I'm a new user trying to understand how the calculator uses my input data to produce results so the data and calculations make sense to me. I'm having trouble tracking how the values in the Regular Investments Balance change from year to year. There appears to be little discussion (program or manual) of what parameters, exactly, are used to compute these values. Can you share this information? Thank You.
This is described in a section called "Modeling of Accounts and Cash Flow" on page 9 of the User Manual. The key to this is understanding how the Cash Account works because contributions to the Regular Investments balance occur only one way: overflow from the Cash Account. Otherwise, the Regular account grows due the growth of the underlying assets (fully explained in the Financial Assets sections of the User Manual). Withdrawals from the Regular account occur when the Cash Account has an underflow condition (i.e., withdrawals deplete its balance to its designated floor) and the designated withdrawal order puts the Regular Account at the top of the order, and when the Regular Account is designated as the source of the funds to purchase of annuity. PRC2023 contains a new report that provides the details of the puts and takes for virtually all accounts, so you'll probably find that useful.
Thank you Stuart for the quick response. I found the basic description you're highlighting in the manual, but I also think there's more going on. I couldn't get the numbers to make sense, so I started removing my input values one at a time until the numbers began to work. What I realized is that the total amount of two pre-existing Investment Loans I entered were being applied directly to the Regular Investment Balance on day one. I use the Investment Loans feature to try and track two unsecured personal loans as I saw no other appropriate way to do this in the model. In reality, the initial funds (remaining portions thereof) from these personal loans are indirectly integrated into initial balances I have for Cash and Regular Savings, so I couldn't legitimately assign the cash value in the initial year to some asset (like I think the model does). Any thoughts on how best to track long-term unsecured debt? Also, I saw that the dollar values already in and moving into the Regular Investment Balance from Cash overflows were being reduced by the annual inflation rate I entered - and it seemed to occur in the same year as the Cash overflow transfer, even though this overflow was already subject to an inflation rate reduction when it was a portion of the annual Income. That is, I believe the annual income was already reduced by the inflation rate and then when it was the remaining balance in Cash after Expenses are subtracted, it was reduced again by the inflation rate as it moved into the Regular Investment Balance for the same year. I figured this out by removing the inflation rate input and all other time value of money factors (RORs). When I did this and removed the Investment Loans, all values in the Regular Investment Balance were trackable over all years. Does this make sense or am I still missing something? Thanks again.
Have you considered the Personal Loans feature for modeling unsecured personal loans? The outstanding balance is included in your net worth and, unlike investment loans, the pay-out is done annually with the payments on those going into the Cash account each year.
Regarding your concern over the inflation rate and cash overflows, all PRC calculations are done in terms of future year (ie., then-year dollars) and subsequently converted to today's dollars. The thing that might be causing some confusion is the timing on how inflation adjustments are made to account balances. There's an explanation on that somewhere in the user manual (tabular projections section, I think). Bottom line: if you want to verify PRC's math, you need to do it in future dollars.
@smatthews51 Understood. And thanks again for your quick response. The loans I'm describing are debts I owe, not loans I've made to others that can increase my Cash position. I think that's what the Personal Loans feature does, correct? Can I fool it to work backwards?
Hmmm, no I don't think so. Now that I'm understanding you, though, I think I'm going to add this capability to the candidate list for a future enhancement. Thanks!
Stuart
@smatthews51 I've posted elsewhere that it would be nice to add the ability to add individual CDs/Bonds (with a few tax options) with varying maturities. At the moment the personal loan is I think the best way, but it only allows 2 entries, so I've been using windfall income.
