You intuitively understand the basics of cashflow and how it works in your daily life. Wouldn’t it be nice if you could apply this to financial planning for your future? Well, you actually can, and we call it lifelong cashflow.
For most of us, the traditional way of retirement planning just doesn’t apply. In the past, with a pension and social security, people knew how much money would be coming in every month. So your monthly budget could keep chugging along, taking into account whatever your new “salary” would be once you retired.
Today, there are fewer guarantees but also many more options. (And, we promise, future posts to help explain them!) From employer investment plans to reverse mortgages to annuities — there are a lot of ways to do this, but not a one-size-fits-all answer. And that’s actually a good thing. Your retirement plan should reflect your real life, over your entire lifetime.
Using your current cashflow, you can make enough reasonable assumptions to get you started on your plan. Say you spend $2,000 every month now, and think you’ll need that much every month after you retire. How do you get there? Focusing on lifelong cashflow provides a framework for choosing options over the course of your life to help you meet that goal. It will also help you face reality, whether that means meeting friends for drinks but not dinner, or taking in a renter to provide extra income.
Think of it like a seesaw: your current self on one side and your future self on the other. While your emphasis will naturally shift from one side to the other as life happens, using the concept of lifelong cashflow to plan will provide the perspective you need to keep things in balance over time.