How cashflow modelling could help your divorcing clients plan for the future

Divorce can have a significant effect on an individual’s immediate financial wellbeing and their future plans.

For example, in the short term, your divorcing clients may see their household income fall and their living costs rise as they move from sharing everyday expenses to coping alone. Looking further ahead, they may also need to rethink how they save and invest for their retirement.

Yet, gaining clarity on such matters during a separation, when everything is changing and emotions are running high, may not be straightforward.

That’s where cashflow modelling comes in.

Financial experts can use this powerful planning tool to give your clients a clear picture of how their wealth and income needs may fluctuate over time.

Keep reading to learn how cashflow modelling works and find out three ways it could benefit your divorcing clients, while also supporting your work as a solicitor.

Cashflow modelling could help your divorcing clients visualise their financial future

Cashflow modelling, otherwise known as “cashflow forecasting”, is advanced software that a financial expert can use to help your divorcing clients visualise their long-term financial position.

It works by analysing data about an individual’s financial situation, such as their:

• Income
• Expenses
• Savings
• Investments
• Debts
• Long-term financial commitments.

The software then uses assumptions about future growth, inflation, interest rates and income to forecast how the person’s finances might change over time – highlighting any potential surplus or shortfall.

Importantly, a financial expert can change the data they input to illustrate how different future scenarios might affect an individual’s finances.

This could provide invaluable insight for your divorcing clients who may be dealing with significant change and uncertainty.

Our separate companyTrue Design Consultancy offers a unique Visualise Your Future process that uses cashflow modelling to explore various settlement scenarios. This could give your clients a clear understanding of how each option aligns with their needs and goals.

This approach also allows me to highlight any possible problems that may arise. I can then work with your clients to address these issues, giving them the clarity, confidence, and control to make informed decisions about their finances.

4 important ways cashflow modelling can empower your divorcing clients

Cashflow modelling is an excellent financial planning aid for all your clients, but it offers particular benefits for individuals who are going through a divorce.

1. Demonstrating how their wealth and financial needs may change

Your divorcing clients may be used to living in a dual-income household and planning their finances as a couple. As such, they might find it difficult to envision how a separation could affect their wealth both in the short and long term.

A financial expert can use cashflow modelling to provide your clients with a visual representation of how their financial situation could change following divorce.

For example, a financial timeline is a simple and effective way to demonstrate how changes to factors such as retirement age or child maintenance commitments, could affect an individual’s wealth.

Having access to this knowledge could help your clients understand what action they need to take to maintain their lifestyle and protect their financial security (and that of any dependents they may have).

What’s more, being able to see what their future finances may look like, could empower them to make crucial decisions with confidence. As a result, you’ll have clear direction on how best to support your clients throughout their divorce.

2. Evaluating the long-term impact of different settlement offers

Amid the stress and upheaval of a divorce, your clients may find it difficult to evaluate different settlement offers objectively.

Moreover, they might struggle to accurately assess how different options could affect their finances many years down the line.

One of the most valuable aspects of cashflow modelling for individuals going through divorce is the ability to explore a range of possible scenarios.

A financial expert can use the software to show your clients how different settlements could affect their wealth over the short, medium and long term.

These crucial insights could allow your clients to accurately assess whether a proposed settlement will meet their needs and proactively address any potential shortfalls. It may also help them avoid costly mistakes, such as waiving their rights to valuable assets, like pensions.

Additionally, through my separate company, True Design Consultancy, I will update your clients’ forecasts as they progress through negotiations. This means they will always know exactly what different scenarios could mean for them and their children.

As such, cashflow modelling could give your clients clarity about their settlement options, allowing you to keep negotiations moving towards a fair settlement.

Read more: 4 compelling reasons why divorce solicitors need to work with a financial expert

3. Facilitating negotiations and supporting asset division

During a divorce, emotions often run high, and financial discussions may become heated.

Cashflow models can provide an objective, data-driven focus for negotiations, which may reduce the influence of subjective perceptions and facilitate more amicable interactions.

This could provide the low-stress environment your clients need to make important decisions about their future.

Cashflow modelling can also help both parties make informed choices about how shared assets should be distributed, based on each individual’s future financial needs and risk tolerance.

All of which ensures you have the information and knowledge necessary to achieve a satisfactory outcome for your clients as efficiently as possible.

4. Planning post-divorce finances

Once your clients have reached a settlement, a financial expert can use cashflow modelling to help them plan for the future.

At a time when their immediate financial situation may feel unfamiliar and uncertain, setting meaningful goals and creating a strategy for achieving them could feel extremely empowering.

As a financial expert who specialises in divorce, I can help your clients capitalise on any wealth they receive as a settlement, allowing them to build towards the lifestyle they want.

My unique approach to cashflow modelling is ongoing and interactive. By working with your clients over the long term, I can support them to regularly review and adapt their financial plan if their circumstances change.

This could reduce stress and allow your divorcing clients to make a smooth transition to their new financial reality.

Get in touch

To find out more about how I can support you and your divorcing clients using cashflow modelling, please take a look at this short video that explains my unique Visualise Your Future process.

If you’d like to discuss how we can work together, I’d love to hear from you.

Please contact me at lottie@truefinancialdesign.co.uk or call 0330 088 9138I.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The Financial Conduct Authority does not regulate cashflow planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.