Your financial situation is likely to change as you get closer to retirement. In order to prepare for the future, long-term cash planning is essential. Estimating your likely spend and potential sources of capital over the coming years is a good place to start when preparing for retirement – even if it feels like long time away.
Balancing the equation of expenditure and sources of capital becomes more important if you think about how reduced hours will impact on your spending habits. Major considerations include:
- Housing – Have you paid off your mortgage? Even if you have, you may want to move to another property or area.
- Travel plans – Retirement often becomes a time for high levels of travel, social life and pursuing interests in other countries.
Your expected levels of expenditure will change depending on your own preference. These preferences help to define which expenditure is core and essential, such as utility bills, and what could be dropped, such as eating out regularly.
The other side of the equation is assessing how your income will meet your expected outgoings. This may be your earnings from work, personal savings, state pensions and investments. While planning your income sources, you should explore a range of different scenarios with different sources of income, ranging from positive to more pessimistic. This will show whether you are likely to have a deficit or a surplus over your lifetime.
If your income source mapping shows that you will have a surplus, you can consider spending more money. Perhaps you may want to provide your family with gifts. A deficit, however, means that you should reconsider the different factors in the financial equation to see how you can reduce costs or increase your financial savings.
Long-Term Cash Flow
Long-term cash flow modelling is one of the most valuable tools for financial planning.
KLO Financial Services can support you with long-term cash flow modelling so that you can prepare for your retirement. If you are interested in seeing what we can do for you, talk to one of our experienced financial planners today by calling your local office.
It is important to note that the value of your investments and your income may go down as well as up. Past performance is not necessarily always a reliable indicator of future performance.