There’s a fine art to getting financial planning right. There’s certainly more to your money than numbers… your family are certainly not numbers, and (say it with me) you are not just a number! Financial planning means looking at you as an individual, in unique circumstances, and figuring out how to make your dreams come true. Sound a little romantic? Well yes, but hear me out.
Some people give themselves the goal of hitting a golden number, for our purposes let’s call that number the Magic Million. They diligently save, invest and strive for that Magic Million target. They push themselves, they learn, they work hard, they sacrifice to get to there. The day comes when the Magic Million is reached, they celebrate, all their hard work has paid off… but now what? The figure itself means nothing at all without a plan, and with all that hard work don’t you want it to mean something?
Making dreams come true
Planning to hit an arbitrary number is simple enough for anyone with a calculator to do – but we are not planning for a number, we are planning for a life of fulfilment, a life worthy of your hard work, one where you can look back with pride at a life well lived.
Financial Planners have a wealth of resources to assist in crunching the numbers and turning them into something meaningful. One of the best tools in our kit is cash flow modelling. Cash flow modelling uses a plethora of mathematical wizardry and assumptions to plan out every penny throughout the rest of your life. It provides a visualisation of your financial health both now and in any number of alternative scenarios. Dream of retiring early? Cash flow modelling has that covered. Dream of starting your own business? Cash flow modelling has that covered too. Dream of building a mansion with a chic indoor ostrich farm? Interesting choice… but yes, cash flow modelling even has that covered.
Whatever your goal, whatever life you wish to live, no matter how big or small of a dream, in the hands of an expert financial planner cash flow modelling can give you a timeline and a plan to get there. If you’re on the right track it will give you the confidence and peace of mind to know your dreams are achievable. If not, it will provide insight into the choices you can make to bring your dreams to fruition. As your life unfolds so does your model, bringing you closer and closer to the life you aspire to and highlighting any course corrections required along the way.
Managing money behaviours
Unhelpful learned behaviours can derail the best of well-intentioned plans. As humans, we are the product of our environment and experiences. This is often an advantage. Having strong determined parents can install a hardworking nature in us. Growing up around confident older siblings can spur us on to take risks and believe in ourselves. A kind-hearted aunt can help teach us compassion towards others.
As all coins have two sides, so do our learned behaviours. If we grew up in a family that had to watch the pennies, we may find ourselves working longer than is necessary for fear of someday running out of money. Or perhaps our family life was full of luxury and now we are frivolously spending, keeping up with a standard of living that we are accustomed to. Both can be equally detrimental to success.
There is ‘no one size fits all’ right or wrong answer here – solutions arise from individual circumstances and are completely unique to you. Cash flow modelling is an excellent tool for showing you where your current behaviours are leading you and the impact they have on achieving your dreams. A well thought out cash flow model will demonstrate that even simple tweaks to your habits can have a huge difference on your quality of life. And who doesn’t want to live a happy life?
Planning for the unexpected
But what about when a plan doesn’t go to plan? Stress testing your plan is as important as having one in the first place. Who could have seen Covid-19 coming and the economic impact it is having on all our lives? Planning for the unexpected can be tricky – after all, no one expects the unexpected. However, cash flow modelling provides a crystal ball to show how you might weather life’s unexpected storms. By using a variety of reasonable assumptions, we can project how your financial health will be impacted by market crashes, or even the loss of a loved one. Your model can highlight any weaknesses in your long term financial plan, and with the support and advice of your EQ financial planner you can take steps now to be ready for the future, whatever it brings.
A Magic Million won’t bring you long term happiness, but financial security to live the life of your dreams will. Contact EQ for more information about cash flow modelling and how it can help you.