How it Works: List of Expenses

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,

Financial Decisions — Risk

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.

Financial Decisions — Expected Value

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.

Version 1.1 Is Here

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
  

How it Works – List of Income

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…

Financial Decisions — Scenarios

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.

How it Works – Starting Assumptions

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.