During periods of increased economic uncertainty, understanding and securing your cash flow needs is a priority, especially if you are already retired, or nearing retirement.
When you are in secure employment, if you listened to the wisdom of your Grandparents you will spend less than what you earn and invest the surplus into growth areas such as shares and property. The idea being that those growth assets will grow over time, and eventually allow you to replace the income you are currently working for, with income generated from your investments.
If the price of those assets fall you don’t need to worry too much because firstly you have plenty of time before you need to access your investments. Secondly, you are still working so your cash flow needs are being met from your employment income.
In fact, you will rejoice during periods of temporary price falls as you will be buying assets at a fraction of their value – basically guaranteeing your future profits.
But what if you are already retired?
Well, with proper financial planning advice you will have distinguished between your cash flow and capital growth needs, and invested in such a way that you have secured your cash flow without the need to have to sell growth assets like shares and property at a loss during periods of temporary price falls.
This won’t stop you being concerned when prices fall, as nobody likes a reduction in the value of their investments. But it will help you eliminate making a loss caused by having to sell long term assets at less than their value.
What if you are hoping to retire soon?
Again, with proper financial planning advice you will be redesigning your investments so that you can secure several years of immediate cash flow needs, and comfortably invest the rest of your portfolio in growth assets to secure your future cash flow needs without the need to have to sell them during periods of temporary price falls.
Seek sound advice. Understand your cash flow needs and retire smiling!