How “time travelling” as part of your financial plan could help you secure your goals

Published on July 16, 2024 by Blackstone

Imagine you could time travel to understand how your financial decisions today might affect your lifestyle in 10 or 20 years. You may be in a better position to turn your goals into a reality. Read on to find out how working with a financial planner could give you a glimpse into the future.

Time travel films and books offer plenty of warnings about the perils of changing the timeline – even a seemingly small change can have a huge impact. With this in mind, a “time travelling” financial plan could help you make better decisions as it could enable you to see the effect they might have on your long-term security and happiness.

The good news is that you don’t need a DeLorean or the help of an eccentric scientist to look at your financial future.

Cashflow modelling could let you see the impact of the decisions you’re making

Cashflow modelling might not sound as exciting as hopping into a time machine, but it can be an invaluable tool when you’re creating a long-term financial plan.

To start, you’ll need to input data into a cashflow model. This might include the value of your assets, like savings, investments, or property, your regular income, and your outgoings. You’ll also want to add the financial decisions you’ve already made. For instance, how much you’re contributing to your pension each month.

With the basic information added, you can make certain assumptions to predict how your assets might change over time. So, you might include your investment portfolio’s expected annual rate of return to understand how the value could change or consider how inflation may affect your expenses.

The results can then help you visualise your assets and financial security in the future. With this information, you can start to understand whether you’re on track to secure the future you want. 

In some cases, you might identify a potential gap, which could lead to you adjusting your plans or making changes to your finances now so you can reach your goals. Again, you can use cashflow modelling to assess changes.

Adjusting your cashflow model may help you understand alternative outcomes

One of the most useful benefits of cashflow modelling is that it doesn’t just allow you to see the outcome of the actions you’re already taking. You can also model other scenarios.

So, you could see how adjusting your decisions now might improve your ability to reach your goals or even make aspirations you previously thought were out of reach achievable.

For example, you could model how:

• Retiring early may affect how much you can withdraw from your pension sustainably
• Increasing your pension contributions might afford you a more comfortable retirement
• Using your savings to travel the world now may impact your long-term financial security
• Boosting your regular investment contributions could grow your wealth over a long-term time frame
• Gifting inheritances to your children and grandchildren now will affect the value of your estate in the future.

As a result, using a cashflow model to understand the long-term implications of alternative options could help you find the right approach for you. Understanding the various possible outcomes may give you the confidence to adjust your actions and stick to a long-term financial plan.

It’s not just your behaviours you can model either, but unexpected events or changes outside of your control. Understanding the effect of a market downturn or period of illness where you are unable to work might enable you to create a safety net that offers you peace of mind.

Of course, the results of a cashflow model cannot be guaranteed and factors outside of your control, such as investment volatility, might also affect the outcome. Even so, it can be a valuable way to identify potential shortfalls or opportunities.

Contact us to time travel and discover how you could reach your goals

If you’d like to take a look at your financial future and understand what it could mean for your lifestyle, please get in touch. We can help you assess how the decisions you make could affect your goals.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate cashflow planning.