How a lifetime cash flow model can create wonder in financial planning

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THE dynamism of life means that for one to live a life worth living, perhaps one wants to be surer at each turn when making a key or important decision.

After all, while we can make life’s big decisions with a laid-back attitude, we might harbour regrets when the outcome of such decisions is far from what we envisioned in the first place.

This is perhaps where people can find good value from engaging in proper financial planning. Through financial planning, we take an honest look at:

  • Our spending and saving behaviours today;
  • Our asset allocation and investment today’
  • Our future and what’s important for us;
  • Our worries, concerns, and things that we want to prepare for;
  • Our debt picture;
  • ‘What-If’ and possible scenarios in life.
Kevin Neoh

Lifetime cash flow model

Also, one of the good benefits of engaging in real financial planning is certainly via a lifetime cash flow model.

A lifetime cash flow model can be constructed through financial planning process by incorporating a variety of cash flow factors such as:

  • A person’s lifetime income;
  • Lifestyle expenses;
  • Ad-hoc or one-off expenses (for instance paying for children education or renovation of home);
  • Future potential income (example, sale of assets, inheritance, bonuses, ex-gratia payment etc);
  • Growth of savings and assets.

With the above items – plus realistic assumptions on things like inflation rate, expected salary growth rate and such – a lifetime cash flow model can be constructed to illustrate how this person’s future would looks like.

One of the greatest benefits of a lifetime cash flow model is that it helps us to ‘bring the future to now’. By seeing how our decisions today can shape or impact our future, it gives a person good awareness and knowledge on whether these behaviours and decisions are supporting us to have the future life we envision to have.

A lifetime cash flow model is also very handy in helping us to get answer such as:

  • How big a pay-cut can I have before it affects my future plans?
  • Should I buy a house that is worth RM1 mil or RM 800,000?
  • Can I afford to stop working at 50 years old?
  • Can I afford to take a sabbatical break?
  • Will I have enough money to pay for my children’s education without jeopardising my own retirement plan?
  • If I lose a big portion of my savings to risky investment, how will it affect my retirement plan?
  • And many more big questions we have in life.


In short, it helps us to first have a preview or trailer to the movie entitled “My Life”.

Should there be any part of this story that we dislike, having the trailer shown to us years or decades earlier can be a powerful tool in allowing us to explore alternatives, and do things differently today.

Although a lifetime cash flow model can show us how the future could look like, it is important for us to note that the future itself is dynamic and fluid, hence a lifetime cash flow model created today will tend to look very different someday.

As there are various assumptions made and regardless how reasonable these assumptions may look like today, what appear to be realistic and true in the past may become irrelevant or obsolete in the future.

Therefore, financial planning is an on-going process but not a ‘touch-and-go’ and ‘one-and-done’ thing.

As such, we will definitely benefit more from it when we conduct a thorough review periodically or when our life is undergoing huge changes. – Aug 28, 2022

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