lifetime cash flowSo what is a lifetime cash flow? In short it is a model of your money over time.

It is constructed by recording details of your current assets, liabilities, income and expenditure and also future events such as retirement, house sales, pension benefits, investment growth, mortgage repayments etc.

Once this has been completed you can see a picture of two important elements of your finances – the difference between your income and expenditure over your expected lifetime, and the projected value of your liquid assets over your lifetime.

The former enables you to see when expenditure exceeds income, and hence when you will need to call on your cash reserves or the bank to fund excess expenditure. The later will tell you if you are going to run out of money during your lifetime.

The lifetime cash flow (LTCF) is at the heart of your financial plan. It is where the rubber actually hits the road, so to speak, where your plans over time meet the money that is going to fund them. The LTCF is where your time and money plans merge into a single picture of what your life and finances will look like over your lifetimes.

Your lifetime cash flow is an invaluable tool in your planning, allowing you to create ‘what-if’ scenarios to see the impact of how you spend your time and your money, and thus helping you to make informed decisions about your time and money. Most importantly, it balances the achievement of important goals in the short term with lifetime financial security.

Sadly, the concept of the lifetime cash flow, and the tools that help you construct one, are mainly the preserve of financial planners at the moment. However, you can easily construct your own on Numbers or Excel.