Join the conversation where Paul Crichton, managing partner at MMG, speaks to financial planning expert Paul Lothian from Verus Wealth, as he demystifies the concept of Lifestyle Cash Flow Modelling. Learn how this essential tool can guide you through the financial implications of life’s biggest milestones, helping you map out your monetary future with confidence.

Here’s what they had to say:

Paul Crichton (PC): Could you briefly explain what lifestyle cash flow modelling is?

Paul Lothian (PL): At its core, lifestyle cash flow modelling is a financial planning tool. It projects your income, expenses, and major life events into the future. It’s like a roadmap that helps individuals and families prepare financially for milestones like retirement, buying a house, or even having children.

 

PC: How does this process typically work?

PL: We start by analysing an individual’s current financial situation—this includes their income, expenses, assets, and liabilities. Then we create various scenarios predicting how these factors might change over time based on their lifestyle choices and goals. By modelling these potential outcomes, we can help our clients make well-informed financial decisions.

 

PC: Can you provide an example where this has been particularly effective?

PL: Absolutely. Let’s take the example of a couple planning for retirement. By using lifestyle cash flow modelling, we can help them understand how much they need to save today to maintain their desired lifestyle post-retirement. We consider variables like inflation, investment returns, life expectancy and unexpected costs. It helps them set realistic financial goals, and at the same time ensures they won’t outlive their savings.

 

PC: What are the key benefits of this process for clients?

PL: First, it provides clarity and confidence. By visualising their financial future, clients feel more in control of their decisions. Second, it encourages proactive financial management, helping clients adjust their spending habits or investment strategies today for a better tomorrow. And finally, it’s about peace of mind – knowing you’re on track to achieving your financial goals, whether that’s a comfortable retirement, children’s education, or even that dream holiday home.

 

PC: It seems like a useful tool. Any final thoughts on lifestyle cash flow modelling, Paul?

PL: I’d just add that it’s an ongoing process, Paul. Life is unpredictable, and your financial roadmap should be flexible to accommodate those changes. Regular check-ins with your financial planner are essential to ensure that your lifestyle cash flow model remains an accurate reflection of your financial aspirations and realities.

 

PC: Great advice, Paul. Thank you for providing such valuable insights into lifestyle cash flow modelling.

PL: It’s been a pleasure, Paul. Anything to help people plan for their financial future!