How to run a 'surplus cash' scenario

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Reasons for doing a 'surplus cash' scenario

Running a 'surplus cash' scenario is useful for many reasons:

  • It is an easy and quick way to see the cash flows and double check your input data and identify any obvious cash shortfalls
  • It gives you a baseline against which you can compare other strategies
  • You can send the strategy paper to your clients to review as an intermediate step in your planning process

It can also help you make some calculations:

  • It gives you an idea of how much excess cash is available to spend on new expenses or investments
  • You can estimate annual living expenses if you only know how much the clients save each year
  • You can estimate maximum living expenses, if you have a shortfall and would like to reducing spending to avoid the shortfall

How to run a 'surplus cash' scenario

If you run a 'cash flows' scenario as described below, then Pathfinder will direct all excess funds to cash, after meeting any required expenses:


StepDetails
1Enter details at the Current situation step as normalFor more details see Entering Data in Pathfinder
2(optional) Copy the scenario you're working onIf you were already working on a scenario, it's a good idea to make a copy, just in case you need to return to the original. For more see How to make another scenario for comparison.
3Enter the scenario name and notes

Give the scenario a descriptive name, like 'Cash flows' or 'Baseline'.

In the notes, you can list what is and isn't included, so you can refer back to it later.

4Enter Income as normal (under the Cash flows & Goals > Cash flows step)

For more details on what should and shouldn't be entered as income, and what defaults are applied, see the Income help page.

5Enter Expenses (under the Cash flows & Goals > Cash flows step)

Enter all known expenses - in the results, you will see how much cash is available after paying these expenses.

If you would like to calculate their maximum feasible expenditure, then don't include their annual living expenses (and in the results, the excess cash will be in indication of their feasible expenditure).

For more details on what should and shouldn't be entered as an expense, and what defaults are applied, see the Expenses help page.

6Set Assets & Loans options to force excess funds to cash (under the Cash flows & Goals > Review Assets & Loans step)

Set the following options for existing assets and loans, unless there is a specific preference to do something different:

  • Family home:
    • Sale options: Never
  • Family home mortgage:
    • Repayment options: Make only minimum repayments
  • Investment Property:
    • Sale options: Never
  • Investment Property mortgage:
    • Repayment options: Make only minimum repayments
  • Cash:
    • Change interest rate: leave blank
  • Shares/managed fund:
    • Instructions for deposits/withdrawals: Leave alone
  • Unsecured loan:
    • Repayment options: Make only minimum repayments
  • HELP debt:
    • Repayment options: Make compulsory repayments only

Do not add any new assets or loans, unless there is a specific preference to do so (e.g. buy a new family home)

7Set the Cash reserve

It is a good idea to set the cash reserve, because:

  • In the results, you will be able to see how much fund they have in excess of their required cash reserve
  • If you copy the scenario, you can be confident that the cash reserve will be consistent across scenarios
8Set the Retirement planning options

For each individual, set the following options:

  • Retirement age: Put their expected retirement age
  • Allow transition to retirement: No
  • Allow spouse super splitting: No
  • Voluntary super contributions: None
  • Custom super guarantee: Leave blank, unless the clients have negotiated a super guarantee different form the legislated amount
  • Keep to super guarantee upper limit: Yes
9Set the Review super funds options

For each super fund, set the following options, unless there is a specific preference to do something different:

  • Close any funds that need to be closed and rolled over
  • For funds that should be kept open:
    • For the 'Custom options' field, choose the robot icon
    • For the investment options inside the fund set the 'Future % split' field to be the same as the percentage of the current total balance.

Do not add any new investments to the super funds, unless there is a specific preference to do something different.

10Review insurance
  • For existing insurance, chose the options that are most appropriate your clients
  • You can enter new insurance if you want to see what the excess is after the new insurance premiums are paid.
11Get results and see the excess cash
  1. Solve your case (for more information, see Results step)
  2. In the results, at the Cash flows & action items step, check the Cash flows report to make sure the data are correct.
  3. To see their excess cash for each year, look at the Cash flows report - the excess cash is shown as a deposit to fixed interest or their offset account.
  4. To see their cumulative excess cash:
    1. Go to the Detailed reports step
    2. On the left menu click Consolidated > Available cash balances