Unless you have the ability to see into the future, cash flow planning should be top of your financial agenda, says Eloise Hammond.
Where will you be in a decade’s time? While you might have a life plan and a rough idea of what you might be doing in the future, if the last year or so has taught us anything, it’s that you can never predict what’s around the corner.
These days, it’s incredibly rare for a person to stay in the same job throughout their lifetime and, in recent years, there has been a significant rise in self-employment.*
The earnings accrued through such a career are therefore likely to fluctuate accordingly.
As working paths and patterns continue to change, it’s more important than ever to regularly review your financial situation, as well as your strategy for future financial security, throughout your working life.
A cash flow plan is a fundamental piece of the financial planning puzzle that can help you secure a successful financial future.
Cash flow planning is the lifeblood of your finances; it will help you decipher if you will be able to meet both your essential and desired expenses every year and visualise the shape of your financial life as a whole.
It involves looking at your goals and aspirations and mapping them against your current assets, income, regular expenses and potential one-off costs, as well assumptions about factors like future rates of inflation.
This will help give a clearer picture as to whether you will be in the position where you have more money than you need or not enough. Identifying potential shortfalls then allows you to come up with appropriate solutions, such as saving more, cutting expenditure or altering timeframes.
As we’ve seen over the past year, scenarios and plans change all the time and so, from a planning perspective, it’s a good idea to throw in some ‘what if’ scenarios, to test what effect these might have on your overall strategy.
These could be anything from downsizing your property or retiring early to ill health or loss of employment. Planning for these financial risks does not make them more likely to happen, it just means you can have a plan B in place to cushion the impact should misfortune strike.
Looking at your finances in this long-term context will enable you to make more informed short-term decisions that may have an effect on your overall financial wellbeing.
To be effective a cash flow plan needs to be updated regularly so it’s important to revisit the plan with a financial advisor on a regular basis to assess if you are still on track and account for any changes that inevitably happen along the way.
While we can never predict exactly what the future may hold, cash flow planning will help you gain better control over the success of your future financial security.
If you would like help making investment decisions for a brighter, long-term financial future, please contact Eloise Hammond on:
01892 770 077
Eloise Hammond | APFS
Chartered Financial Planner
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