The rising cost of living can make long-term financial planning challenging. With the uncertainty of how inflation may affect your expenses and assets in 20 years or more, it’s natural to feel concerned. However, with a clear financial plan, you can gain peace of mind and confidence in your financial future.
Inflation: A Global Concern
Inflation continues to be a pressing issue for many. Research from Ipsos highlights that inflation is the top global concern in 2024, with 37% of Britons ranking it as their primary worry.
The rapid increase in the cost of living since 2021 has placed significant pressure on household budgets, leaving many people rethinking their long-term plans. Perhaps you’ve reduced your savings or pension contributions to cope with rising day-to-day costs.
While inflation peaked at 11.1% in October 2022, the highest in over 40 years, the Bank of England (BoE) has since worked to bring it closer to its target of 2%, with inflation recorded at 2.3% in April 2024. Yet, concerns remain about how future spikes in inflation could affect financial security.
This is where financial planning comes in.
How a Financial Plan Can Help You Manage Inflation
A financial plan helps you understand how your assets and expenses might change over time, providing clarity and control over your financial future.
1. Forecasting the Future with Cashflow Modelling
Cashflow modelling is a valuable tool that allows you to visualise how your assets and expenses could evolve throughout your lifetime.
Assets: Start by calculating the value of your current assets, such as savings, property, and pensions. Then, consider how regular contributions and growth (e.g., investment returns) could increase their value. For instance, assuming an annual investment return of 5% (while recognising market fluctuations) can provide insights into potential growth.
Expenses: Factor in your current spending and account for inflation. Using the BoE’s 2% target as a baseline can help you understand how the cost of living might rise over time.
2. Modelling the Impact of High Inflation
Cashflow modelling can simulate different scenarios, including periods of high inflation.
For example, you can explore how inflation of 8% during retirement might affect your savings and assets. This information can guide proactive decisions, such as building diversified investments or adjusting retirement plans to mitigate the impact of rising costs.
3. Planning for Life’s “What Ifs”
Cashflow modelling isn’t just for inflation concerns. It can also help you prepare for:
Taking lump sums from pensions and their impact on long-term income.
Weathering financial shocks, such as illness or unemployment.
Adapting to lower-than-expected investment returns.
Supporting loved ones through gifting without compromising your financial security.
Managing the costs of care in later life.
Retiring early by adjusting contributions or income expectations.
How Cleveden Park Wealth Can Help
At Cleveden Park Wealth, we understand the challenges inflation presents. Our financial planning services are tailored to your unique circumstances, helping you navigate the complexities of long-term financial security.
From modelling scenarios to creating strategies for asset growth and protection, we’re here to provide the guidance you need to achieve your goals and prepare for life’s uncertainties.
Contact Us Today
Inflation doesn’t have to derail your financial plans. Let us help you create a robust financial strategy to safeguard your future. Contact Cleveden Park Wealth to arrange a meeting and discover how we can support your long-term financial success.
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