4 ms·

wow! That's a level of personal financial analysis that I've never contemplated doing. It's fantastic that someone has built such a great tool for others, an

by geph2021 3y ago

wow! That's a level of personal financial analysis that I've never contemplated doing. It's fantastic that someone has built such a great tool for others, and you get so much value from it. For me personally, I fail to understand the point of doing this level of analysis, at lest for some of the things you listed that seem highly hypothetical and uncertain (e.g. raises, IPOs, even future mortgage rates). I guess that's the nature of any financial forecasting, but this just seems like it's taken to a level that I would not find helpful. Take for example the kind of mortgage to choose, a decision that all home buyers face and can be daunting (there's so much mortgage/lender lingo that is foreign to most people). The "right" answer is to go with a shorter-term, variable rate, because on average you'll pay less interest than longer-term/fixed rates. But that's also the wrong answer for some people who don't want, or can't handle variability in their biggest monthly expense. Layering those factors into an overall retirement calculator/projector just seems like overkill and over complicated for that decision. MHO...

fishtoaster 3y ago
Well, I can't speak for most people, but one thing I've been doing is using this modeling as feedback into my budget. 1. Track my current expenses (I use https://lunchmoney.app/ https://lunchmoney.app/, but a spreadsheet works fine). Looks like I'm spending $X/month 2. Build a reasonably complete model of my financial life assuming $X expenses per month (I use ProjectionLab) 3. Do I run out of money before the end of my life? If yes, look at my expense breakdown and look for areas to reduce it (fewer ubers, eat out less, cut back on diamond-encrusted tiaras, etc). My new budget is $Y/mo. Goto 2. 4. Do I have a ton of money left at the end of my life? If yes, I can increase my budget a bit for things I like (more ubers, eat out more, more diamond-encrusted tiaras, etc). I can revisit this over time as my income changes, or my retirement account value changes based on real-world market performance, or I get a windfall, or I get married, etc etc.
- scubakid 3y ago
  Cutting back on the tiaras before the mocha lattes, huh? Starbucks really has their customer retention on lock ;P
kelnos 3y ago
> The "right" answer is to go with a shorter-term, variable rate, because on average you'll pay less interest than longer-term/fixed rates. My 30 year fixed-rate mortgage at 2.6% begs to differ ;) Yes, I had lucky timing; I was able to refinance right at the start of 2022 when rates were pretty much at their lowest. But overall, I think your assertion isn't correct. It really just depends on conditions. If rates are in general very low, you probably want that fixed-rate mortgage, even if the variable one is -- at least for now -- a little bit lower. In the US, most people get 30-year mortgages, and it's pretty much impossible to predict what rates will be like in 10, 15, 20, 25 years. If rates are higher, and you believe the reason for that is temporary (like the inflation reduction measures going on now), a variable-rate mortgage is probably a good gamble. If rates drop, you can always refinance (either into another variable-rate mortgage, or to a fixed rate). Honestly, the 7% now on a 30-year-fixed isn't that bad, historically. It just feels bad because we had such low rates in recent years.

fishtoaster 3y ago

Well, I can't speak for most people, but one thing I've been doing is using this modeling as feedback into my budget. 1. Track my current expenses (I use https://lunchmoney.app/ https://lunchmoney.app/, but a spreadsheet works fine). Looks like I'm spending $X/month 2. Build a reasonably complete model of my financial life assuming $X expenses per month (I use ProjectionLab) 3. Do I run out of money before the end of my life? If yes, look at my expense breakdown and look for areas to reduce it (fewer ubers, eat out less, cut back on diamond-encrusted tiaras, etc). My new budget is $Y/mo. Goto 2. 4. Do I have a ton of money left at the end of my life? If yes, I can increase my budget a bit for things I like (more ubers, eat out more, more diamond-encrusted tiaras, etc). I can revisit this over time as my income changes, or my retirement account value changes based on real-world market performance, or I get a windfall, or I get married, etc etc.

scubakid 3y ago
Cutting back on the tiaras before the mocha lattes, huh? Starbucks really has their customer retention on lock ;P

kelnos 3y ago

> The "right" answer is to go with a shorter-term, variable rate, because on average you'll pay less interest than longer-term/fixed rates. My 30 year fixed-rate mortgage at 2.6% begs to differ ;) Yes, I had lucky timing; I was able to refinance right at the start of 2022 when rates were pretty much at their lowest. But overall, I think your assertion isn't correct. It really just depends on conditions. If rates are in general very low, you probably want that fixed-rate mortgage, even if the variable one is -- at least for now -- a little bit lower. In the US, most people get 30-year mortgages, and it's pretty much impossible to predict what rates will be like in 10, 15, 20, 25 years. If rates are higher, and you believe the reason for that is temporary (like the inflation reduction measures going on now), a variable-rate mortgage is probably a good gamble. If rates drop, you can always refinance (either into another variable-rate mortgage, or to a fixed rate). Honestly, the 7% now on a 30-year-fixed isn't that bad, historically. It just feels bad because we had such low rates in recent years.