What is financial forecasting and what’s it for?
Financial forecasting is all about predicting future financial outcomes based on past data. In businesses, it’s used to predict and plan for future revenue, performance, profit and expenses, but in your personal life it can be used to forecast savings potential and long-term growth. You can also use forecasts as a basis when goal-setting for your personal finances. Do you want to purchase a rental property? Use forecasting to see what your financial position will be in the future and when you’ll be able to purchase a property.
Building wealth is a complicated process and accurate forecasting can help you make better financial decisions by equipping you with the knowledge of what’s coming in, what’s going out, and how much you’ll have left to play with over the long term.
How the heck do I do it?!
Smart question! Forecasting can be done manually by plotting out your future guaranteed and projected income along with projected expenses to see where you’d be in several months or years’ time. But manual is so 2002, right?
PocketSmith’s intelligent forecasting features allow you to create spreadsheet-free (phew) forecasts, graphs of your projected savings potential, automatic interest calculations and view your cash flow, turning you from forecast newbie to superhero in minutes. PocketSmith can act as a great personal or small business financial forecasting software and can save you a lot of time compared to working it all out manually.
Financial forecasting for your life
Financial forecasting your personal life can help track your long-term financial goals as well as short-term financial goals. It lets you plan for unexpected expenses and save for life’s big moments, like buying a home or starting a family.
By plotting out your forecasted income and recurring expenses, you can see clearly when you’re due to hit major milestones in your savings accounts, how your net worth is tracking, and the long-term effects of your budgeting system.
For example, if you’re saving for a house deposit, PocketSmith’s forecasting features can show you how long your current savings strategy will take you to hit your goal. From there, you can make changes to your budget and spending habits to hit your goal faster or more effectively, by viewing your exact forecasted balance to the day, up to 30 years in the future. Neat!
Financial forecasting for your side hustle
Financial forecasting can also be helpful for running your side hustle or small business. Forecasting your projected income based on extrapolating past data and recurring income can help you model your cash flow potential, make business decisions, and identify ways to maximize revenue. Whether you’re making a big business investment and want to know how long it’ll take to recoup the costs or you’re working towards a revenue goal, forecasting gives you the control you need to scale.
Financial forecasting for multiple streams of income
Forecasting when you have multiple sources of income can be complex, but with PocketSmith’s inbuilt systems, all your financial data from all sources can be collated together and categorized, giving you a complete view of your future position from all angles. With visual charts and graphs, you can make informed decisions on how to maximize your income and net worth by seeing which streams of income are performing best for you.
Sign-up to PocketSmith today and get your forecast on!
Emma Edwards is a finance copywriter and blogger, on a mission to humanize the financial services industry by creating meaningful content that’s accessible and empowering. You’ll find her penning money tips at her blog, The Broke Generation, sharing financial insights on Instagram, or injecting life into content for her business clients.
