Spending plans are about time as well as money. Your life goals will have determined how you spend your time. Some time will be spent on generating income; some will be spent on spending your money. However, it is not just the current year you should be planning for, but a whole lifetime. Carl and Ellie, the stars of the Disney Pixar film Up who we introduced in Step 1, never quite managed this. For Ellie in particular, Paradise Falls remained a dream, so nearly achieved but never actually achieved as the money was never quite there.

Developing spending plans is straightforward once goals have been set. In short, take your life plan and build a time line of when your life goals are to be achieved. Plan in detail how much your current and future plans will cost to give you a picture of projected lifetime expenditure (Chart 1).

Then work out how that expenditure will be met by income from earned income, pensions and investments to give a lifetime cash flow (Chart 2). If areas of red remain it will be necessary to adjust time, income, expenditure or investment returns to make the plan work.

The cash flow will show you if you are in a strong or weak financial position. If your financial position is strong you can start to build “what-if” scenarios to accelerate the achievement of your goals.

Remember that none of us know what will happen tomorrow. Like Ellie, we could end our lives with unfulfilled dreams. For Ellie and Carl, a little bit of cash flow planning could have got both of them to Paradise Falls and the achievement of their childhood dream – but then we would not have had the pleasure of a moving and entertaining film!