Future-proofing your finances

The unknowns in your financial outlook can always shift, especially when you come up to retirement.

One of the best tools for looking at the future is to use long-term cash flow planning to project your likely long-term expenditure and the income required to meet it.

At this point, you may not be able or wish to continue working to shore up against future financial challenges, so you will need to think about how stopping or reducing work will impact on your lifestyle and spending habits. For example, you may have paid off your mortgage, but you might want to move to another property or settle elsewhere.

Working out what expenditure is essential (such as utility bills) and what could be dropped if the financial resources dip (such as eating out) is a useful first step. These outgoings will need to be covered by your income and capital resources, including earnings from work, state and other pensions and rental income, as well as total returns from savings and investments.

Cash flow projections pull together these possible expenditure and income outcomes to show whether you are likely to have a deficit or a surplus over your expected lifetime. A surplus could allow you to increase your expenditure, such as making gifts to your family.

A deficit forecast may mean you should reconsider your spending plans and see where you can make cost savings. If you have the choice, you might want to rethink your retirement date and focus on additional pension or other saving.

It is hardly surprising that long-term cash flow modelling has grown into one of the most valuable planning tools.


The value of your investments, and the income from them, can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

Investing in shares should be regarded as a long-term investment and should fit with your overall attitude to risk and financial circumstances.

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