FAQ
Frequently Asked Questions
How to use this Site
Step 1 Go to the Financial Snapshot.
Step 2 Enter the details of your current and expected retirement income, expenses and investment savings.
Step 3 Review the results on the graph. Moving your mouse over the graph will bring up a tool tip with details. At the bottom of the page is a table with the details of your future cash flow projection and retirement funds.
Step 4 Go to the Take Action to address any shortfall or add to your surplus.
Step 5 Review the effects of:
- Increasing your savings
- Reducing your spending
- Increasing your rate of return
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Terms and Calculations
Financial Snapshot
- In the Assumptions table the pre-set values for the Income Indexing Rate, the Inflation Rate - Expenses and the Return on Investments are intended to be conservative assumptions. All of these can be adjusted to meet your specific situation, or to see the affect of changes to these assumptions on your retirement finances.
- Return on Investments is the annual rate of return for sum of investment funds and the gains or losses from the previous year's investment funds.
- The calculations are based on full years. In instances where the annual total is the sum of amounts added incrementally through out the year, such as monthly savings, the return is prorated based on savings for one half of the year. Full values are used in calculations, however, rounded amounts are displayed.
Future Cash Flow Projection Table terms
NOTE: the Future Cash Flow Projection Table is generated and adjusted in real-time as the data to create or change a financial snapshot is entered. If there are no data in either/or the Years to Retirement or the Retirement Years fields the table will not be visible.
- Year is the current year.
- Starting Funds is the amount of funds remaining at the end of the previous year. In the first year the amount is the number entered into the Investment Funds field.
- Savings OpportunityThe amount displayed is equal to the difference between income and expenses when income exceeds expenses. This represents an opportunity to increase your monthly savings. When expenses are equal to or are more than income the amount displayed is 0.
- Net Gain/Loss is the sum of the return (or loss) on the year's Starting Funds and the return on one half of the savings accumulated during the year. Where expenses exceed income the loss is calculated using the half of the difference multiplied by the rate of return.
- Funds Remaining represents the total funds invested at the end of the year, taking into account income, expenses and investment returns during the year. The calculation adjusts the annual amounts using the assumptions for indexing income, inflation of expenses and return on investments. Where expenses exceed income the encroachment on capital is subtracted from the total.
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Take Action
- Monthly Contribution Amount the amount you would have to save each month over and above your current savings until you retire to make up any shortfall.
- Annual Contributions the amount you would have to save each year over and above your current savings until you retire to make up any shortfall.
- Initial Shortfall the surplus or shortfall at the end of your retirement calculated in your financial snapshot.
- Additional Savings the total of funds saved for the number of years specified without any investment returns.
- Total Savings if Invested the total of funds saved including investment returns until the end of your retirement years. (The Total Savings if Invested the total funds if invested will calculate only if you have included years to retirement or years in retirement. Otherwise, only the future value of spending reductions will be calculated).
- Total Spending Reduction the total amount of spending reductions for the number of years specified without investment returns.
- Total Funds if Invested the total amount of spending reductions if funds are saved and invested until the end of your retirement years..
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Examples
Assume the rate of Return on Investments is 4%
Remember, you can change that (as well as the rates of inflation for your income and/or your expenses) and see how that affects your retirement prospects.
Scenario 1.
You have $10,000 in Investment Funds.
You have an income of $1500/month or $18,000/year and expenses of $1000/month, or $12,000/year. This gives you a Savings Opportunity of $500/month or $6,000/year.
If you don’t enter anything into the Monthly Savings field, then that money just disappears from your wallet as well as your future financial plan.
So let’s say you choose to save $100/month, or $1,200/year, you still have an opportunity to save an additional $4,800/year.
Net Gain/Loss is calculated as 4% of your Starting Funds (4% of $10,000 is $400) PLUS 4% of ONE/HALF of your annual savings (Half of $1200 is $600. 4% of $600 is $24).
Your total Net Gain/Loss is $400 + $24 = $424.
Your Funds Remaining is your Starting Funds ($10,000) PLUS the Net Gain/Loss ($424) PLUS your Savings for the year ($1200) for a total of $11,624.
That becomes your Starting Funds for the next year. Nice!
Scenario 2.
You have $10,000 in Investment Funds.
You have an income of $1000/month, but expenses of $1500/month.
You are spending more than you earn, so you add to your savings in this case.
Your annual income is $1000 * 12 = $12,000, but your expenses are $1500 * 12 = $18,000, or an over expenditure of $6,000 each year, that will have to come out of your savings. Your overspending has an added cost, which is reflected in the Net Gain/Loss for the year.
Net Gain/Loss is calculated as 4% of your Starting Funds (4% of $10,000 is $400) MINUS 4% of ONE/HALF of your annual over spending ( 4% of $3,000 is $120, so your total Net Gain/Loss is $400 - $120 = $280. Your overspending is causing a loss of $120/year investment income.
Your Funds Remaining is your Starting Funds ($10,000) PLUS the Net Gain/Loss ($280) MINUS your over spending for the year ($6,000) for a total of $4,280.
That becomes your Starting Funds for the next year. That’s a bad trend -time to make some changes!
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Disclaimer
The results shown are intended to represent the long term trend of your financial circumstances using a cash flow calculation based on data that are supplied by you. The calculations do not represent any guarantee of future results. Big Tool Enterprises disclaim all and any guarantees, undertakings and warranties, expressed or implied, and shall not be liable for any loss or damage whatsoever (including human or computer error, negligent or otherwise, or incidental or consequential loss or damage) arising out of or in connection with any use or reliance on the information or advice on this site. The user must accept sole responsibility associated with the use of the material on this site, irrespective of the purpose for which such use or results are applied. The information on this website is no substitute for financial advice.
