Most people fail to apply the same organisation to their finances as they do to running their lives and homes.
The result is a haphazard mess of bits of savings, investments, pensions and insurance that probably cost too much and fail to deliver the required result.
People who are serious about their money turn towards lifetime cashflow analysis to help plan their finances and control their debts and tax.
It doesn’t matter if the analysis is on special software, a spreadsheet or paper – the important move is starting the ball rolling.
What does lifetime cashflow analysis do?
Think of the process like GPS for a car. You set your current location and where you want to go, then the GPS finds the best route and offers guidance at each junction. Just like GPS, lifetime cashflow planning can foresee obstacles and offer an alternative route.
Like a GPS, it’s no good setting London or New York as a destination – lifetime cashflow analysis works best when specific objectives are set, such as a £1 million retirement fund or paying off a mortgage early.
How can I plan for 30 years ahead today?
You can’t. Products, interest rates, inflation and a host of lifetime events such as marriage, children and job changes will impact the plan.
That’s why regular reviews to monitor performance are important.
Every year or two, inflation and interest rates will need adjusting, too.
For a lifetime cashflow analysis to work effectively, the individual has to have an open communication channel with their financial adviser. If not, even if small changes are overlooked the process won’t work as designed.
How much does lifetime cashflow analysis cost?
The charge depends on each individual and how complicated their finances work out. For many, the exercise starts at £1,000 to £2,000 for the initial financial plan and an ongoing consultation or management fee each year.
Like any financial advice charge, it’s worth working out how much lifetime cashflow analysis will help. If the gain provides more than the cost, then taking the plunge is worthwhile, but if the pain of expense outweighs the benefits, then hold off.