In times of high inflation, it’s common for you to be wary of how much money you spend. This is a completely normal thought process, but have you ever thought that you might need to spend more money?

Underspending, especially in retirement, can be an issue for many clients. It means you don’t do all the things you dreamed of with your life, and it could mean you simply leave an Inheritance Tax (IHT) problem for your loved ones when you pass away.

One effective method to ensure you can manage your spending is to create a cashflow plan. With a cashflow model in place, you can see your future financial situation in black and white, giving you the confidence to spend without worrying about running out of money.

Read on to discover the great benefits of a strong cashflow plan, and how it could help you to go through life without the fear of running out of money.

Cashflow plans examine your financial situation and help you plan your future

As the name suggests, cashflow planning is a concept that looks at your income and assets over a specific period of time and forecasts any future earnings and expenses you may incur.

A cashflow plan takes your financial objectives into account, as well as your financial needs, such as retirement plans or helping out family. It can also consider factors such as inflation and varying investment returns.

The cashflow model takes all your assets and expenses into consideration, and helps you determine how to effectively work towards them without the risk of damaging your short- or long-term lifestyle.

Not only does this bring clarity to your financial goals and the steps you need to take to achieve them, but it also shows you how much money you’ll have left over to live the life you’ve always wanted to.

The 3 main benefits of a cashflow plan

1. It could help you avoid not living life to the full

During difficult economic circumstances, like those we’re currently seeing, saving is important. You don’t want to run into an unforeseen cost that you haven’t saved for and end up in excessive debt.

However, there is a fine balance between saving and spending – if you save too much, you could run the risk of not living life to the full or dying with a large IHT problem.

This is where a cashflow plan really starts to shine. A well-thought-out cashflow plan can model several different “what if?” scenarios, to establish how your decisions could affect your finances.

Of course, it’s impossible to predict what the future holds with any certainty. Even so, a cashflow plan can help you develop your financial decisions from an informed position, instead of basing them on guesses and assumptions.

This is why, by working with us, we can help you to build your very own cashflow plan so you can get the peace of mind that you can afford to spend. After all, you don’t want to miss out on life’s excitement by over-saving.

2. Gifting money could help you avoid large Inheritance Tax bills

Another reason you may want to think about spending more money is to avoid paying an excessive IHT bill when you pass away.

As of August 2022, the standard IHT rate stands at 40%. Of course, there are already ways to mitigate IHT – for example by making gifts or using trusts.

Another more obvious method to reduce a potential IHT liability is simply to spend more while you’re alive. Cashflow planning can, again, help to model what you can afford to spend without the risk of running out of money in later life.

For example, you may want to gift some of your wealth now, or you may want to go on a round-the-world trip you have always dreamed of. Cashflow modelling can help you to work out whether these goals are possible and, if not, the steps you can take to achieve them.

3. Cashflow plans could help you get involved with a good cause

There is almost nothing better than seeing the beneficial impacts of your wealth while you’re still alive, so what better way to do so than by donating to a good cause?

This could be a local charity that deals with an issue close to your heart, or an international non-profit that aims to help the wider world.

Again, a cashflow plan can establish what level of philanthropy you can sustain, taking all your financial variables into account. It ensures you can support all the causes you care about without putting your own financial position in jeopardy.

Get in touch

Cashflow plans are a great way to earn some peace of mind amid such economic uncertainty. Those of you who have been with the firm for some time will likely already have a robust model in place.

If you have recently joined alongside James Blacklaw and would like to discuss how a cashflow plan could help you plan your future, please email James directly at jblacklaw@caltonwm.com or call on 01721 729 402 or 01313 786680.

Please note

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.