How to use the Generic Planner:
- Put how much money you earn in the row labeled ‘Income’ (row 2).
- Guess how much money you will earn in the future. For mine, I forecasted a 0.5% raise every year. The planner as it sits right now is the same all the way across.
- Scroll down to see the implications of investing 5%, 10%, 15%, and 25% of your savings every year. Below each amount of savings is a forecasted Return On Investment (ROI). For your reference, the stock market has returned roughly 10% per year over the last 100 years or so. I used the 7.5% rows in my planning, since expecting 10% per year is a little aggressive.
- If you already have investments, overwrite the values in the C column for all the ROI rows. This will establish your baseline. Also, input your age in 2017 in cell C3.
- Look over to the right to see how much money you should have invested at any given age.
18 year old, making $30,000 starting in 2017. Assuming she invests 5% every year, and a 5% ROI at age 65 she would have $282,038 saved up. Not enough to live on, as we have seen in previous posts, but certainly better than most.
The thing I like about this spreadsheet is it’s easy to see how things compound over time. Again – there is no substitute for starting early. To show the value of that, go ahead and overwrite the income row with something higher, and then remove the first ten years of investments. Going back to our example above, the same woman earning $45,000 per year and saving 5% of that at the same 5% ROI would only have $228,663 saved. Again, start early.
I had been using my spreadsheet for a few years when I found Personal Capital. I love it. It allows you to track all your investments in one place, to include assets of different types – houses, cars, stocks, etc. One super cool dashboard shows me exactly how I’m doing. The best thing about Personal Capital is the ‘Planning’ tab. It does what my spreadsheet does, except it runs 5000 simulations making things better or worse than baseline. Remember how the spreadsheet I created estimates an ROI of 2.5%, 5%, 7.5%, 10%? Well, Personal Capital runs 5000 Monte Carlo Simulations which allow each individual year and asset class to perform differently, then tells you how your plan holds up:
It generates two lines on a chart:
- The median – this means that half of the 5000 simulations are above that median line.
- The 10th percentile – this means that 10% of the simulations are below the darker shaded area. So in 500 out of 5000 simulations, my plan does even worse than shown.
It also allows you to generate multiple plans:
As you can see in the scenarios tab, my current plan only works half the time. Meaning that my plan has a lower probability of supporting my current lifestyle than Sex Panther. So I ran some other scenarios and determined that if I don’t spend any money (the Low Spending or Ultra Low Spending plans) then I will still have money. Genius! Note ‘The Dream’ plan is one where I ratcheted up my savings to a super high level.
So, yes, I like Personal Capital. I like it a lot. I still keep my spreadsheet, since I like to see how things compound over time. Also, I like to save yearly tabs to see how I compare to my old projections. Now, I’m currently exceeding my projections, so I like to see it. If I fall behind we’ll see how much I like seeing that! Probably not much.