Why the numbers are essential for successful financial planning

When creating a financial plan, you often start with your goals. After all, setting out your aspirations first lets you create a plan that’s tailored to you. Yet, understanding your numbers is just as crucial for successful financial planning and they could help you understand the effect of your decisions.

So, which numbers are the key ones you should know?

Which numbers you may want to track will depend on your goals

To keep your financial plan on track, monitoring key numbers can help you assess your progress and identify potential gaps. Read on to discover which numbers could be important in two different scenarios.

Ensuring your family’s financial security

If you have a family, a key priority might be to ensure their long-term financial security. You might want to set money aside to pay for milestones, like helping children go to university. You may also be worried about what would happen if you faced a financial shock.

So, questions like those below could help you highlight the key numbers that will allow you to create a financial plan that reflects your circumstances.

  • What are your household’s day-to-day expenses?
  • What is the value of your family’s large financial commitments, such as a mortgage?
  • What is the value of planned one-off costs?
  • How much do you have saved in an emergency fund?
  • What percentage of your income is protected?

The answers to these questions may highlight things like a gap in your financial safety net that could mean your family is vulnerable to a shock. Or that you may benefit from putting money aside to pay for one-off costs, like supporting your child’s homeownership goals.

Planning for your retirement

When you’re planning for retirement, there are several key numbers you might need to consider. For example, the answers to these questions could be important:

  • How many years or months until you hope to retire?
  • What percentage of your income are you contributing to your pension?
  • How much income do you need in retirement, and how much will it need to increase to maintain your spending power?
  • How long will you spend in retirement?

With these numbers you may be able to start creating a plan that provides you with financial stability and peace of mind throughout retirement. Again, the results could help you identify potential gaps or indicate where you may need to compromise.

Key numbers could help you forecast how your wealth will change

Cashflow modelling could help you see how your wealth and assets may change over the long term.

To start, you input key information, such as your income, the value of your assets, or how much you are contributing to your pension each month. You can then see how your wealth might change over the years.

This is where knowing your numbers is important. Cashflow modelling is only as good as the data you input. So, taking time to understand the value of your assets and financial needs could be essential.

Once you’ve added the figures, you can use cashflow modelling to see the outcome of different scenarios. For instance, how would:

  • Your retirement income change if you increase your pension contributions?
  • Different investment returns affect your long-term wealth?
  • Gifting a lump sum to a loved one affect your long-term financial security?

So, it can be used as a way to understand how the decisions you make now could affect long-term plans.

The results of cashflow modelling cannot be guaranteed as the outcomes will be based on some assumptions, such as investment returns. However, it can provide a useful way to visualise how your financial decisions could affect your long-term wealth.

Regular reviews to update your numbers could be valuable. It also presents an opportunity to ensure your financial plan continues to reflect your goals. Over time, your aspirations might change, and, as a result, you may want to adjust your financial plan or the data used in your cashflow model.

Contact us to talk about your key numbers and how they could help you reach your goals

We can work with you to create a tailored financial plan that reflects your aspirations. Taking a bespoke approach could mean you feel more confident about your current finances and how they’ll change in the medium and long term.

With regular financial reviews to track key numbers, you can focus on what’s most important to you. Please contact us to arrange a meeting.

Please note:

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

The Financial Conduct Authority does not regulate cashflow planning.

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

Past performance is not a guide to future performance and should not be relied upon.

Approved by The Openwork Partnership on 05/01/2024.


Stay in the loop

Keep up to date with industry insights and company developments by signing up to our free bi-monthly newsletter.

    The internet is not a secure medium and the privacy of your data cannot be guaranteed.

    Guide: Everything you need to know about annuities when creating a retirement income

    Read more

    Working habits from around the world that could transform your work-life balance

    Read more

    Landlords: Could using a limited company reduce your tax bill?

    Read more

    Mortgage availability is rising. Here’s what to consider when narrowing down your options

    Read more

    Investors are turning to government bonds. Here’s what you need to know

    Read more

    The ups and downs of the FTSE 100 40-year history demonstrates time in the market matters

    Read more

    Retirement planning: The importance of setting out your lifestyle goals

    Read more

    Guide: 7 allowances you might want to use before the end of the 2023/24 tax year

    Read more

    How to secure a competitive interest rate to cut your mortgage costs

    Read more

    3 important figures to review on your payslip to manage your short- and long-term finances effectively

    Read more

    Inflation is falling. Here’s what it could mean for your finances

    Read more
    Contact us

    We’re here to help

    Leave us a message and we’ll be right back in touch.

      The internet is not a secure medium and the privacy of your data cannot be guaranteed.

      Get in touch

      01252 979673 admin@johnsonwealthsolutions.com
      11 Kings Rd,
      GU51 3AA