Cashflow planning

Cashflow planning enhances financial security

The old adage of ‘fail to plan – plan to fail’ has never been as relevant as it is today. There is now less state support available than ever at key life stages, such as retirement, ill health, death and loss of employment.

Given that predictable personal cashflow is fundamental to our sense of financial security and peace of mind, it’s perhaps surprising that many people focus mainly on short-term cashflow. After all, the sustainability of any desired lifestyle requires enough after-tax income to at least match expenditure over the short, medium and long term.

Lifetime cashflow planning uses techniques designed to help you think in the longer term – building commitment to a plan that will protect your future interests. It is of tremendous value to people who wish to:

  • Become and remain financially well organised
  • Determine their lifetime goals
  • Create a lifetime cashflow plan
  • Control their tax liabilities

How does cashflow planning work?

Cashflow planning takes account of all the factors and events that may influence your life along the way. We can model the effects of pretty well any financial action or change, at any point in time. This helps you to answer unknown future questions, such as:

  • When can I afford to make the choice to carry on or to stop working?
  • If I give some of my money to my children, will I still be able to live comfortably?
  • What rate of investment return do I need to achieve my objectives?
  • Will downsizing our home in the future release enough cash to support or fund my retirement?
  • What is the inheritance tax bill likely to be for my estate and are there ways of reducing it?
  • If I die or get seriously ill, what will be the financial outlook for my family?

Cashflow planning in practice

A cashflow planning exercise typically starts with a discussion, leading to a personalised report that:

  • Presents a clear and detailed summary of your financial arrangements
  • Defines your version of the ‘good life’ so you can start working towards it
  • Sets out a path towards achieving and maintaining financial independence
  • Quantifies the capital and income required to meet the financial consequences of the death or disablement of you or your partner
  • Identifies opportunities to minimise tax liabilities
  • Analyses future income and expenditure using assumptions agreed with you
  • Creates an investment strategy tailored to short, medium and long-term aims, taking account of your attitudes to short-term volatility investment value
  • Raises awareness of tax issues likely to arise as a result of the death of you or your partner

Review and tactical changes

For any number of reasons, no plan stays perfectly on the course originally designed. So it’s important that you review your plan periodically, consider any adjustments and keep your sights set on your intended goal.

The frequency of review and significant changes to plans needs to be carefully managed. Too many short-term adjustments may cause the plan to go from one extreme to another. Too few adjustments and the plan will soon be out of date. The aim is to follow an investment journey in keeping with the volatility anticipated for the level of risk of the solutions selected.

Cashflow planning gives Logic Wealth Planning a tool for creating and keeping your financial plan on track when the tides and winds of life conspire to blow it off course.

Just like the business plan of an organisation, cashflow planning is of no value if the resulting financial plan is filed away, ignored and neglected as life moves on and circumstances change. This is one of the reasons it works so well with life-focused financial planning methods, which align closely with your life story to encourage full commitment to the plan over the long term.

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Logic Wealth Planning Limited is Authorised and Regulated by the Financial Conduct Authority. Registered in England and Wales number: 4206195. Registered Address: 18/19 Salmon Fields Business Village, Salmon Fields, Royton, Oldham, OL2 6HT. Trading address: Sigma House, 9 Southgate, Cross Street, Off Green Lane, Heywood, Greater Manchester, OL10 1ND. Telephone: 0808 1234 321.