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For many of us, the prospect of finally leaving work for good and focusing on the aspects of life they truly enjoy is a wondrous dream. Just imagine it now; leisurely days filled with holidays, quality time with your grandchildren and the ability to embark on whatever whim takes your fancy. Now imagine doing that before any of your peers. Sounds like bliss, but is that even possible? Believe it or not, I can show you how to retire early; the answer ultimately boils down to how prepared you are.
It is a general misconception that those whose retirement is akin to a utopia are wealthy. There may be some truth in this, but actually the people who can afford to live out their final years in comfort are simply financially prepared. I am sure that anyone who regularly reads our articles will know what I am going to say next, but for those who are new to our writing; ‘people do not plan to fail, they fail to plan’. If you are not prepared for the future, how can you expect to enjoy it earlier than expected? However, feeling secure about your future goes a little deeper than just planning, as life has a knack of throwing in the odd unexpected situation. No one knows what is around the corner. So how can you successfully plan for it? Crystal balls may help you to see into the future, but they are not always reliable! What you need is a mechanism that will set out multiple scenarios about what could happen to your money and where that would leave you. I am delighted to tell you that this tool does exist.
If you would like to know where you are heading financially, and let us be honest- who wouldn’t, Lifetime Cash Flow Forecasting is the tool for you. So what is it and how does it work? Lifetime Cash Flow Forecasting is a tool that allows you to understand the impact that the decisions you make today will have on your future finances. Essentially, it provides you with a very visual display of how your future finances will look, both from a cash-flow point of view (will I have enough money to pay my out goings) and from an asset point of view (how much am I worth). Not only is every aspect of your finance today taken into account, hypothetical situations are also factored in from your likely future, along with assumed interest, inflation and growth rates. This means it becomes your unique Lifetime Cash-Flow Forecast that best reflects your future and even better, it will show you how much money will need in retirement, meaning that you will be able to see if and how you can retire early.
Once the core Lifetime Cash flow Forecast is built, you can immediately identify years ahead when cash flow will be tight, as well as how your net worth is likely to change throughout your life. Once we have this core model, we can start to look at how changes you can make along the way change your future finances very easily. These ‘what if’ scenarios can be anything, for example ‘what if I need long-term care for 10 years’? ‘What if my daughter needs money for a house?’ Or even ‘What if I want to go on holiday twice as often?’ This tool can factor in endless scenarios, probabilities, likelihoods and demonstrate how they are likely to affect your cash-flow and overall wealth.
One of the greatest examples of how this benefits our clients is in the lead up to their retirement. It helps people understand how much money they will have at retirement, and more importantly, how much they will actually need. No one wants to be the richest man in the cemetery, but you also don’t want to run out of money either and you very often want to leave a legacy to your loved ones. This is a fine balance. Lifetime Cash-Flow Forecasting can often allow people to spend more; not the advice they would normally get from their financial adviser. It also often allows people to take less risk with their investments because they realise that less growth is still going to give them everything they need, with less risk of it going wrong.
Another example may be a client who has to plan for school fees whilst trying to ensure they can enjoy nice holidays with the children when they are growing up. The Lifetime Cash Flow Forecast could show that they can afford to put their retirement planning on hold for a few years and deplete their investments in order to facilitate this, whilst not preventing them from having enough in retirement. This information could be so valuable to the lives of them and their children; certainly more than money could normally buy.
These two examples may seem very different, but they actually deliver exactly the same result; peace of mind and clarity of how today’s decisions will impact their future. Lifetime Cash-Flow Forecasting ensures that you are financially well organised and prepared for any eventuality or unexpected situation. It will also prevent you from running out of money in your later years and make sure that you are taking the appropriate level of risk with your funds. It can also be reviewed as often as you need it to be (typically once per year, but this is not set in stone), so if anything changes, you can immediately see your new strategy and implement the necessary plans.
Lifetime Cash Flow Forecasting is a vital part of sound financial planning. It delivers clarity to your future and allows you to make realistic plans that are in line with your actual life, not a ‘model’ one. Our clients are really reaping the benefits of this tool and feel empowered that they can make more financial decisions on their own. It is also comforting to know that you can look forward to your retirement and completely understand when and how you can retire early.
Getting older might make you feel like you are slowing down. Do not be fooled into thinking this is cognitive decline, you have so much information in your brain that it takes more time to access it! You can be stronger and happier in your retirement than ever before. Life is an adventure, you can expect change and embrace it. Learn the right time to retire, how to boost your retirement income and create your dream retirement. Follow your dreams and love what you do!
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