What is cash flow planning?

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Defining a plan of action around your personal cash flow allows you to be more intentional and effective with your wealth.

The primary objective of cash flow planning is to understand inflows and outflows and develop a plan of action to allow you to be more effective with your wealth. There can be numerous benefits to cash flow planning for high-net worth individuals and families.

Getting started with cash flow planning

Cash flow planning is typically conducted in concert with your wealth advisor, who’ll gain an understanding of your assets, various sources of income, and how you spend that income. But they’ll also dig deeper by exploring your lifestyle expenses, debt repayment, aspirational goals, as well as your charitable giving that will define your legacy. The result could be a multi-year cash flow analysis to help you visualize how different assumptions, such as significant purchases, family, or philanthropic gifts will affect your long-range cash flow and assets. Cash flow modeling can also help you determine the appropriate investment strategy to meet your stated intentions.

Why is cash flow planning important?

Obtaining an understanding of your cash flow can result in benefits such as the reduction of income and wealth transfer taxes, more effective family and philanthropic giving, strategic investment account drawdowns, and enhanced portfolio and risk management. Two areas that can benefit are legacy and investment planning.

"Cash flow planning empowers you to make strategic decisions regarding the role and purpose of your wealth during your lifetime and after your passing. An additional benefit is solidifying an investment objective to achieve your ambitions."

Jill Garvey
Wealth Strategist, Huntington Private Bank®

Considerations for estate and legacy planning

Successful estate planning is an on-going exercise. Many wealthy individuals and families want to retain a healthy income stream and control over their assets. They may forego estate planning opportunities and overpay from a tax standpoint.

Creating a cash flow analysis and wealth plan, in concert with your financial, tax and other advisors, allows you to visualize what your estate and tax situation could look like if you don’t act and what it would be like if you give away a portion of your assets to family or charity. A comprehensive analysis will empower you to move forward.

Cash flow modeling enhances portfolio outcomes

Determining a strategic asset allocation is the most important aspect of the investment process. Financial advisors worth their salt understand your financial circumstances, goals and tolerance for risk and will help recommend an appropriate mix of assets to achieve your objectives.

Multi-year cash flow modeling gives a long-term view of your probability of achieving your goals given various assumptions and rates of return. Most wealthy individuals will not be able to meet their ongoing lifestyle objectives by investing in cash. Instead, there needs to be a component of growth in the portfolio to outpace inflation, which is usually attained by investing in stocks. Therefore, long-range cash flow planning can help solidify asset allocation recommendations needed to maximize returns to support goals.

We can help

Cash flow planning can make it easier for high-net-worth families and individuals to prioritize their goals and objectives and for their advisory team to provide customized tax and estate planning recommendations. To learn more, please contact your Huntington Private Bank team to see how we can help or find a Huntington Private Bank office near you.

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