What is cashflow forecasting and how does it help you?

In a nutshell, cashflow forecasting is the process of projecting what your income might be in the future, based on your current financial circumstances and a number of assumptions.

But let’s not get ahead of ourselves, and let’s pull back for a minute…

There are a couple of ways you can look at this. At its most simple, we could just do the cashflow forecast making a number of assumptions in terms of growth predictions etc and come up with a figure that we think you are likely to achieve in the future.

That figure will give you an indication of the kind of lifestyle you might have during retirement. If it’s a fairly low figure it might mean you won’t have the funds to go on holiday, enjoy hobbies, eat out or do anything else that’s fun. But I guess it might be a wakeup call.

So, that is one way. But I favour a much more holistic approach, that I think is far more exciting…

Rather than starting with the numbers, why not start with the dreams?

You’ve worked hard all your life, so why would you want retirement to mean hardship? Surely, you’ve earned the right to some fun? To fulfilling some of those “one days” you’ve promised yourself over the years?

This approach means thinking about how you really want to live life when you are no longer working full time. I encourage clients to fill out a retirement diary to really focus their mind. Whilst playing more golf might seem attractive right now, suddenly realising you have nothing else to fill your time, suddenly it’s not quite so palatable.

I’ve talked before about ideas for you to consider to keep your mind and body active once you retire. But, ultimately, only you can decide what you would like life to look like. I want to encourage you to dream big. Add in some of those once in a lifetime holidays or experiences, not just the day to day.

Once you’ve done that, we can start putting some figures to those dreams. How much a dream holiday will cost, the annual golf club membership, the monthly fine wine subscription, the cost of running your car, and so on.

In much the same way as you plan your finances now to ensure you have sufficient to pay your bills, we will have a figure for your future bills and lifestyle.

Then we look at everything you have in place now – financial products, debts, assets, income – and forecast what that will become in the future. Clearly there are some clever algorithms behind the scenes, and there are various scenarios built in over time. But it’s a powerful and effective starting point.

For some clients it’s incredibly enlightening – they realise that they can achieve some of the dreams they have had. They may even be able to start enjoying some of those pleasures earlier than they had expected. They may also be able to retire, or semi-retire, before the age of 70, when they are still fit and healthy and able to enjoy life.

For others, it helps them focus their minds on what they really want.

What’s truly important to them. It gives them momentum and a determination to change various aspects, so they do have a fulfilling retirement.

This is also the perfect time to talk to your loved ones about your plans. And your wishes should you suffer from ill health. And by the way, planning for that too, is equally important, but a subject for another day…

This second style of cashflow forecasting is the one I feel very passionate about. I truly want everyone to live their best lives. You know how fond I am of saying “Life is not a rehearsal”, so why not work with me to give your current and future life the very best performance.

If you would like to learn more about cashflow forecasting, please contact me on 01344 875 310.

Start getting a return on your life…

First steps: Take your free Return on Life Index assessment

cashflow forecasting
Start getting a return on your life…

First steps: Take your free Return on Life Index assessment