What is Cash Flow Modelling?


Model your financial future: Will you have too little, too much, or just enough money?

Find the Best Life Insurance Plan for You

Get free quotes and compare life insurance policies.

Lifetime cash flow modelling is at the heart of our life insurance financial advice. Cashflow modelling is used to forecast your financial future and is a snapshot of your current financial situation based on all your assets, investments, debts, income and expenditure, projected forward, year-on-year. The graphs give us a visual understanding and show you how much money you could have in the future and whether you are on track to achieve your goals.

In brief, it allows us to ask the three big questions:

  • What happens if …….?
  • Will I be all right if……….?
  • Can we afford to……….?

By building a model based on your wealth, assets and liabilities, now and in the future, we can get a real insight into how life events will impact you and your family.

We can build a financial roadmap and factor in certain’ what ifs’ along the way:

  • disability,
  • retirement options,
  • weddings,
  • downsizing,
  • holidays,
  • bank of mum and dad etc.

By giving you a visual understanding of your financial situation, now and in the future, we can put insurance in place that supports your lifestyle and protects your assets, so you can live the life you want with the money and budget you have.

What are the benefits of Cash Flow Modelling?

  • It gives a client a graphical picture of their financial future.
  • It provides the context in which clients can make informed decisions.
  • It can highlight retirement funding shortfalls.
  • It allows the client to map out different scenarios.
  • It can give peace of mind.

What sort of scenarios can we map out?

The first step is to collect information about your monthly income and outgoings, savings and other assets. Then, your financial advisor will analyse this information and your future goals and requirements, taking into account life events such as your retirement, downsizing your home, one-off expenses like gifts to children and buying a new car, and even your death.
  • Do I have enough disability protection if suddenly I can no longer work?
  • Can I take early retirement?
  • Will my expected retirement income sustain my required spending levels over the longer term?
  • Should I sell our investment property or keep the rental income coming in?
  • What effect will downsizing the family home have in later life?
  • Will we be able to afford a holiday home in later life?
  • How much life insurance do I need?
  • How much life insurance does my partner need?

Financial planning is a journey, not a destination

A picture says more than a thousand words. And a financial picture gives clarity if any shortfalls might occur and make appropriate plans. A personalised graph representing a snapshot of your current financial situation helps us be very specific about your future finances. How we can use insurance to protect your assets and make sure you can retire comfortably. Cash flow modelling is a living document and should be a core part of your half-yearly/yearly financial review. Your circumstances will change each year, so this will need to be updated. However, even small changes can make a big difference in the long run.

How accurate is cashflow modelling?

Cashflow modelling helps your financial advisor make sensible assumptions about your future finances. Of course, it can’t be completely accurate like any forecast, but it can identify trends and show you if you are on track to reach your goals. Many people review their forecasts each year and check their progress.

The power of cash flow modelling is in handling a lot of complex information and turning it into a simple graphical output. Using a single cash flow modelling chart helps clients make better financial decisions.

Related Articles