Lifetime cashflow can improve lifestyle plan

By MAX HORNE
Published on Sunday 19 February 2012 00:00

THE question that most people want an answer to, but are afraid to ask is, “Can I maintain my lifestyle without running out of money?”

Most people simply don’t want to ask this question because they know that the probable answer is that they will have to alter their lifestyle in retirement to make sure they don’t run out of money!

It doesn’t have to be this way. A good financial planner can produce a lifetime cashflow for an individual and it will show them the “hotspots”. This is when money will be tight and needs to be replenished from either downsizing a house or simply altering those plans that were going to provide that dream retirement.

If I need to alter my retirement plans, how will these changes affect my lifestyle? Will I have enough income during my retirement?

Of course, an individual shouldn’t wait until they are going to retire to get a lifetime cashflow done, the time to do this is as early as possible during their working life so that they can alter their savings and expenditure patterns to make sure there is going to be enough money when they stop working to cater for the income requirement in retirement. For example, you may need to cut back slightly on doing different things. What would be the effect of not buying that new car next year but waiting a year? What would be the effect of putting an extra 10 per cent into pension plans and savings?

A lifetime cashflow will also identify the cash shortfalls that would happen if you were off work through being sick or hurt for long periods of time and where you rely just on state benefits with no income protection insurance.

Of course, the other big area is that it identifies what would happen if you died. Could your dependants live in the same lifestyle you have created for them?

If I needed to stay in a nursing home in later life, how would this affect my finances? Would I run out of money and would I have to rely on the State?

It is true that most marital arguments are over money but it is simply because they are failing to plan.

Proper financial planning is all about making sure that you have got enough money to cater for the lifestyle you wish to have.

Wouldn’t it be great to know that you could afford to do everything you hoped and dreamed for without having to worry about money. It would then be a life full of no surprises, no money worries, no arguments, life would be good!

A skilled financial planner, using lifetime cashflow modelling, can answer the question, “Will I run out of money?”

Max Horne is an IFA with Max Horne Group

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