Have you ever asked yourself…
These are just some of the many financial decisions which can be made easier with the right tools.
At Equilibrium, we believe a robust financial plan, bespoke to your circumstances, can empower you to make better financial decisions so you can:
- Live the life you want
- Look after those you love
- Leave a powerful legacy
In order to do this, we use cash flow modelling as a key element of our service which is essential to the work and advice we provide.
It applies a scientific approach to a subjective area of financial planning, providing a ‘road map’ that illustrates how likely you are to achieve your objectives, and what planning, if any, may be required to make these objectives more achievable.
What is a cash flow forecast?
Put simply, it’s a projection of your finances, showing money coming in and going out with a resulting cash balance.
It involves looking at your assets, investments, debts, income and expenditure. We then project these values forward over a set timeline using assumed rates of investment growth, inflation, and interest. It can be simple or complex but this will depend on your circumstances and objectives.
As such, a cash flow forecast is an interactive plan that accounts for all these factors and makes the future tangible by plotting the direction you wish to go.
How does it work?
The cash flow plan is a dynamic model that we review at least annually to see how its playing out in reality and as a means to check you are on track to meet your objectives.
Let’s take a closer look at the steps we take:
Beware of GIGO
GIGO stands for ‘garbage in, garbage out’.
A cash flow model is only as good as the information that goes into it, therefore it is important to consider all your financial circumstances (positive and negative) and ensure these are kept updated with any changes to your circumstances.
In order to rely on the outputs for important decision making, it is essential the data which is added and the assumptions upon which the projections are based on are correct and realistic.
For many, seeing the financial future mapped out provides great peace of mind (see one of our testimonials here).
Firstly, it eliminates the initial ‘stuck’ feeling that comes with uncertainty. Knowing whether or not your current income and expenses are sustainable will allow you to make life-changing financial decisions with confidence. It will also shine a light on any current shortcomings, helping you to better prepare for the unexpected.
Focusing on the short-term alone makes it difficult to consider opportunities that stretch out into the future. When financial security is not guaranteed, decisions such as taking a year of annual leave, investing in property, going on a dream holiday or making gifts to your loved ones become even more challenging.
These complex situations require tailored solutions. Having a proper plan in place can provide greater clarity about your financial position, enabling you to make more informed decisions, and seize any unique opportunities available to you.
