Cash Flow Modelling

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What are your financial dreams in life? Perhaps you want to retire earlier than planned, and take that world trip you’ve always dreamed of? Maybe you want to know that you have enough money to help your children through university, or put down a deposit on their first home?

Enter: cash flow modelling.

Cash flow modelling helps you map out what your financial future might look like and supports you to achieve your financial goals.

How does cash flow modelling work?

A cash flow model provides a detailed picture of your current financial position and forecasts what this could look like in the future, whether that’s 5 or 50 years from now.

At Liberty Partnership, we’ll work with you to produce the most accurate cash flow model, collecting detailed information about your assets, investments, debts, and monthly income and expenditure.

We then use this information to create a detailed picture and visual representation of your current and projected future financial position. We’ll build in external factors like rate of economic growth, inflation and interest rates to obtain the most accurate projection.

If, at any time, your situation changes, for example, your salary goes up, you receive an inheritance, or you sell off an asset, we can update the model to reflect your change in circumstances.

What are the benefits of cash flow modelling?

Work towards your goals

At various points in our life there are moments when we will have concerns or reservations about committing to a big financial purchase or expense. Often, we’ll wonder if we can afford it and enjoy it now, or if we should be sensible and delay for a few years until we are more financially secure.

Cash flow modelling essentially gives you the answer to this question. If you want to buy a holiday home or take a cruise around the world, the model will show you exactly what your finances would look like. Rather than delaying something you’ve always wanted to do, you might discover that your finances are already in a very healthy position – leaving you free to enjoy your hobbies and pursue your dreams.

You can also use your cash flow model to plan for eventualities that might currently be a good few years off in the future. For instance, if you want to see based on your current income if you’ll have enough money to support your children or grandchildren when they get older, we can project how much you’ll have available.

Analyse how your money is being spent

Imagine a cash flow model as a giant ledger containing all of your finances (both current and projected). You can see how much money is coming in, how much is going out and how much you have tied up in assets and investments.

It lets you make immediate decisions about whether you need to cut back on some of your expenditure or if you can afford to put more money into your investments and pension.

If your future goals aren’t achievable in the time frame you had mapped out then we can work with you to look at ways they can be. It’s possible that tax planning could increase your net income or moving some of your investments would give you a better yield.

Plan your retirement

We start saving for retirement very early in our working career but it might be years before we give proper consideration for how long we’d like to work for and how much we’d like saved up.

A cash flow model will show you what your finances will look like for any given year in the future and what your expenditure is likely to be. If you have a retirement date in mind we can show you the projected value of your pensions, savings and investments to work out if it’s a comfortable amount for you to retire on. If not, we can calculate how much extra you will need to put aside to reach the figure you have in mind.

You might even find that you are more financially secure that you thought and can retire a lot earlier!

Factor in unforeseen events

Life doesn’t always work out as we expect. We can plan for what we think the future will be like, but unanticipated things happen along the way: both good and bad.

You could receive a sizable inheritance from a relative, or you may lose your job and be forced to downsize your house. We can’t predict what will happen, but using our cash flow model we are able to show the level of impact they would have on your financial position.

Get an insight in to your investment strategy

We put money into investments in order to save for the future. Using our cash flow model we can predict the level of growth and interest –  accounting for changes in interest rates and inflation – so you can see what your wealth is likely to look like at any future period.

This can be really valuable in deciding how much of your current income you can afford to commit to investing and also what level of risk strategy you might want to set in order to meet your goals.

Provide peace of mind

Nobody likes to think of what will happen if they have an accident and need long-term care or die unexpectedly. However, it’s comforting to know that your family will be in a secure position if something does happen to you.

Cash flow modelling can map out the value of your assets at any given point in the future. If you want to make sure you have enough money put aside in case you need to pay for care or help your children to buy their first home, then we can provide support. The cash flow model also allows you to make tax planning decisions, such as reducing your inheritance tax liability in the event of your death.

It’s important when building a cash flow model that all your financial positions are up to date, so the initial stage is just the start of your journey. We will work with you to review and re-forecast the model any time your situation changes or you want to set a new financial goal. At Liberty Partnership, we’ll help you live the life you want to lead.