as buying a house, starting a business, or funding your retirement.
Effective wealth management
With a clear understanding of your financial situation, you can make better decisions about investing, saving, and spending your inherited wealth, ensuring that it serves your needs and goals over time.
By analysing different scenarios and their potential impact on your finances, a cash flow plan enables you to assess and manage risks associated with investments and other financial decisions.
Inheritance often comes with tax implications. A cash flow plan can help you understand your tax liabilities and plan accordingly to minimise the impact on your financial health.
If you have long-term personal goals like funding your retirement, a cash flow plan allows you to see how much you need to save and what returns you need to achieve to meet those objectives.
If you want to pass on wealth to your heirs, a cash flow plan can help you determine the best strategies for preserving and distributing your assets following your wishes.
THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP, AND YOU MAY GET BACK LESS THAN YOU INVESTED.
THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE.
A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND ON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES AND TAX LEGISLATION.