Financial Modeling: The Games We Play

After years of experience working with financial planning clients of all kinds, I've come to recognize that the initial stages of intelligent financial planning involve the following key activities: 

  1. Get clear on what your goals are

  2. Take inventory of what you're working with (income, assets, etc.)

  3. Make reasonable assumptions about the future (investment returns, etc.)

  4. Evaluate strategies for enhancing the chances of achieving your goals


Our process starts with building a financial model that accurately portrays your current financial situation, strategies, and goals. This "Current Plan" model is highly detailed, reflecting the real-world nuances of your financial situation. 

The model gives you a clearer understanding of what you're doing and where you stand relative to your goals. Am I on track to get where I want to go? Financial modeling can provide an educated look at the answer. And, for many, having a clearer sense of context about their financial situation can be of tremendous value.

Moving Beyond the Current Plan
But, the fun really starts when we move beyond the Current Plan model and begin to play around with alternate scenarios and assumptions. What if I quit my job today? Could we spend more money without undercutting our financial future? What if I retired and my investment portfolio immediately took a direct hit from stock market losses? By "battle testing" different types of scenarios, we can evaluate how well you might weather the storm. 

Kirsten Cowles