How to use an Excel sheet to understand life financial planning?
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When it comes to work, it is nothing more than making money. However, have you ever thought about how much money you need to earn throughout your life? And if we want to retire early, how much should we earn?
This question suddenly came to mind after I had been working for several years. I was really surprised until I saw this blog post “How much does a person spend in his lifetime”! It turns out that a couple whose entertainment is mountain climbing, who only buy clothes once a year, whose children are well-behaved and who do not buy mobile phones will spend 30 million yuan to live a simple life!
However, when will these 30 million be spent? And can I earn this amount?
When I was studying project management, I suddenly discovered that if life is a project management, then there will be a project golden triangle: time course (about 80 years), scope (birth, old age, illness, death, eating, drinking, diarrhea, urination)… So how much budget should we prepare?
So I used Excel to make a [Lifelong Financial Table] (https://goo.gl/1rYKZY). Using this table can help us quickly estimate our income and expenses in this life, just like a revolving door in life. Of course, there are also many interesting issues derived from the book, and these are not just examples. Everyone can adjust it to their own version according to the actual situation!
Next, let us understand step by step!
1. The structure and default values of this table
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Opening this report full of dense numbers, we can see: the yellow column is income, the blue column is expenditure, and the green column is income minus expenditure; the left column is the project, the middle is the year-by-year expenses, and the far right is the total.
The default values of this table are as follows. After understanding this setting, you can save this large table as a new file and adjust it according to your current situation:
- Get married at 31 years old → have a child at 32 years old → retire at 65 years old → goodbye at 80 years old.
- Starting from the age of 31, I will buy a car every 10 years, a total of 5 cars.
- There is savings and investment principal starting at the age of 31.
- Work will continue without interruption and there will be no salary increase after the age of 50.
- The deposit and investment principal will not be used, only compound interest will be used.
- Expenditures in this life
Well, let’s look at the spending part first.
For the expenditure part, just type it in directly according to the list of “How much money does a person need to spend in his lifetime”. Please read the details yourself.
In order to make this table more beautiful and easier to read, I have hidden all the details. Friends who are interested can adjust it themselves before using it.
In the total part, because the cost does not include inflation, another rate is listed that includes 2% inflation; because the cost is calculated on a family basis, there is also a rate for each party to pay half (oh, of course this also means equality between men and women).
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As you can see, even if inflation is not included, it will cost us nearly 30 million yuan to live to the age of 80. If inflation is included and each spouse contributes half, then they would need to bear at least more than 23 million. And I have to explain first that this is the version of a frugal couple!
Well, can we really pay for it?
3. Income in this life
So, let’s look at the income part next.
I’ve made a few settings here:
- Based on the 2016 median national income of around 40,000, a starting value for a 31-year-old with an annual salary of 500,000 is given, with a fixed annual salary increase of 2%.
- At the age of 31, I had a starting point of 500,000 in savings, which I put into a fixed deposit of 1%. The principal was not spent and only interest was collected.
- After the age of 66, there will be a monthly pension of 20,000.
- There is an investment of 200,000 yuan at the starting point of 31 years old. To be polite, let’s first assume that there is an investment return rate of 3% every year. The principal is not spent and only interest is collected.
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As can be seen from this table, assuming we live to be 80 years old, we can expect to earn more than 28 million yuan.
So, what happens to income minus expenses?
- Annual cash flow
As you can see from the last column, if you support your family by yourself, your income will be less than 20 million; if each spouse contributes half, you can still have a balance of just over 4.6 million. The premise is that both parties have been working, have not lost their jobs, and have not spent money on major medical treatments.
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Looking at the year-on-year cash flow, we can see that at the age of 31, both parties will each have less than 120,000. If it is a unilateral expense, it will be less than about 745,000, which is the amount that must be prepared before the age of 31. Most of the years in the middle are positive numbers, but after the age of 66, because there is no income from work, the expenses will be greater than the income in the future, which means that sufficient pension should be prepared before retirement.
- What does this table tell us?
Well, are you surprised when you see this?
After compiling this table, my own thoughts are as follows:
- It is very hard for one person to raise a family, and both husband and wife must contribute to make it less strenuous (of course, the career balance of working women is another issue).
- You cannot be unemployed or have a major unexpected illness, otherwise your income will be cut off (and insurance is important, which can reduce the fluctuation of cash flow).
- Open source: The higher your income, the more you can face life with peace of mind (so we must work hard and make career plans in advance).
- Open source: If investment tools can have higher interest rates, the time to double will be sooner (well, you must learn investment and financial management).
- Reduce expenditure: learn to control the budget, strictly adhere to the amount of money to be saved, and spend the money where the benefits are greatest (learn to separate and distinguish between priorities).
- Benmengbi: Why are expenses like this? Your expenses represent your life. If you know early on what kind of life you want to live and understand the possible income and expenditure, you can plan for the future more steadily and move towards your goals.
At this point in the explanation, I think everyone should be able to understand: What this table wants to tell you is not just the correlation between income and expenditure, but life goals and life planning! Think about it, you can guess your life through dozens of fields. Isn’t it both realistic and cruel?
After seeing this, will you want to take control of your life more? Have you ever thought about how to configure the numbers in each field?
After I made this chart at the beginning of last year, it was like waking up from a dream! Therefore, I face my life actively, hoping to fill the gap as soon as possible so that I can live with peace of mind. Because I have undergone huge changes, I specially wrote this article to share it. I hope to give some reminders to friends who have no financial concepts and help everyone establish basic concepts.
Well, in fact, this is a very basic statement. If we have the opportunity, we will discuss other cases of change issues, such as: adding different investment instruments, adding loan relationships, etc. By the way, if you have any ideas, please leave a message and let me know! Whether it is investment, financial management or life planning, we sincerely welcome everyone to share and communicate.
Of course, the most important thing is to quickly save this report in a new file and play with your own [Lifelong Financial Statement] (https://goo.gl/1rYKZY)! (No need to ask for permission, just save a new file)
As I said last time, life should be invested in “the most important things”, and it is also important to learn to use project management skills to master life’s financial planning!
Further reading
- Looking at life financial planning from the perspective of project management: a table to accompany you through the revolving door of life
- “The Soul of Money” Post-reading Experiment: A Fantasy Journey of 3,000 Yuan
