19th January 2024 - Sean Banks

Why the numbers are essential for successful financial planning

When creating a financial plan, you often start with your goals. After all, setting out your aspirations first lets you create a plan that’s tailored to you. Yet, understanding your numbers is just as crucial for successful financial planning and they could help you understand the effect of your decisions. 

So, which numbers are the key ones you should know?  

The numbers you may want to track will depend on your goals 

To keep your financial plan on track, monitoring key numbers will help you assess your progress and identify potential gaps. Read on to discover which numbers could be important in two different scenarios. 

Ensuring your family’s financial security 

If you have a family, a key priority might be to ensure their long-term financial security. You might want to set money aside to pay for milestones, like helping children go to university. You may also be worried about what would happen if you faced a financial shock.

So, questions like these could help you highlight the key numbers in your meaningful financial plan. 

The answers to these questions may highlight gaps in your financial safety net, meaning your family is vulnerable to a shock. Or, that you would benefit from putting money aside to fund one-off costs, like supporting your child’s homeownership goals.  

Planning for your retirement 

When you’re planning for retirement, there are several key numbers you need to consider. For example, the answers to these questions could be important: 

With these numbers you can create a plan that provides you with financial stability and peace of mind throughout retirement. Again, the results could help you identify potential gaps or indicate where you may need to compromise.

Key numbers help you forecast how your wealth will change

Cashflow modelling helps you see how your wealth and assets may change over the long term. 

This is where knowing your numbers is important. Cashflow modelling is only as good as the data you input. So, taking time to understand the value of your assets and financial needs could be essential.

Cashflow modelling is key to helping you understand how the decisions you make now affect your long-term plans.

The results of cashflow modelling cannot be guaranteed as the outcomes will be based on some assumptions, such as investment returns. However, it can provide a useful way to visualise how your financial decisions could affect your long-term wealth. 

Regular reviews to update your numbers are important. They also present an opportunity to ensure your financial plan continues to reflect your goals. Over time, your aspirations might change, and, as a result, you may want to adjust your financial plan or the data used in your cashflow model. 

With regular financial reviews to track key numbers, you can focus on what’s most important to you.

Risk warnings

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate cashflow planning.

The value of your investment 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.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. 

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