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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, so you can 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, such as:
How much excess cash is available to spend on new expenses or investments
An estimate of annual living expenses, if you only know how much the clients save each year
An estimate of 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:
Step | Details | |
|---|---|---|
| 1 | Enter details at the Current situation step as normal | For more details see Entering Data in Pathfinder |
| 2 | (optional) Copy the scenario you're working on | If 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. |
| 3 | Enter 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. |
| 4 | Enter 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. |
| 5 | Enter 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. |
| 6 | Set 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:
Do not add any new assets or loans, unless there is a specific preference to do so (e.g. buy a new family home) |
| 7 | Set the Cash reserve | It is a good idea to set the cash reserve, because:
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| 8 | Set the Retirement planning options | For each individual, set the following options:
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| 9 | Set the Review super funds options | For each super fund, set the following options, unless there is a specific preference to do something different:
Do not add any new investments to the super funds, unless there is a specific preference to do something different. |
| 10 | Review insurance |
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| 11 | Get results and see the excess cash |
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