One of the central planks of successful financial planning is the ability to make sound decisions. An essential element to enable this is a thorough understanding of your current financial situation and how it might look in the future.
The frequently heard complaint “I can’t see the wood for the trees” suggests that most people do not have this required level of understanding.This therefore raises the fundamental question –
How can you be expected to make sound decisions, now, that will affect your life not just in the short term but in 10, 20 or 30 years time?
For financial planning to be truly successful it must have the ability to create a robust, understandable and adaptable context in which you can make sound decisions. Financial forecasting tools are essential in this regard and while many people shy away from these they are very easy to understand and visually very effective. They –
- Clearly illustrate your current and future financial position based upon your current income, expenditure, assets, liabilities and planned goals (if any)
- Enable the defining and prioritisation of your goals while also identifying potential risks.
- Illustrate the future effect of decision you are considering now through Scenario/ “What if” forecasting. The significant benefit of this is that it allows you to make sound decisions based upon all of the available information.