Cashflow Modelling – What you need to know

Painting your retirement picture

It’s one thing to read about how big a blue whale is, but it’s another thing entirely to stand next to one: Ultra HD TV just doesn’t do it justice, compared to the real thing.

It really helps our understanding when we see concrete examples of things that we might only ever read in books: we have the same challenges when describing retirement.

It’s an abstract concept for many – and it’s as BIG as a whale!

How do we bring that alive and make it ‘’real’’?

That’s where cashflow modelling comes into its own: different retirements appear right in front of your eyes. You can model any number of different scenarios and colours and watch it unfold, like a picture being painted.
As someone said, it’s all about the ‘’colour and detail’’.

Retirement becomes real with cashflow modelling. The future comes alive – and it’s in colour!

How can you advise on retirement without painting these pictures – and do you know how to paint them?

That’s why your exam questions are testing your ability to understand cashflow modelling, more and more.

It’s an essential part of both AF7 and AF8 exams.

In both exams, you will be asked to demonstrate your understanding of each of the elements and assumptions relate to each other – and the impact of changing any assumption.

What better way to learn how cashflow modelling can paint your retirement picture, by actually using it to paint pictures?
What better way to learn than using and touching and watching – using all your senses to learn how cashflow modelling works.

Here is an exam question from AF7: describe how an increase in the inflation assumption used will impact the cash flow model?

It wasn’t particularly well answered: it lacked clarity and detail.
How much easier this question would have been if you’d been able to actually see the result of using a higher inflation assumption and been clear exactly how it works – and most importantly, how it impacts on any future retirement plans (or in the case of AF7 – how it might impact on any transfer considerations)?

How does the retirement picture change when the assumptions change?

Have a look at this video: it brings the answer alive. John shows you the answer and the impact.

Click here to view the video