Financial Forecasting

In simple terms, financial forecasting is the process of assessing your current wealth and, from this, forecasting how it will change. It takes into account both income and expenditure, helping to make clear how your finances may change in the future.

It sounds simple but there’s a lot that feeds into the process and the more information that’s used, the better the results. You should include areas such as property wealth, investments values, fixed income and debts. Once done, you go on to calculate how your wealth will be impacted by factors like growth, inflation and interest rates over the years.

As you can imagine, this can get complicated. Effective financial forecasting does all these calculations behind the scenes, giving you a visual representation of the information.

Financial forecasting can give you an idea of how your wealth will change over your lifetime. It can help you see which products are best for maximising your savings with your goals in mind and help make your aspirations seem more tangible by demonstrating how the steps you’re taking will have an impact over the longer term.

It’s a process that can also help you keep track of where your money is going. If you want to increase your savings, it can give you an indication of where you’re able to cut back and what difference it will make. Having a visual representation of where your money is going can help you understand if your finances are in line with your priorities.

When you start saving for retirement it’s likely to be decades away. As a result, workers are often unsure of how much they have saved or, if it’s enough for their retirement plans. Using a financial forecasting tool means you can see how your pension savings are projected to grow over the years and the level of income it can provide once you’ve given up work.

Inflation and returns will have an impact on your wealth. With these two important factors varying over time, it can be difficult to assess the full effect of them. By adjusting the levels of interest or return when financial forecasting, you can start to create a picture of the different results of varying scenarios. This can be particularly useful for investments and weighing up risk with potential returns.

Saving or investing with long-term goals in mind can be challenging. The small steps you take regularly towards them can seem insignificant.

Financial forecasting can give you a visual representation of how you’re progressing towards objectives. It can help them seem more tangible and give meaning to your efforts, knowing they are setting you on the right path.

Throughout life, there will be events that affect your assets.

Financial forecasting can consider these and demonstrate how they will affect your estate. For example, it can show you how receiving an inheritance, downsizing your home, or losing your partner’s pension should they die before you will impact on your wealth and lifestyle. You can’t always predict what will happen, but financial forecasting can help you prepare.

It’s difficult to plan your legacy without knowing exactly how much your assets are likely to be worth when you pass away. Financial forecasting can give you a projection of your estate at different points of your life, allowing you to plan more effectively. You can also see how other decisions, such as needing long-term care, could impact the inheritance you leave behind for loved ones.

The importance of keeping financial forecasting data up to date.

To reap the full benefits of financial forecasting, it’s imperative that the data used is kept up to date. The forecast is only as good as the information it is based on. Working from previous financial forecasts could mean your decisions are based on inaccurate assumptions and projections.



At Servo Private Wealth, we work with wealthy families, high net worth individuals and entrepreneurs as well as companies and charities to grow and protect the value of their, and their client’s wealth, over the long term.

Our Six Stage Process
Financial Forecasting
Wealth Planning Service