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Should there be a Firecalc (program) for cash flow?
Old 12-18-2008, 08:34 PM   #1
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Should there be a Firecalc (program) for cash flow?

Several threads recently have dealt with cash flow in one way or another.
e.g. those about the stock market decline and the threats to ER (cash flow planning might have helped to avoid the threat)

and

Question On Retiring & Living Off Investments

In my way of thinking these are cash flow questions. It is a very important aspect to the ER discussion but not addressed in most places. Having worked in finance cash flow has always been a factor in my finances.

Should there be a Firecalc type program that helps people with cashflow?

I have a spread sheet that computes my cash flow for about 35 years.

Annual Estimated expense budget reduced by the following income in the following order until income equals expenses:
1. net earned income
2. social security
3. pension etc
4. Income from cash equivalent investments - holding for future years
expense budget - 4 years? - replenished annually.
5. Income from taxable investments
selling of taxable investments
6. Income from tax sheltered investments
selling of tax sheltered investment

The income and selling of tax sheltered should be done according to tax requirements and to reduce taxes; if possible.
+++++++

Does anyone else estimate their cash flow requirements?
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Old 12-18-2008, 11:40 PM   #2
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Yes, but I usually lump steps 4-6 together as that's the funding of expenses not covered elsewhere. Rather than try to determine in each year where the 'funds' come from, I would do that as I was preparing my annual budget for the next year and planning rebalancing to determine the flows.

But I'm open to suggestions.

-- Rita
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Old 12-19-2008, 09:26 AM   #3
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So many variables, so little time.....Ah!

I think the complexity of budget and cash flow planning needed depends on how large your pot is compared to your current and potential expenses. Those with a minimal amount of assets will need to get down to the dollar while those who have much more, can get by with the proverbial wild ass guess.

This would seem to make a generalized spreadsheet a difficult item to prepare.

Furthermore, after reading many of the posts in the under $3000/mo lifestyle thread, I have reflected back over the last seven years since I retired, and thought about the unplanned expenses that always happen and can ruin planning for those on the knife edge of adequate retirement funding....
1) New roof $14000
2) Transmission $2700
3) Health insurance increasing from $200/mo to $900/mo
4) New lawn Mower
5) Dishwasher
6) New heater
7) House painting
etc. etc. etc.

I'm not sure that I could plan for these things other than having more assets than what you might think you would need to retire.
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Old 12-19-2008, 09:40 AM   #4
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Yes, I do pretty much the same thing. I have a spreadsheet that shows future cash flows over my projeted life span. I've probably used most every calculator out there, but having this view of cash flow is what finally gave me enough confidence to ER.
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Old 12-19-2008, 10:02 AM   #5
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Quote:
Originally Posted by SteveL View Post
I'm not sure that I could plan for these things other than having more assets than what you might think you would need to retire.
If you had 3-4 years of estimated expense budget in cash equivalents they would be taken care of. Then you have the time to get the cash pot back up to its proper level.
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Old 12-19-2008, 06:24 PM   #6
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Quote:
Originally Posted by dex View Post
Annual Estimated expense budget reduced by the following income in the following order until income equals expenses:
1. net earned income
2. social security
3. pension etc
4. Income from cash equivalent investments - holding for future years
expense budget - 4 years? - replenished annually.
5. Income from taxable investments
selling of taxable investments
6. Income from tax sheltered investments
selling of tax sheltered investment
Would add cash flow type of income from option trading as well, which provides a hedge against capital changes.
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Old 12-19-2008, 06:31 PM   #7
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Most calculators could use an improvement. Been a while since I used firecalc, but here is what I remember mentioning before.

For example having entries for taxable vs tax free vs tax deferred.
Having entries for various accumulation techniques or scenarios.
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Old 12-19-2008, 09:10 PM   #8
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I have something similar, but programmed in C. It includes tax estimates so I can trade off tax strategies, like Roth conversions.
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Old 12-19-2008, 09:22 PM   #9
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Yes, I have my cash flow in excel. Mine is very simple. After I reached FI according to Firecalc, it became my goal to w*rk only enough to meet current expenses until full retirement in 2011. I know all of my monthly fixed expenses and approximate variable expenses from the last few years. So I work enough to meet the projected expenses for the next month. At the end of each month, I sum the balances of my cash accounts to make sure that the amount is at least equal to the previous month's balance.
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