Retirement Capital Analysis

Introduction

Money Tree’s cash flow includes the analysis of cash income, expenditure, and liabilities. It also incorporates the estimate of pensions, social security, education funding requirements, individual financial planning goals, and miscellaneous income or expenses. It is a customized way of planning for college education financing, business plans, retirement plans, and even family budgets. For finance students, it is a practical way to learn financial planning for clients. It is a tool convenient for financial advisors.

Key Lessons from the Analysis

Financial advice is nothing more than just art. Interactions that financial consultants have with clients do not deliver the hard numbers corrected to more than two decimal places. In this case, they amount to generalizations and so may be more applicable to a casual rather than a serious business conversation. There may be no problem with it provided it occurs based on true figures. However, the problem is that most numbers that we get from general conversations do not reflect the real world. Applying these discussions in real life situations is like using a map drawn in crayon. For instance, we often fail to consider practical miscellaneous sources of income and expenses. In this case, we fail to correct the cash flow plan for factors such as dividends, interests, sale of residence, inheritance, and many other factors that take way or add cash. In simple terms, a cash flow plan includes earned income (salary, wages, and self employment), pension plan and social security, and miscellaneous sources of income (inheritance, dividends, etc), on the income side.

On the expenses side, the analysis considers personal living expenses, life insurance and other premiums, mortgage and loan repayment, planned investment and retirement account deposits, taxes, and miscellaneous expense items. The basic principle is that when cash income exceeds expenditure, the surplus goes to savings and investment accounts. If expenses exceed income, savings and investment accounts will provide funds for the shortage. It is evident that conventional methods of financial planning leave out significant information that is vital for correct analysis of cash flows. It is the reason why people attain the age of 60, and realize that they do not have savings to spend for their retirement despite having consulted financial advisors. From the repeated practice with the software, a small adjustment makes a significant difference in the final report and subsequent recommendations. The software is accurate because it incorporates all the information necessary for the development of financial plans. The software provides a personalized way to plan for the future. It draws recommendations indicating areas requiring adjustments. It is fun to use in analysis.

Conclusion

The key lesson is that a credible financial plan crunches numbers to the last decimal point justifying every financial item in an entity’s cash flow behavior. It is a fast way to conduct financial analysis and generate plans without the need for manual input. The software generates reports in the form of graphs, table, and recommendations. The reports are easy to interpret and conduct consultancy. Consultancy may use repeated calculations using different values of the various items so that the client can see the difference in spending habits. The software is a credible and a reliable way to analyze client’s financial behavior and draw a future plan based on the outcome of the analysis.

Reference

MoneyTree.com (2012). “Silver Financial Planner”. Www.moneytree.com

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