It’s Finally Here!
I’m excited to announce that the Ultimate Finance Tracker is now available for download! All you have to do is click this link, provide (and confirm) an email address, and it will be sent directly to your inbox.
Download your copy now and follow along with the rest of this tutorial!
What can you do with the Ultimate Finance Tracker? The better question is what can’t you do! You’ll be able to:
Effortlessly budget like a master
Estimate your tax liability for the 2020 tax year
Learn where you stand when it comes to retirement
Discover if you have the opportunity to retire early
Look at a wide variety of pretty charts that summarize your finances
And so much more
Sounds pretty good, right? Honestly, I’m very happy with how this turned out, and I think everyone else will be too. I’ve been using it the entire time it’s been in production, and I can truthfully say it’s the first time I’ve actually enjoyed staring at and analyzing my finances.
Getting Started with the Ultimate Finance Tracker
The Ultimate Finance Tracker (UFT, for short) will be made available to you via a Google Sheets document and Excel download. The Google Sheets version will be in read-only mode, so I suggest making a copy to your Google Drive to enable editing.
Upon opening the UFT, you’ll see six tabs. They are:
Input 1) Income
Input 2) Expenses
Input 3) Retirement
Input 4) Taxes
There are also a few hidden tabs that contain the models and calculations that are running in the background. Feel free to check them if you’re interested!
In the Excel version, I’ve purposefully protected all of the sheets with no password required. All of the input cells, however, are unlocked, so you should have no problem running the UFT without unprotecting the sheets.
Alright, now let’s dig into everything the UFT can do!
Starting with the first tab…
Obviously, this model is not a substitute for any legal or financial advice. Please read through this tab to understand the full disclaimer of liability and check out the Terms & Conditions on the website itself. Now with that taken care of…
Inputs 1 & 2: Income & Expenses
The first two steps ask that you input your current income and expenses. The tables here are straightforward, and the inputs themselves should be self-explanatory.
First few sections of the Income & Payroll input table.
First few sections of the Expenses input table
Each line item has two user inputs associated with it. First is how often you incur the expense or receive the income. The dropdown options include weekly, biweekly, monthly, and annual. The second is the associated dollar value. For instance, if you spend $100 a week on food, select “Weekly” in the cell C19 dropdown on the expense tab and input $100 in the adjacent cell D19.
If you accidentally input something other than a dollar value, the cell will highlight red to let you know something is wrong.
To help fill out these tables, I suggest grabbing a copy of your latest pay slip and checking your credit card purchase history online. See whether your last month of expenses is representative of what you typically spend, and make adjustments accordingly.
The only other thing I would note here is to not sleep on the “Miscellaneous” expenses section. I always end up with at least $100 of miscellaneous (or one-time) expenses each month. Be sure to include those!
Input 3: Retirement
Once you’ve input your income and expenses, the UFT will then look to project your finances forward into retirement.
First few sections of the Retirement input table
The first two input sections, “Salary & Contributions” and “Current Account Balances” should be easy. Simply input the frequency with which you receive paychecks/contribute to retirement accounts, your expected annual salary growth rate, and the current balances of each account.
The next two sections might require a bit more explanation, especially if you haven’t read Finance in a Flash — 2020 Edition yet!
Retirement Plan section of the Retirement input table
Under “Retirement Plan,” you’ll first be asked to decide upon an asset allocation. For the purpose of the UFT, asset allocation refers to the percentages of your retirement balances that are invested in stocks vs. bonds at any given time. You can choose to be 100% invested in stocks, bonds, or a mix of the two using the “Glide Path” option.
Glide paths are a method of reallocating between stocks and bonds as you age.
To keep things simple when “Glide Path” is selected, the UFT uses your age as a percentage in bonds, and the remainder in stocks. So if you are 27, you will have 27% in bonds and 73% in stocks. Next year, you will have 28% in bonds and 72% in stocks, and so on.
The purpose of the glide path is to provide higher stock exposure when you are young and able to outlast a bear (i.e., underperforming) market, and lower exposure when you are older and close to retirement.
Next, input your current age and the age at which you wish to retire.
You will then be prompted for a “Withdrawal Strategy.” Traditional retirement involves drawing down your account balances once you reach retirement age. By selecting the “Drawdown” option, the UFT will calculate how long (in years) your savings are projected to last, given your expected annual expenses in retirement.
You may choose a different option, however. In the Financial Independence (FI) community, there are various rules of thumb that attempt to stretch retirement savings out for as long as possible. The guiding principle is that if you withdraw between 3-4% of your savings annually, average market returns will outpace withdrawals. If you can achieve this, your retirement savings can theoretically last forever.
To play around with this concept, you can select between 3-4% annual withdrawal rates to see how long it will take you to achieve “Financial Independence.”
Economic information section of the Retirement input table
The last section in retirement is “Economic Information.” These inputs are, of course, highly speculative. So, to help you along, the UFT includes suggested percentages that represent historical averages.
Input 4: Taxes
Onto taxes. Thankfully, the UFT does most of the work for you! All you have to do is fill out the following:
First few sections of the Tax input table
First, input your filing status (e.g., single, married filing jointly, etc.). If you are married filing jointly, make sure your inputs on the rest of the tabs match your joint income and expenses. If you are married filing jointly, but would like to get a picture of your own finances, select “single” to approximate all of the UFT calculations for you alone.
Next, your state of residence. This will help the UFT approximate your state income tax.
Then, in the “Deductions & Credits” section, input your standard (which will apply to most folks) or itemized deductions, as well as whether or not you qualify for any tax credits. If you are unsure, check last year’s tax filings to see which deduction you received and if you claimed any credits (e.g., the $2,000 per child tax credit).
Finally, the last section allows for local income (or “wage”) tax. This will most likely be 0% (or "N/A"); however, if you live or work in a city like New York or Philadelphia, you will want to input the accompanying local wage tax percentage.
That’s it! The UFT tax model will then churn in the background and pop out the expected taxes you will owe come April 15th.
Here’s where the UFT works its magic!
The summary tab synthesizes all of the information from each of your inputs. Using your current savings rate (i.e. the percentage of total compensation that’s directed towards retirement accounts), the UFT is able to project your future savings and investment growth all the way into retirement.
In the black cell in row 42, you will see a message regarding your retirement timeline. If you selected the “Drawdown” retirement strategy, the UFT will tell you the value of your investments at retirement age, as well as how many years they are likely to last (given the expected rate of return in retirement).
If you instead selected between 3-4% withdrawal rates for your retirement strategy, the message will display how many years it will take before you can retire (given estimated expenses in retirement). The UFT will then tell you how that timeline compares to your desired retirement age.
Below this message, you will also find the following charts:
1. Total Compensation Summary
2. Tax Information
3. Monthly Expense Report
4. Projected Account Balances at Retirement Age
5. Retirement Accounts Projected Growth
Excerpt from the Summary tab
There you have it! The UFT is a fantastic tool to get a holistic view of your finances. Beyond that, it will also help you understand where you stand on the path to retirement. I hope you enjoy using the UFT as much as I do!
If you have any comments, questions, or notice any errors, please reach out through the Finance in a Flash contacts form or by commenting below! I hope to continually improve the tool over time (with user feedback, of course) and add as much value to your financial journeys as possible.
Want to learn all of the personal finance essentials in one place? Check out Finance in a Flash - 2020 Edition for everything you need to know!
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