- Building a retirement plan by yourself is difficult
- But there are free tools that can help you along the way
- They offer a decent level of personalisation and can tell you a lot about your financial future
Financial planning is difficult because, put most simply, it involves picturing what your life will look like in the distant future: no easy task for any saver. How much income will you need in retirement? How will your investments perform in the next 10 years? How much will you be able to save every month? These are all questions you may find understandably tricky to answer.
To help their clients plan for their finances in 10, 20 or 30 years, financial advisers use a process called cash flow planning or modelling. They ask about your assets, expenses, financial goals, risk tolerance and several other factors, then input the answers into a software tool. Based on a set of assumptions concerning external factors such as inflation and investment growth, the tool models whether you are going to have enough money to achieve your goals – or whether you are going to have a shortfall and run out of money too soon.