If you’re new to investing, you might not even know where to start. There are so many different strategies and if you’re uninformed, you could make some wrong decisions. When you’re first starting out, it’s important to take the time to determine what it is you’re trying to achieve with your investments.
This does not constitute advice and advice should be sought in all instances before acting on it.
Do you want to grow your wealth long-term or are you hoping for more immediate returns? Working towards a goal helps you make the right investment decisions and financial choices, in general.
Cash flow modelling
One way to help control your finances is cash flow modelling. It’s a model of your income and expenditure so you can easily see where your money is coming from and going to so you can make more informed decisions about your finances.
Here are a few benefits of cash flow modelling:
- Enables you to have a clear understanding of your financial situation.
- Helps you identify areas where you may be overspending thereby allowing you to discover money-saving opportunities.
- Empowers you to make more informed decisions about investments and other financial commitments.
- Lets you set realistic financial goals.
Peek into your financial future
Cash flow modelling gives you a visual representation of your financial future, giving you an illustration of what could happen to your finances. By seeing what your future could look like, you can devise a plan that ensures you make the most of the money you have while also building your wealth and meeting your financial objectives year after year.
By going through this process you can compare your current and future financial position through analysis of your current and forecasted wealth as well as income flow and outgoing expenditures. You’ll be able to see all of your assets — your investments, debts, income, and expenses — projected forward so you end up with a detailed picture that was created using calculated rates of growth, income, inflation, wage rises and interest rates.
Looking at your financial journey in this way enables you to implement a detailed plan that outlines how to deliver your financial future.
When you first create your initial cash flow model, it’s calculated with rates of growth, income, tax, etc. that are assumed. It’s important you’re made aware what assumptions have been made in the making of your plan. This is also why you need to review it regularly, so that you can make any adjustments necessary to ensure you remain on track.
Let’s talk numbers
A lot of your decisions will be influenced by what is within the cash flow. It informs how much you save and spend and guides your investment choices, which can be a lot to manage, so it’s important to stay on top of things.
At financial crossroads, be sure to return to your cash flow model and run through the numbers.
It helps to have goals that are specific. You can’t just say that you want to have enough to live comfortably during retirement, you have to create a goal for a certain number. By focusing on something specific it’s easier to come up with a plan that will help you achieve your goals.
Work with a professional
To ensure that you continue to meet your desired lifestyle goals, it is important for us to regularly review your financial plan and make any necessary amendments should your personal circumstances change.
It’s always a good choice to review your finances, so get in touch with the experts at Dental & Medical Financial Services today.