Get in touch
Accountants & Business Advisers

Personal cash flow forecasting – the key to a secure financial future

6 November 2023

Newsletters and Updates

Share this article

The number of people aged 100 years or over in the UK has hit a record high and will only continue to rise. Data published by the Office for National Statistics in September 2023 showed there were 13,924 centenarians in 2021, an increase of almost 25% since 2011.

Advances in medical science may mean that many of us will live longer and healthier lives with perhaps our children living for as long as 130 or 140 years. A population that lives longer will present significant economic challenges for governments and for our personal finances.

Whether we live into our 80s, 90s or to 140 the need to understand and prepare for a secure financial future is critical and personal cash flow forecasting will become increasingly more important.

You are never too old – or young - to plan and prepare cash flow forecasts. Whether in your 30s expecting to live well into the next century or in your 90s deciding on how to fund your care needs or ability to make lifetime gifts, a cash flow forecast will help shape your decision-making.

The implications of longevity in the population on government and the State will be profound and it is not beyond our imaginations to see how it will struggle to provide the levels of support many of us have been used to.

At what point, for example, would a state pension kick in if it were to survive at all? It would likely be unaffordable to support a population that retires at 70 yet may live for a further 50 or 70 years. Perhaps the answer might be longer working lives with multiple careers. But what implications might that have for employers?

How would society respond to a growing population and the increased demand for housing and healthcare? Advances in healthcare will enable many of us to live long and healthy lives, but would it remain free at the point of need? Housing today challenges the Government, yet those challenges will be multiplied many times over with an aged and growing population. Perhaps multi-generational living will again become part of the housing mix.

The answer is that we simply do not know. But we can safely assume that government alone will not be able to provide the levels of support we have today. Individuals will be expected to and will need to take greater financial responsibility for their longer lives.

Personal financial forecasting

Personal financial forecasting is not new. It will be familiar to those planning for their retirement with independent financial advisers working to complex formulas to determine the amount of pension and savings an individual needs over a predictable life expectancy.

But there is a bigger picture to consider, and this is where your accountant can help. At different points in your life, a different approach will be needed. Those, for example, building their careers, perhaps in their 30s and fully expecting to live well into their 100s will adopt a very different approach to financial forecasting than an individual in their 80s or 90s.

For those in their later years, cash flow forecasting may focus on the provision of healthcare, day-to-day spending needs, financial support to family members and reducing exposure to inheritance tax.

For those working in their 50s and 60s, perhaps with school fees or a mortgage, cash flow forecasting may look to retirement, exploring the assets held, potential inheritances and whether they should bypass mum and dad for the benefit of children, the appetite to downsize to a smaller property and any future significant costs such as weddings, family holidays and future care needs.

For those building their careers – the 30-year-olds who expect to live for a century or more – cash flow forecasting will be very different. The need to understand the wealth needed to support a long and healthy life together with the flexibility to meet changing family circumstances will often require creative thinking. How do you, to paraphrase the former US Secretary for Defence Donald Rumsfeld, prepare for the ‘known unknowns’?

Your accountant will look to the big picture whilst providing the link between your personal short-term goals and long-term aspirations, addressing the challenges that life can somethings throw at us, and always with an eye on the current and changing tax landscape.

Above all, it is the holistic view and independence of your accountant that is to be valued.

To discuss this further, please contact one of our Private Client Services team members.