Cash Flow Forecasting- what is it, and why do I need to do it?

There are everyday expenditures we can’t escape, like food and mortgages, those costly things on the horizon like helping put our kids through university and then aspirational ‘spends’ such as a house extension or that tourer caravan when we retire.

Ensuring we’ve got enough at every stage of life for the necessities and ‘nice to haves’ is much easier with a cash flow forecast.  Simply put, a cash flow forecast helps you understand how likely it is you’ll be able to meet all your essential and desired expenses through an assessment and projection of your assets, income and what you spend now and in the future.

The main aim of a cash flow forecast, or plan is to project your current financial standing into the future, enabling you to make more informed decisions about your finances today.

For instance, let’s assume I’m 30 years old (I wish!) and I’ve just started a job where I receive 8% of my annual salary of £30,000 into my workplace pension scheme each month. This equates to £200 a month or £2,400 per year. Using the following parameters of an annual net growth rate of 4.73%, an annual salary increase of 3%, I can project that my pension plan, when I retire at, say, 65, will have a value of £482,484.*

With cash flow planning tools, I can make further assumptions on how I’ll spend this money to calculate how long it may last before I’ve spent it all. 

I can then run further scenarios, such as assuming a higher or lower growth rate or contributing more to my pension. All in all, it gives me a better understanding of how much I need to save and for how long to accumulate enough money for a comfortable retirement.

And cash flow planning goes far beyond looking to retirement.  You can run numerous scenarios, such as ones to help you plan how to keep your family financially sound if anything happens to you or how much wealth you can gift your family without impacting your lifestyle.

At SRG Wealth Management, all of my clients get a bespoke financial cash flow plan, and it’s regularly updated to capture their ever-changing circumstances. Our reports are shown in a simple graph without any financial jargon, making it much easier for you to make informed decisions about your finances at every stage of life.

Ready to take control of your finances with cash flow planning? Get in touch for a no-obligation meeting click here.

*These figures are examples only and they are not guaranteed – they are not minimum and maximum amounts. What you get back depends on how your investment grows and the tax treatment of the investment. You could get back more or less than this.