I am an Excel addict. This is a fact, and one I am not ashamed of. Some people get bored and whip out their phone/iPad to play Candy Crush or some WWII tank game (ahem… Mr SSC). I open my Excel spreadsheets. And, probably to no one’s surprise – one of my favorite Excel pastimes is playing with the SSC budgets and doing some rudimentary forward calculations to see if we can reach FIRE even sooner!
Over the past few months, I’ve met a few other Excel-addict which has been fun. And this month Mrs. Maroon and I decided to join forces to show off some of the fun budgeting calculations we do with Excel. So, please click on over to the Mixing Maroons to check out how she utilizes Excel!
So, today, I am going to discuss one of my latest spreadsheets – my “How much do we need to FIRE?”. Yes, I realize that there are all sorts of super awesome simulators out there that do all this (like firecalc), but I am interested in more than the end result – I like to go in and fiddle with numbers to get a better understanding of all the inputs and assumptions. In a strange way, I find it therapeutic in that it makes me feel not-so-crazy for planning on giving up a huge salary.
One of the reasons for creating my own forward modeling was to be able to include some issues that concern me. Among them are:
- Adding in the extra cost of teenagers
- Setting healthcare to inflate more rapidly than the general CPI
- Estimating the effect of dividends on our withdrawals
- Playing around with different stock/bond weightings.
- Effect of part-time jobs and pre-60 tapping of 401k/IRAs
Below shows how I have this all set up. You can see my ‘inputs’ are mostly green boxes.
So now to zoom in, so you can actually see what I am doing. Over on the very left side, I have my “total invest” set to $750,000. Right now that is about what I think Mr. SSC and I will need after we pay off the house to last us until we are 60 and living off of our 401ks and IRAs. Also in the left most box – I have some fund information that I use to calculate my returns and dividends. I just selected 3 funds from Vanguard – an equity, income, and bond fund. I also included their fund fees, just to be a tad more accurate. Right now I have all the returns and such set to be the same each year – but I have it set up so I can put in more accurate historical information… same with inflation. Right now I assume 2%. Why 2%? Well, I’m cheap and we don’t buy a whole bunch. So, essentially I’m hoping that our costs are below inflation. I call it optimism.
OK – the next set of columns is where I put in our expected costs. At the top, you can see I have an estimated need of $45,000 a year. This includes taxes, but not healthcare. Below the cell labeled “HC inflate” I have healthcare inflating at 4% a year, and it initially costing us $9000/year. Next column of expenses is teenagers. Here I estimate that teenagers cost an extra $200/month/kid. Maybe its food, maybe school activities or extra clothes. And honestly, I have no idea if $200 is reasonable – it may be too much, or two little. I just recall watching my brother eat 3 chicken breasts at a time… every day. Next, we have a ‘new’ car column, and then its all totaled up for our yearly expenses.
I know – I know – this is fascinating!
Also in the above figure on the right-hand side are our Investment Allocations – Here I can play with how much cash to keep on hand (1 year), and a stock/equity bond split (this is really cool to play with). So these columns show me how all my cash and investments are allocated. That bright yellow box – that tells me if I turn 60 with any money left!!!
One of my goals with the spreadsheet was to pull in dividend income. So, these dividends below are just based on the three mutual funds that I mentioned before. I also have a column where I can put in additional income – whether from a part-time gig when the kids are older, or from tapping the 401ks a little bit early.
Pretty fun stuff – huh? Now I need to add more colors to make it even jazzier Then, my next step is to get Mr. SSC to check this out, so that he will REALLY believe me that we can agree on our goal of $750k. He’s still a little squeamish about this all. ! Do any others of you out there prefer Excel? Or what software is your favorite?
And if you want to see some more fun with Excel head over to Mixing Maroons!
Oh, and hopefully this works… here is a link to the spreadsheet that I discussed. Remember – I’m a geologist, not some super finance guru – so, let me know if you find any errors! Budget_calculator