Financial planning doesn’t have a lot in common with science fiction. Yet, cashflow modelling could allow you to explore the lives you could lead if you made different decisions. So, it has more in common with the multiverse theory than you might initially think.

The multiverse theory suggests there is a hypothetical group of multiple universes with many different worlds. It proposes that every time an outcome is observed, there is another “world” in which a different outcome becomes reality.

So, while here you may have made certain career decisions, or started a family, there are countless other realities where you’ve made different choices.

Despite some scientists searching for evidence to support the multiverse theory, they haven’t found any yet, and others are sceptical. Yet, it’s continued to be a huge source of inspiration in science fiction.

Indeed, one of this year’s Oscar nominations Everything Everywhere All at Once suggests that every decision you make creates a parallel universe. You can see the influence of the theory in literature too, from Matt Haig’s Midnight Library to thriller Recursion by Blake Crouch.

But, what does the multiverse theory have to do with cashflow modelling?

You can “test” your decisions through cashflow modelling

Cashflow modelling can forecast your future finances in different scenarios.

You start by inputting information, such as how much you have in savings, the value of your investments, or your income. By making certain assumptions, like expected investment returns or income growth, you can project how your wealth will change over your lifetime.

Once the information has been added to a cashflow model, you can then model different scenarios and take a peek into what could happen in those other realities. You can see how decisions you make, or things outside of your control will affect your financial future.

Let’s focus on investments. A cashflow model could show what may happen if:

• You increased how much you invested by 10% each month
• Investment returns were 3% or 5% a year
• You used your investment portfolio to potentially increase your retirement income by £5,000 a year.

Sadly, cashflow modelling doesn’t let you experience other lives like you see in films. But it can help you visualise different scenarios and how the decisions you make could lead to very different outcomes.

2 compelling reasons to make cashflow modelling part of your financial plan

1. It can give you confidence in your financial decisions

As cashflow modelling can help you understand how your decisions could affect your wealth in the short, medium, and long term, it can give you confidence.

If you’ve been deliberating over whether you can afford to give your child a property deposit, or if you have enough to retire early, cashflow modelling could mean you’re able to move ahead with plans with fewer doubts. By understanding the implications of your financial decisions, you can focus on what’s important in your life.

However, you should keep in mind that the results of cashflow modelling are based on assumptions. As a result, the outcomes aren’t guarantees and it’s important to re-run the process on a regular basis to incorporate changes in values or circumstances.

2. It can help you prepare for different outcomes

One of the challenges of creating a long-term financial plan is that things outside of your control can affect it. Cashflow modelling can help you answer “what if?” questions like:

• What if I was forced to retire earlier than expected due to ill health?
• What if I passed away? Would my spouse and children be financially secure?
• What if I live longer than expected?
• What if a market crash occurred and the value of my investments fell?
• What if my income needs increase above those anticipated?
• What if inflation is higher than expected?

By modelling these types of scenarios, you can see what effect they would have on your wealth and lifestyle. That puts you in a position to prepare for them to give you peace of mind. It could include putting more away for your retirement now or taking out life insurance to provide for your family if you pass away.

As a result, cashflow modelling can mean you and your loved ones are more financially secure and better prepared to overcome unexpected life events.

Are you ready to consider the multiverse? Get in touch

If you want to better understand how the financial decisions you’re making could affect your life in the future, please contact us. We can help you visualise different outcomes, and then create a financial plan that could potentially turn your aspirations into reality.

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

The value of investments and income from them can go down. You may not get back the original amount invested.

Past performance is not a reliable indicatory of future performance.