Forecasting your net worth

Forecasting projects your household's net worth year by year, from today to the end of your plan. It starts from what SageFin already knows — what you earn, what you spend and what your accounts hold — so you begin with a picture of your own money and adjust it, rather than filling in a blank form.

Every figure is an estimate. A forecast shows what would happen if its assumptions held. It is not advice and not a prediction, and it is built to be directional: good for "can we retire at 60 or 62?" and "what does the house do to us?", not for a figure to the dollar forty years out.

Building your first forecast

Build my forecast opens a short setup. Nothing is saved until the last step.

1. Your information. Name the forecast, choose who is in it, and choose where living expenses come from: Use my spending history (your last twelve complete months, and it keeps updating as more arrive) or Enter a yearly figure. You also see the take-home, assets and net worth SageFin found.
2. Income. Take-home pay for each source, after tax, in today's dollars. SageFin starts by splitting what reached your accounts evenly; change it to what each person really earns.
3. Accounts. Which accounts the plan should grow, spend from or pay down. Leave out a credit card you pay off every month — it is already in your spending — and usually the home you live in, unless you would sell it to live on.
4. Retirement. The age each person stops working, or Not decided yet.

Every person in the forecast needs a birthday, because that is how the forecast knows when their plan ends. Yours can be added during setup. Anyone else adds theirs in Settings → Profile — only they can — or you can leave them out of the forecast until they do.

Forecasts belong to the household, so everyone in it sees the same ones.

Reading it

Four figures sit at the top: net worth at the end of this year, at retirement, the retirement age, and net worth at the end of the plan. Under them is Projected net worth, a chart by calendar year, with Show as a table if you would rather read the numbers.

Today's dollars or future dollars. Today's dollars — the default, and the one to use — takes inflation out, so a figure forty years from now reads in money you understand. Future dollars shows the raw amounts. Switching changes how the numbers read, never the plan.

Below the chart, three tabs break it down by year:

• Accounts — each account's balance at the end of each year. Select any figure to see how it was reached: growth, contributions, payments and withdrawals.
• Cash Flow — income, expenses, what was saved and what had to be sold to cover a shortfall.
• Events — the life events in this forecast, and whether each one is actually counted.

A box above the chart says what the forecast left out or assumed: an account with no balance, an income source with no amount, living expenses averaged from fewer than twelve months. Read it before trusting a figure. The forecast never quietly fills a gap with zero; it leaves the thing out and says so.

When it cannot run at all, it says why instead of drawing a chart: nobody is included, someone has no birthday, or there is no living-expenses figure — typed, or from at least one complete month of spending. A household that spends nothing would save every dollar for forty years, which is a confident chart of something that will not happen.

What it assumes when you have not said

Edit assumptions opens every setting, and each change saves as you make it. Anything you leave blank uses a default, and the screen marks it (default) so you can tell your figure from ours.

A rate you type is the whole rate, not an amount on top of inflation: increase 4% is 4% a year.

Each account can be tuned from the Accounts tab with Edit: its growth rate, how its withdrawals are taxed, and a yearly paycheck contribution, such as a 401(k), which stops when its owner retires. A loan needs its rate and monthly payment. If neither your debt plan nor your lender has supplied them, it shows Missing details and is left out until you add them.

Life events

+ Add event on the Events tab puts something on the timeline: Retirement, Social Security, Buy a home, Have a kid, Career break, New job, Other income or Other expense. Each needs a year, or an age, before it changes anything. An event only counts when it says In the forecast, and the tab says why when one does not.

Leave a field blank and the event uses a sensible default, labeled as one. Two things have no default on purpose:

• A retirement age. A retirement nobody dated is not assumed to happen at 65; it is left out, and that person's income runs to the end of the plan until you set one.
• A price, a salary or an amount. A home with no price, or a new job with no pay, does nothing rather than guessing — it is not a $0 job that shows you losing your income.

Buying a home asks what housing you stop paying for. Your spending already includes today's rent, and the forecast holds your living expenses as one yearly figure it cannot see inside. Tell it the rent, and it stops charging it from the purchase year. Leave it blank and it charges both, and says so. Enter 0 if you pay nothing today.

Each loan asks the same kind of question: is its payment already in your living expenses? If they come from your spending history and you do not say, the forecast assumes yes and stops charging the payment once the loan is paid off. If you typed a yearly figure it cannot tell, so it keeps charging it. Either way it says which it did.

When there is money left over, and when there is not

A year that ends ahead goes first to repaying any earlier shortfall, then into Extra Savings, an account the forecast keeps for you. Split extra savings sends a share to accounts of your choosing instead, in order — a percentage is of what is left after the rows above it.

A year that ends behind is covered by selling, in this order unless you change it: Extra Savings, cash, taxable brokerage, tax-deferred (401(k), traditional IRA), Roth, then tax-free (HSA, 529). Tax-deferred money is not touched before its owner is 59½, and a home or car is never sold.

Tax on those sales is a simplified model, not tax advice: a flat rate per kind of account, with no brackets, no state tax and no required minimum distributions. What nothing can cover is not hidden — it is carried as an unfunded shortfall and taken off net worth, which is how the chart can go below zero.

Scenarios: trying a what-if

Your first forecast is your baseline. The + beside it adds another, either Start from scratch or Duplicate existing scenario — duplicating is the quick way to ask "what if we bought the house two years later?" without touching the original.

Compare with lays another scenario over the one you are looking at: a dashed line on the chart, and the difference under each figure at the top.

The ⋯ menu on a scenario renames, reorders, duplicates or deletes it. Deleting cannot be undone, and deleting the baseline makes the next scenario the baseline.

What it simplifies

A forecast is a model, and a few of its shortcuts are worth knowing:

• Your living expenses move as one figure. Everything inside them rises with the same rule, so a fixed loan payment that sits inside your spending history rises with inflation too, when in reality it stays the same. That overstates expenses a little while the loan is alive — understating net worth, never flattering it — and corrects itself once the loan is paid off.
• Returns are steady. Every year grows at its rate; there are no bad years or good ones.
• Taxes are flat, as described above.

The phone app has Forecasting too — in its menu to start with, or on the tab bar if you move it there. It shows the same forecasts, one year at a time.