Money FI Knowledge Base

# Modelling future life events

By adding events to your FI Plan, you can more accurately project your journey to financial independence. Events are anything that will affect your future expenses or investments such as:

  • Buying a house or car.
  • Sending your child to school (ie: school fees).
  • Going on an expensive holiday.
  • etc

Events can either be once off or recurring. A once off event as the name implies, happens once on a future date. For example you might be expecting a large bonus from work at the end of the year which you plan on adding to your investments.

Recurring events happen every month over a period of time. For example perhaps you plan on buying a house in a few years from now. To model this you could setup a recurring event which increases your expenses for the next X years to account for the mortgage payments.

# Creating a once off event

A once off event requires the following information:

# Event name (required)

Give this event a name, for example: Bonus from work.

# Date (required)

The date on which this event will occur.

# Adjust expenses (optional)

If this event results in a change to your expenses, enter a positve value to increase your expenses or a negative value to decrease them.

# Adjust contributions (optional)

If this event results in a change to how much you typically contribute to your investments each month, enter a positive value to increase that amount or a negative value to decrease that amount.

# Investment Withdrawl (optional)

If this event results in a withdrawal from your investment balance, enter a negative value to represent that withdrawal.

Investment withdrawals require that you enter the pre-tax amount you plan to withdraw as well as any tax that may be applicable on that withdrawal.

TIP

Here's an example of how to model the following once off event:

A few months from now I want to go on a holiday which will cost $5 000. To do this I plan on reducing how much I invest for that month by $1 000. I also plan on withdrawing $3 000 from my investment balance to help pay for it. The final $1 000 will simply be paid for out of pocket.

So to model this I'll create a once off event with the following parameters:

  • Event Name: My awesome holiday
  • Date: June
  • Adjust expenses: +$1 000
  • Adjust contributions: -$1 000
  • Investment withdrawal: -$3 000 (for simplicity I'll leave tax as zero)

All done. Now when I run my FI plan again, this event will ensure that my FI projection will be adjusted accordingly.

# Creating a recurring event

Recurring events happen every month over the period of time you specify.

These events contains the same base parameters as detailed above for once off events along with some minor differences:

# Date Range (required)

Indicate the start and end date during which this recurring event applies.

# Annual escalation (optional)

There is an optional annual escalation which can be applied for adjustments to expenses or contributions as well as investment withdrawals.

A positive value will increase your adjustment annually by the specified percentage while a negative value will decrease it.

TIP

Here's an example of how to model the following recurring event:

In two years from now I plan on buying a house which I want to pay off in 15 years. I've decided to reduce the amount I contribute to my investments each month to pay for half of the mortgage. The other half will be paid out of pocket (resulting in an increase of my monthly expenses)

So to model this I'll create a recurring event with the following parameters:

  • Event Name: Mortage payments
  • Start Date: 2 years from now
  • End Date: 15 years after the start date
  • Adjust expenses: increase by 50% of what I expect my monthly mortgage payments to be.
  • Adjust contributions: reduce by 50% of what I expect my monthly mortgage payments to be.

All done. Now when I run my FI plan again, this event will ensure that my FI projection will be adjusted accordingly.

# Generating comparisons

Comparisons help you answer questions like:

  • What if I buy a house in two years from now?
  • What if I withdraw a lump sum from my investments next year to use for a holiday?
  • What if I stop going out to restaurants as often as I do and invest that money instead?

To setup a comparison you simply add future life events and then slide the Generate comparison switch to the active position.

The result of using the generate comparison functionality is that two FI journey projections will be created:

  • The primary projection includes all future events
  • The secondary projection excludes any events which have been flagged for comparison.

Generating comparisons makes it easy to see how potential future life events will impact your financial independence timeline.

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