Cashflow and Compounding

Identifying your path on the Financial LifeCycle

Volatility and the financial lifecycle

The financial lifecycle diagram shows a smooth line of wealth creation.

At times you are likely to have your ups and downs.

For example, in the short term, your investments may drop by 20%, or you may change jobs, taking a pay cut, or you may set up a new business, which can take time to establish its cashflow, or you may find your position is made redundant. These times bring the volatility in the wealth creation journey.

Some people love the ups and downs, and others prefer smooth sailing. (To learn more about these differences, read the Your Money Personality module.)

Further to this, the financial lifecycle shows a smooth line due to the perspective we are using. The financial lifecycle diagram squeezes 60 to 70 years of a person’s life into no more than 10 to 15 centimetres across your screen. We have foregone the detail for the bigger picture.