What is “cashflow planning”, why do we use it, and how does it help you?


Cashflow planning is one of the most valuable tools in the financial planning toolkit. By creating a cashflow model using your key financial information and your goals for the future, you can create and make interpretations from a comprehensive report detailing your wealth.

When you work with us at Britannic Place, cashflow planning is a central pillar of the journey we take you through. But if you’re yet to undergo this process, or you went through it a while ago and can’t quite remember how it works, you may be wondering why we use it and the benefits of doing so.

So, find out how cashflow planning works, and why it’s such a useful and worthwhile method for helping you to make decisions about your wealth.

A visual way to view your income and expenditure

A cashflow plan is simply a way of forecasting your future financial position, making predictions for your income and expenditure, and then using this information to make decisions with your wealth.

Imagine how businesses might organise their finances. Companies will carefully calculate how much it costs to manufacture their product or provide their service to create a clear picture of their expenditures.

They can then price this product or service and forecast how many sales they expect to make, giving them a figure for their predicted income.

With this information to hand, the senior leadership of a business can work out important financial information, such as their total revenue and profit, what they can afford to pay themselves and their employees, and how much they can put towards further expansion.

As this is a forecast, they can also model different scenarios, looking at what would happen if certain eventualities came to pass. This might be internal, such as if sales were higher or lower than predicted, or external, perhaps considering what would happen to the business in the event of a recession.

For individuals, cashflow planning operates in a similar way. By creating a forecast of your expected income and expenditure, you can create a visual report of your finances. In doing so, you can see exactly how far your money goes in supporting your lifestyle, and make decisions over any necessary changes as to how your wealth is organised.

Crucially, planning in this way allows you to put your goals at the centre. Just as a business’s leadership team can use the model to work out how different choices will affect their profitability, you can do the same to see how far your money goes in supporting your desired lifestyle and helping you achieve your goals.

You can then organise your wealth to put you on track to reach them, ensuring that your money revolves around your goals, rather than vice versa.

While it can benefit people in all stages of life, cashflow modelling is particularly useful for retirement planning. Retirement often presents a significant financial change, so creating a forecast to see how your money is suited to cope with this can be a valuable exercise.

You can model various different scenarios for your wealth

One of the key difficulties that can come when making decisions about your money is that there are many variables that could affect you.

Fortunately, a major benefit of cashflow planning is that, just as in the example of a business, it allows you to model various different scenarios and build these considerations into your cashflow plan.

For example, while you can forecast your expenditures, potential volatility in the stock market could reduce the value of your pensions or investments, temporarily affecting your income.

So, being able to plan for events like this in your cashflow model can help you to navigate these circumstances, should they arise.

Similarly, you can model what might happen if you decide to pursue a different lifestyle. Retirement planning often involves putting your goals at the centre to calculate your potential expenditure, but what if you change your mind about what you want out of life?

Imagine that you decided to retire earlier than you had initially planned. In this case, you could input this into your cashflow model, giving you a clear picture of how far your wealth would be able to support you without those last few years of income from employment that you had originally been counting on.

In this case, a cashflow plan can show you the financial impact of redefining your goals, allowing you to make more informed decisions with your wealth.

The ability to forecast these different outcomes can be hugely beneficial, ensuring you always have an accurate picture of your finances, regardless of internal and external factors like these.

Of course, it’s worth remembering that these are just predictions, and so events may not occur exactly as you forecast them. Additionally, it’s difficult to predict all eventualities, meaning something may happen that isn’t initially included in your forecast.

That said, a cashflow model can still give you a good idea of what might potentially happen in future, and how your finances would manage.

Cashflow planning can give you peace of mind for the future

Perhaps above all else, cashflow planning can offer immense peace of mind for the future.

The reason that a business would carry out this process is to ensure that they are financially stable and secure in the face of various eventualities, and this is just the same for you as an individual.

Even in difficult market conditions or when your goals or circumstances change, knowing that you have enough money to live your desired lifestyle can be hugely reassuring.

Again, although you can’t necessarily forecast every potential outcome, you can still input many variables to see what might happen, and you can update your model to reflect changes that you haven’t planned for, too.

This approach can allow you to focus on the things you love and enjoy, rather than worrying about the pounds and pence.

Get in touch

If you’d like to find out more about how we use cashflow planning to help you achieve your goals, please do get in touch.

Email info@britannicplace.co.uk or call 01905 419890 to speak to us today.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority (FCA) does not regulate cashflow planning.

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