Making plans is good. Making plans that you can execute is better. You can plan ahead your finances by adding forecasts or doing scenario planning.

Prerequisites

The 6 financial concepts to grow your net worth

The 3 Nova forecast charts

Scenario forecasting and planning

<aside> 🧑‍🏫 Your plans are realistic when they meet these 2 conditions:

1. Your forecasted balance is positive
2. Your forecasted Free Cash Flows are positive </aside>

1. Maintain a positive forecasted balance

Your plans require you to have a given amount of money at some given future point(s) in time. The forecasted balance shows if you’ll ultimately have the money (positive balance) or not (negative balance).

Example: you’re planning to go on holiday in 6 months and need to:

1. pay for the flight today
2. book the hotel with a £100 deposit next month
3. pay for the visa in 2 months
4. save £2,000 for your holiday before your departure

You need to plan all these future payments and make sure you’ll have the cash ready for each payment. You can easily do this with Nova by creating a forecast for each future payment, and looking at your forecasted balance:

• if continuously positive, you’re good to go
• if your fall into negative territory, it means you’ll run out of money:

Do not make plans where your balance ever gets negative, even if it’s forecasted to return positive after your next paycheck!