Financial forecasting / lifetime cashflow analysis - an introduction
Lifetime financial planning done properly has to include a fluid financial forecast created using sophisticated planning software. The tool of choice for Maven Adviser is Voyant.
Voyant is incredibly powerful. It enables us to create multiple 'what if' scenarios based on your unique financial situation, life goals and ambitions. These scenarios enable us to produce a final, detailed plan that not only reflects your current needs, but can be adjusted in the future as your life changes.
Voyant is the bedrock of our financial planning business and it enhances all our client relationships.
Becoming a master of this software is a long journey. It takes the professionals years. Our Chief Maven, Andy Hart, is a recognised Voyant 'guru' and teaches other Financial Advisers how to use this software to achieve maximum results.
How does cashflow planning software work?
Real life is unpredictable and ever changing. So an important feature of this software is it that it is completely collaborative and fluid.
The software works by calculating anything that requires time, money or planning to achieve. So the more detailed you can be, the more strategic and realistic the planning will become.
To start, we enter your raw financial data:
- Employment earnings
- Business income
- Rental income
- Trust income
- Investment income
- Pension income
We then look at your current and future expenditure:
- Household fixed expenses
- Household discretionary
We then add assets:
- Your home
- Investment properties
- Business assets
- Trust assets
- Personal affects
And finally, liabilities:
- Credit cards
In order for the outcome to have meaning we use certain assumptions on the items entered. This is where our expertise comes into play. The three most important assumptions used in private client long-term financial forecasting are:
- Inflation (applied to all items)
- Investment returns
- Cash saving returns
Once all the raw data and assumptions have been added, we can begin the process of examining the outputs and see how close you are to achieving your lifetime goals.
Questions that lifetime cashflow software can answer
- Am I saving enough for my retirement?
- Can I quit my job now?
- Can I retire early?
- Can I work part time and then retire in five years' time?
- Can I give my daughter £30k to buy a house - will I need this money later?
- What investment return today do I need to never run out of money?
- If we both died tomorrow how much death tax would we owe? And what can we do about it?
- How much more do I need to save to hit my target?
- How much more can I spend to die penniless?
- If I got hit by a bus tomorrow how will this affect my plan and my family?
- Do I need more life insurance?
- What (or even how much?) do I need to sell my business for, so that I become financially independent?
- What’s the minimum income I need to earn to survive?
Building your plan is just the first step; the real value is in proactively maintaining it as your needs change.
I'll update your plan annually, unless there's been a serious life event - for example critical illness, family death, redundancy or divorce.
Creating 'what if?' scenarios
Voyant plans enable you to chart your progress - you can see how much you've achieved and where you're heading. But they also enable you to manipulate the data to show alternative scenarios. These scenarios take minutes to update using Voyant, when traditional alternatives would take days.
Voyant creates a carbon copy of your original plan so that you can compare both to see what would make the most sense to implement.
Money is an emotionally confusing subject. Using Voyant enables me to create the peace of mind you need to feel comfortable with your financial future.