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Finances: Income Inflows and Expenditure Outflows

Creating a picture of your finances, now and in the future

It’s important to evaluate your current finances and your financial and lifestyle goals if you want to plan for your future responsibilities and aspirations.

Financial Planning with Fish Saltus

In order to create a successful lifestyle financial plan, you need clarity over your financial and lifestyle goals, your objectives and your motivations. An integral part of this process includes cash flow modelling. A cash flow model is used to calculate how your income, expenditure, savings and investments may be distributed over time.

This process illustrates what might happen to your finances in the future and enables you to plan to ensure that you make the most of your money to enable you to achieve your financial and lifestyle goals.

Current and forecasted wealth
Cash flow modelling shows your current position relative to your preferred position and your goals by assessing your current and forecasted wealth, along with income inflows and expenditure outflows to create a picture of your finances, now and in the future.

This detailed picture of your assets should include your investments, liabilities, income and expenditure, which are projected forward, year-by-year, using calculated rates of growth, income, inflation, wage rises and interest rates.

Meet your investment objectives
In order to implement a detailed plan that outlines how to deliver your financial future, communication is vital. To ensure that, over time, you achieve your desired lifestyle goals, it is important for us regularly to review your financial plan, at least annually, and make any necessary amendments should your personal circumstances change.

Cash flow modelling can determine what recommendations and best course of action are appropriate for your particular situation and the right asset allocation mix. The growth rate you require is calculated to meet your investment objectives.

Analysis of different scenarios
This rate is then cross-referenced with your attitude towards risk to ensure your expectations are realistic and compatible with the asset allocation needed to achieve the necessary growth rate.

Where cash flow modelling becomes particularly useful is the analysis of different scenarios based on decisions you may make – this could be lifestyle choices or perhaps investment decisions. By matching your present and expected future liabilities with your income and capital, we can make recommendations to ensure that you don’t run out of money throughout your life.

How much to save, spend and invest
A snapshot in time is taken of your finances. The calculated rates of growth, income, tax and so on that are used to form the basis of any cash flow modelling exercise will always be assumptions. This is why regular annual reviews and reassessments are required to ensure you remain on track. Nearly all decisions are based on what is contained within the cash flow, from how much to save and spend, to how funds should be invested to achieve the required return, so there is a lot that needs to be managed.

A lifetime cash flow plan will enable you to:
> Produce a clear and detailed summary of your financial arrangements
> Define your family’s version of the ‘good life’ and begin working towards it
> Work towards achieving and maintaining financial security and independence
> Ensure adequate provision is made for the financial consequences of the death or disablement of you or your partner
> Plan to minimise your tax liabilities
> Produce an analysis of your personal expenditure planning assumptions, balancing your cash inflows and your desired cash outflows
> Estimate future cash flow on realistic assumptions
> Develop an investment strategy for your capital and surplus income in accordance with your attitude to investment risk, flexibility and accessibility with which you are comfortable
> Become aware of the tax issues that are likely to arise on your own death and that of your partner

Own peace of mind
With every financial corner you turn, it is important to run through the numbers, which will help you make the right financial decisions. It is important to be specific. For example, it is not enough to say, ‘I want to have enough to retire comfortably.’ You need to think realistically about how much you will need – the more specific you are, the easier it will be to come up with a plan to achieve your financial and lifestyle goals.

If your needs are not accurately established, then the cash flow will not be seen as personal, and therefore you are unlikely to perceive value in it. Some years, there may not be any change, or just small corrections. However, in other years, there may be something significant. Either way, you will need to ensure things are up-to-date for your own peace of mind, knowing your plans are still on track.

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For independent, expert advice on financial planning, wealth management, investments and more, please contact Farnham-based Fish Saltus today on 01252 931265 or complete our short enquiry form and we’ll call you back.

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GETTING FINANCIAL HELP DURING THE CORONAVIRUS (COVID-19) PANDEMIC

The coronavirus (COVID-19) pandemic has not only dealt a blow to the UK economy, many people and families have unfortunately experienced financial hardship. According to a recent survey, 31% of the population say they are struggling with their finances due to the effects of the pandemic[1].

With the pandemic causing many workers to lose working hours or their jobs, it’s more important than ever to
know what financial options you have.

UNDER-35s ARE MOST LIKELY TO BORROW
But the survey shows that the impact is not spread evenly. It appears that people aged 18-35 have experienced the most financial difficulty and are most likely to seek help from others. During the pandemic, 18-35s have been four
times more likely than any other age group to receive financial support from their family or friends. They’ve also been twice as likely as other age groups to take out a loan to make ends meet.

PEOPLE AGED 35-55 HAVE BEEN IMPACTED LESS
Those in the 35-55 age group have been less likely to need to borrow than the under-35s, and also less likely to report a worsening of their financial situation than those aged 55-65. But that’s not to say that they have it easy. Nearly
one in three people in this age group say their finances are worse now.

OVER-55S HAVE THEIR RETIREMENT PLANS DISRUPTED
Many people in the 55-64 age group have had to change their retirement plans. Income from work for one in four of these people has fallen 40%. A rise in unemployment has led to increasing numbers of people taking early retirement, with some relying on their property wealth to fund this.

OVER-65S ARE SUPPORTING THEIR FAMILIES
Over-65s have been less affected than the general population, with 17% reporting that they are struggling financially. This is likely due to their pension income, which, in a lot of cases, will have remained level. More than one in ten of those aged over 65 say they have offered financial support to family members, which is the highest of any age group.
Before providing help to younger family members, it’s important to make sure that you can afford to without affecting your standard of living. Consider how your costs might rise later in life and ensure that you retain enough wealth to cover these additional expenses.

SUPPORT IS STILL AVAILABLE IF YOU, YOUR FAMILY OR YOUR BUSINESS NEED IT
In response to the impact of coronavirus, the government agreed a raft of measures with providers across a range of sectors to ensure struggling consumers are treated fairly. For those still worried about paying utility bills or repaying credit cards, loans or mortgages due to the impact of coronavirus, support is still available. Visit www.gov.uk.

PEOPLE STRUGGLING TO PAY ESSENTIAL BILLS ARE ENCOURAGED TO:
>  Contact providers: if you think you might have a problem paying bills, contact your providers to explain the situation and receive help.
>  Ask for help if it is needed: if you are struggling with your bills or credit commitments, free advice is available. Coronavirus has affected the entire nation and many people need support now, even if they never have before.
>  Explore payment options: if you are struggling with bills, it is better to agree a payment plan with your provider/s and keep making regular instalments, rather than cancelling direct debits and letting debt build.

Top 10 tips to achieve your financial goals

10 tips to help achieve your financial goals

Time to diagnose your money situation with a financial health check?

Even if you have a solid financial plan in place, it still needs to be updated regularly to ensure it reflects any life changes. But what should your priorities focus on now? Is it time to turn your attention to your pension, your ISA, your mortgage, or something else?

Read more…