The biggest question that we face from our clients is ‘Will I run out of money?’
The problem with this question is we obviously don’t know how long someone might live or what financial challenges lie around the corner. However, we can use some assumptions to build a picture using our own formula based spreadsheet system. We lovingly call this our Thomas and Thomas ‘Pro-Flow Model’.
We start by recording how much capital you have available and how much income you expect to receive from other sources. We then ask how much you expect to spend and target the shortfall.
We will link the shortfall or ‘required income’ to inflation and then run our own investment models against the shortfall. This helps us to give you a detailed analysis of your projected reducing or increasing assets over time.
Cash flow modelling isn’t a panacea. Life can never be fully predicted. However, we find our ‘Pro-Flow Model’ tool a great sanity checker to back up your financial plan. If the exercise shows you are going to run out of money – we may want to adjust our joint expectations about your future income.
The simple answer is that cash flow modelling is only as accurate as the data we feed in to it. This is why we constantly strive to revisit and review your financial plan. Promising to catch up with you once a year to re-run the numbers if necessary and check that you are not likely to run out of money. We have built up many years’ experience in helping our clients not to run out of money. We believe that our ‘Pro-Flow’ form of cash flow modelling is particularly valuable to our clients as it has a human element and is flexible to their ever changing circumstances.