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Math was never my strong subject. In high school I never took algebra or anything beyond arithmetic- there is an archaic word for you. When I ventured into college many years later I had to take a non-credit course in algebra to get accepted. Years later calculus was required. I liked the course so much I took it twice. It didn’t matter that the professor barely spoke English. I didn’t understand her or the subject.
Here I am 55 years later and still looking for an occasion to use algebra or calculus. There was one time I wish I had paid attention though.
I was presenting a executive compensation plan to the company Chairman. He was using a whiteboard to analyze what I was proposing. There were formulas all over the place. I finally gave up the charade and admitted I had no idea what he was talking about. Good thing it was the year before I retired.
This leads me to the fascination with spreadsheets for personal finance and retirement planning. Back in the day I had a modest ability to use Excel. A few years ago I actually attempted to track our spending using Numbers on my iPad. I concluded it didn’t tell me anything I didn’t intuitively know – we lived well within our means – which to me simply means we saved adequately and never carried credit card debt.
Besides, I had to keep entering stuff to make the spreadsheet do anything. If I tried to project the future, the assumptions were all up to me – and I kept changing them. I figured out you could achieve any goal with just a tweak to you assumptions. Annual rate of return? Click up. Inflation rate? Click down 🤑
My hat is off to those who like spreadsheets, even calculus. No doubt spreadsheets provide a measure of comfort, perhaps a reassurance about their financial future – or it’s nearly hobby. If you happened to be an engineer, I understand.
For me going into my bank app tells me how I spent money last month via charges, direct bill withdrawals, checks (very few) and ATM use. It doesn’t know how I used the cash withdrawals, but does it matter?
Perhaps my dislike for and skill deficiency with math is the reason I like money stuff simple and high level. So far the seat-of-the-pants approach has served me well.
I’ve already said my piece on spreadsheets: https://humbledollar.com/2023/09/driven-by-data/
The article notwithstanding, my financial spreadsheets were more useful when we were driving toward a goal of financial independence. Reaching retirement, I find the data is less interesting to me. For you, Dick, your monthly cash flow is so much higher than your monthly needs that a spreadsheet is not useful to you. No need to worry about margins; you know you have “enough.” And if they’re not fun for you, why bother? I get it.
Excel rocks. I love the Microsoft 365 version which can look up stock, ETF, or fund prices. I’m stuck with assets split between Fidelity and Vanguard until 2030. Excel makes it easy to have a consolidated view of net worth and pre-Social Security income. After that, life gets simpler and Excel may get to take a break.
The key word is “consolidated” which to me makes sense. Exactly why I consolidated with Fidelity and they do the work.
Spreadsheets are a useful tool that can be as simple or complex as you like. You don’t have to be good at math to use a spreadsheet. I wouldn’t be as effective in nearly every aspect of my life without them.
I don’t know where I read it, but “it” suggested that if you live below your means there was no need to have a budget. Having said that, I do have a spreadsheet, updated each year, that shows how much went out and what came in, in not great detail. I find this a good tool in determining how I allocate money to checking, savings, and brokerage accounts for the coming year.
Each month when my income arrives in a checking account it is automatically allocated among other accounts. One for ongoing bills, one for my wife to use, one savings and another travel. Money is auto sent to our 529 accounts and a small amount to a brokerage MM account.
I only make changes to the bill account if I see the balance not staying steady between deposits ands withdrawals. I only had to do that once in the last five years.
I fear I have a deficient spreadsheet gene preventing me from using one.
Spreadsheets are a powerful tool. Just like any other tool, the more you use them, the better you get, and the better the product you produce. Analytic tools give you the information to make better decsions. In your example of the chairman, I assume they had to make decisions involving large amounts of money. Making those decisions without understanding the ramifications would have been a dereliction of their duties.
Tweaking inputs and assumptions, and observing the results in your analysis, often provides valuable information and insight. For example, if you run a retirement projection and the analysis says you need an annual return of 25%, you just learned that your plan will most likely not work. Analytic tools are great for doing “what if” studies, and understanding the sensitivity to changes in inputs.
Turbo Tax is basically a fancy, complicated spreadsheet. If I want to decide how much of a Roth conversion to do, I could guess the impact on that years taxes, or I could run a quick test case on a copy of the previous year’s return and get a pretty good idea of the complicated interactions.
Absolutely agree. I’ve used excel for a number of financial items: predicting the effect of mortgage prepayments on loan lifetime, managing capital gains harvesting, monitoring spending habits/budgeting. Gotta remember, it’s a modeling tool and models are only as good as the assumptions that go into them.
The more I read of others approach to money and investing the more I realize how abnormal I must be. It seems I don’t do anything by the rules so to speak.
Several years ago, like 14 I built a spreadsheet using Numbers. I listed all our expenses and our net income and found there was more income than the expenses I could think of. That’s all I needed to know. I haven’t looked at it since, even if I could find it.
I think if we had tried living on a formal budget during the ten years we had 1,2 or 3 in college we might have given up. Nothing on paper would make sense. We just made it work. Just making it work and never having credit card debt is all we did and do.
Spoken like a true engineer, Mr Connor
You’re not wrong Rick, but math still sucks!
Hi Dick, this is Chris. Thank goodness I am not the only one! I did the save first, spend the rest all these years. Never knew how to do spreadsheets. We did ok too. Spouse is doing spreadsheets now to track our spending.
So Chris, I have to ask, what will you do with the info after spending is tracked?
I track a few things with all the data I enter in Quicken. I know the spending is less than the income. I know how much it costs to take our vacations, and how much we spend on groceries compared to previous years. I track auto expenses to determine if it is time to consider replacement. I track utilities because we’re trying to decide if there’s a true payback for installing solar panels. The catch-all category of “Misc” gets special attention at the end of each year so we can determine if a new specific category should be added.
Because of the data I include, sometimes there’s an unexpected benefit. When a window shade failed, I was able to look up the vendor on the credit card detail and order a similar replacement.