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What, why and when of Life Planning

Life Planning is a discovery process which has three elements:

  • Thinking about what you really want from life
  • Working out how much money you’ll need
  • Figuring out where the cash is going to come

This is all done around a cashflow forecast for the rest of your life, starting with your current position and making some assumptions around finances, health and your life expectancy.

Start with your current net position of savings then more onto income. The income starts at today’s levels and includes what you expect over the coming years. If there are any increases these require underlying assumptions. These can be challenged in the discussions and validated over time. This could mean doing a business valuation and/or setting up some Key Performance Indicators for the business.

When you are happy with the income figures add in the expenditure. Go into as much detail as you can with expenditure because you’ll believe the results. If you just guess you won’t believe it and can say you won’t spend that much.

Look at your bank and credit card statements for the last 12 months. This will help pick up all the different types of expenditure, including withdrawals from the hole in the wall.

When you have entered the starting position, income and expenditure the only variables are inflation and investment returns.

At the end you’ll have a cashflow forecast and there are only three options:

  • On track
  • Surplus
  • Deficit

If you’re on-track there is a good argument to be focussed on de-risking and protecting your situation.

  • What would happen if you needed medical procedure which stopped you working?
  • What would happen if you needed medical procedure which stopped you working?
  • What would happen if you could only work 50%?
  • What would happen if you died?
  • What would happen if your spouse/partner could not work?
  • What would happen if your spouse/partner could only work at 50%?
  • What would happen if your spouse/partner died?

If you find you have a large surplus then you have some questions more questions to answer:

  • Should I slow down or stop working earlier?
  • Can I scale back and enjoy work more?
  • Could I spend more money now?
  • Can I give money away?
  • Do I have an Inheritance tax problem?

If you have a deficit you’ll have three choices:

  • Accept the implications of not building enough wealth
  • Cut back on expenditure
  • Create more wealth

For business owners the last option is an opportunity but it requires work; building a Winning Strategy and then executing the strategy.

When should you do a Life Plan?

If you know you’ve got a massive surplus, don’t care too much about Inheritance tax and you’re happy then perhaps you don’t need to bother. Otherwise now is a good time.

If you know you have a massive deficit then it can be difficult to engage in Life Planning because you don’t want to face the brutal reality; it’s painful admitting you have a problem. But, just like a recovering alcoholic, you need to be able to admit your problem before you can overcome it.

Working out your deficit is an opportunity to explore why you have one and address the root cause.

Assuming you don’t have some form of spending disorder, if you own a business it will probably be because the after tax profits are not enough to support your lifestyle.

Rather than change your lifestyle, challenge yourself with some questions:

  • Do you have limiting beliefs?
  • Are you suffering from a technician’s mindset?
  • Is your service or product really good enough?
  • Do you have the right clients?
  • Is your pricing model strong?
  • Is your marketing good enough?
  • Are you sales skill good enough?
  • Is your business management weak?
  • Do you need a coach to bring the best out of yourself?

If you would like to explore Life Planning get in touch and I’ll show you the software we use. It’s not expensive and it can be the start of a transformation.

Image from Flickr by Jonathan Rolande.

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  • We are highly qualified and experienced

  • Specialist in tax planning

  • Fair and reasonable pricing policy