What is Cash Flow Modelling in Financial Planning?

‍What is Cash Flow Modelling?

Cash flow modelling is an essential tool for financial planning, as Private Wealth Managers help clients plan for their future financial needs and goals. By creating a detailed cash flow projection, we can help identify potential cash shortfalls, determine the amount of savings required and evaluate the impact of different financial decisions.  

With a quick data analysis, you will have a clear picture of your wealth as it grows over time. The analysis takes into account your current income, expenditure, debts, investments and assets. It also considers factors outside your control, such as inflation, market growth and interest rates. This results in a full-picture projection of your finances based on all available data.  

We review your Lifetime Cashflow Model annually and can monitor the progress of your upcoming goals and your retirement plan down the line. You will be able to notice patterns, test out ‘what if’ scenarios in a fail-safe environment and seize opportunities you once thought were out of reach.  

How does the Cash Flow Modelling Process work?

A Private Wealth Manager begins with a detailed consultation to gather relevant information about your assets, current income and expenditure, and your goals for the future. This step is crucial because it allows us to fully understand your priorities and aspirations, as well as your attitude to risk in order to build a comprehensive profile.

The profile is based on a number of factors, including:

• Current annual income and expenditure
• Assets and investments
• Liabilities, including loans and mortgages
• Income protection and life cover
• Desired retirement age, lifestyle and income
• Expected future windfall and expenditure 

Your profile will help us make informed assumptions about your financial standing and other external factors such as projected market growth and inflation rates.  

Once this profile is complete, we input the data into a market-leading cash flow modelling software to create a visual chart of your lifetime cashflow. As your circumstances change, this cash flow model will be reviewed regularly so that you always have the most up-to-date version.

What are the Benefits of Cash Flow Modelling?

There is no greater peace of mind than to be able to have a clear view of your financial future.  

Understanding if your present income and expenses are sustainable can give you the confidence to make life-changing financial choices. Most importantly, it can help you identify any current shortcomings so that you can prepare for the unexpected.  

With the help of a secure testing environment, we can help you model different scenarios and assess their impact on your assets.

For example, if you wanted to buy property, take a sabbatical or retire early, we can test these scenarios against your Lifetime Cashflow Model to determine if they are achievable or help you come up with a savings and investment plan that will bring you closer to your goal.

In summary, cash flow modelling enables you to:

• Save and invest more effectively
• Make informed financial decisions
• Protect your assets
• Plan for your retirement 
• Prepare for unexpected scenarios
• Explore and enjoy opportunities 
• Minimise risk and liabilities
• Realise your full financial potential 
• Make the most of your wealth

Elmira Donald, our Private Wealth Manager at Melbourne Capital Group, offers her expertise to individuals of varying ages and backgrounds to help structure and establish financial plans. Please don’t hesitate to contact her today on +60 17 600 4303 and elmiradonald@melbournecapitalgroup.com or fill in the form below.

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