An overview of what cash personal cash flow modelling is, how does it works and the benefits.
What is cash flow modelling?
Cash flow modelling is a tool used by Lifestyle Financial Planners to help clients understand their current financial position and their future financial position by generating a graphical, financial planning forecast.
In short it shows a client whether or not they may run out of money in the future, whether they may have ‘too much’ money, when they may be able to retire or if they can afford to treat themselves to a luxurious holiday or other big expenditure.
How does it work?
The actual forecast is created by the financial planner. However the key to generating the most effective plan is reliant on the financial planner asking their clients the right questions first.
The questions must focus on the client, taking into consideration the client’s goals, objectives and aspirations.
Examples of effective questions are:
- What is the client’s level of income and expenditure?
- Are they expecting any changes to their incomings and outgoings, for example receiving an inheritance?