To address cash flow and financial planning, start with the expense side of the income statement to drive the process. Focus on what it costs to maintain the lifestyle to which you have become accustomed and project those costs, with a factor for inflation, into the future. It’s important to distinguish needs from wants so that in case the likely circumstances will not generate sufficient cash flow, appropriate actions can be taken.
Next, focus on the income side of the statement by identifying existing or anticipated sources of cash flow, such as social security, pensions, annuities, etc. Include the propensity for the existing balance sheet assets to provide cash. If there is adequate cash flow from existing sources of income and assets, you will likely breathe a huge sigh of relief. But in the more likely scenario, there will be a deficit. If this is the case, you’ll need to isolate and manage the financial variables that can be controlled, such as reducing spending, balancing risk and reward to generate higher portfolio returns, and defining the financial requirements that must be met as a result of the business transition.