Spending questions

[runswithfire]

I did a quick search and didn't find anything, so...

1. On the "Other Income/Spending" tab, if I want to model a spending reduction, I assume I enter a negative number and select "Off Chart Spending" - correct? The reason I ask is that the parenthetical comment after the "Pension Income" selection says "or off chart spending reduction", implying I should select that instead of "Off Chart Spending".

2. This looks like a bug, and a pretty significant one (I can't be the first person to find it?) If I enter Off Chart Spending and unselect the inflation adjustment checkbox, then look at the resulting "single-year" spreadsheet, the Off Chart Spending is still inflation adjusted. Whoops!

Bonus request - I'd sure like more entries for Portfolio Changes (and income/spending). I have donated, but this didn't unlock any additional ability to enter Portfolio Changes.

 

[pb4uski]

If you want to model a spending reduction use the pension for the amount of the reduction in the first year of the reduction, the year it wil occur, and chose inflation adjust if the expenses being reduced increase with inflation (or not if they are the same each year).

Off-chart spending is for spending that is not included on the Start Here page.

Just curious, what are the kinds of things that you are trying to include?

 

[runswithfire]

Ah, thanks! So I should model reductions in spending as increases in income?

Say I start with 75k in annual income, which I'll choose to be inflation adjusted (constant spending power). I also start with 50k in annual, inflation-adjusted spending and 25k in annual, non-inflation-adjusted spending (a mortgage). Now I pay off the mortgage and want to account for reduced spending. The trouble with just adding 25k in non-inflation-adjusted income is that the annual spending on the start page was all inflation adjusted. So I guess I have to add 25k in inflation-adjusted income in this case.

Or, I could enter my spending on the start page as only the inflation-adjusted part (50k) and then add non-inflation-adjusted spending of 25k on the Other Income/Spending page. And once that mortgage is done, add 25k of pension on the same page. Seems a little convoluted.

I don't see why I can't also account for the 25k reduction as a spending reduction as I originally described. But regardless whether I select inflation-adjusted or not, that amount is inflation adjusted in the calculations and that will throw off the results pretty significantly.

Could someone who maintains firecalc confirm whether this is an actual bug in the way spending is modeled?

re: the additional spending/income entries or portfolio changes, I'd like to account for deferred compensation that varies annually over a fixed period of time, and I'd also like to account for some small business income that won't last forever. So for example I'd enter 5 years worth of varied income. The way I'm accounting for this today is to treat the 5 years of compensation as 3 years of compensation, summing multiple years and just treating it as a larger lump sum payment. This has to throw off the modeling accuracy, so I was hoping to be more accurate

 

[pb4uski]

IMO the best practice with a conventional mortgage is to exclude the mortgage payments from spending on the Start Here page and enter the mortgage as fixed off-chart spending beginning in the current year (2017) and then enter a fixed pension beginning in the year after the mortgage is paid off. I agree with you that is it convoluted and wish that it had just been built into the tool, but alas, it is what it is.

On your deferred comp, you could probably use the Portfolio Changes tab.

Another option for all of these is to build it into manual entry of spending on the Spending Models tab (bottom radio button).

And you may be looking to too much precision...

 

[runswithfire]

I like your best practice because it produces better end results

Using the manual entry you just have to remember to manually resume your normal inflation-adjusted spending once you stop entering overriding values. If I have three years of $100k in spending, the 4th year can't just be a -1 in the manual entry, it needs to be my starting spending * (1.0 + inflation%)^4.

re: precision, good point, but I do want to know what's marked with chalk and what's not before I choose where to swing my axe, and I don't want firecalc wielding the axe