Ok, so it’s been a while since I’ve posted, but it’s not because I’m lazy… I’ve been working hard on a future version of the spreadsheet…
But, back to blogging! Next in our ‘How it Works’ series is the ‘List of Expenses’ tab. As the name implies, this is where you should list out all of your expected expenses. You can be as granular or as high-level as you want.
For example, Continue reading
In the last few posts, we looked at a few basic tools for planning: scenarios and expected value.
Today, I want to demonstrate one application of these tools: considering risk in financial decisions. We will refine this statement a bit later, but for now, here is the bottom line: when making financial decisions, you should always choose the option with the greatest expected value, but only if you can handle the risk. We’ll look at three examples: one illustration from gambling and two financial decisions. Continue reading
In my previous post, I discussed the scenario feature as one good aid for decision making with the Life Spreadsheet. In addition to comparing scenarios, in some situations it can be useful to combine multiple scenarios into one by using a calculation called the expected value.
It’s been a long time coming, but the new version of LifeSpreadsheet is now available! Download it here.
The new features include:
- A ‘Plan Until’ date, allowing you to plan to a certain age or year
- Pay down loans faster, easily add one time payments to loan balances
- Expanded number of income and expense items
- Support for tax-free investments (like Roth IRAs)
- Formatting updates should make the spreadsheet easier to use
The next tab we’ll discuss is the list of income tab. This sheet is where you should list out all of your expected income sources, like your job, rental house income, social security, etc.
As we did with the prior tabs, we’ll look at each field and explain what it does…
While Alex describes the basic features of the spreadsheet and gathers your feedback concerning how you would like us to improve it, I will show you how to start using the spreadsheet for your financial decisions. Eventually, I will be examining some detailed case studies, but in preparation for that, I’d like to first explain how to use some of the fundamental tools. I’ll start today by examining how to use the built-in features of Excel and Open Office to compare different scenarios.
At this early stage of the Life Spreadsheet, you have the opportunity to influence its development. Over the next few weeks, I’ll be posting to explain how the spreadsheet works one tab at a time, while Eric posts more detailed case studies of using the spreadsheet to aid in real life decision making. As I post about how it works, please leave feedback about how you think it could be better.
Today we’ll cover the ‘Starting Assumptions’ tab.
As some of you noticed, there was a bug in the Open Office version on the ‘Investments by Year’ tab, but it’s fixed. You can download the updated version on the Download Page.
Also, I renamed it with the .docx extension so that I could upload it to WordPress. (We are using their hosting services for now). Before you open it, just rename it to ‘.ods’. I know it’s inconvenient, but it’s better than scribd!
If a number of internet financial planners out there are to be believed, planning for your financial future is a relatively straightforward process. Enter income. Enter expenses. Calculate 8% growth of surplus. Look forward to your future as a millionaire. For that matter, if you talk to Alex, you might come away thinking that financial planning is just as simple as that.
But I’m not an accountant; I’m a Ph.D. student, so I’m wary of simple answers. I also don’t make an accountant’s salary. So while Alex has begun spreading the rumor that the Life Spreadsheet is a retirement calculator, I’m here to tell you that it is that, but is also much more. The Life Spreadsheet is the beginning of an ambitious project to make the power of rigorous analysis for everyday financial decisions accessible to all.
Many of you have expressed interest in different versions of the spreadsheet, so we made an Open Office/LibreOffice version. There are now 2 versions (.xlsx and .ods) on the download page.