Wednesday, April 08, 2015

Financial Planning

There is a certain amount of pleasure in doing financial planning.  There is also a certain amount of uncertainly, which leads to a certain amount of terror.

We have a spreadsheet that goes out about 35 years, projecting what we think our extraordinary expenses will be -- trips, cars, expenses related to our child, to our house.  Overall, we're in good shape (resisting the urge to rap my knuckles on a piece of wood), and even if we do everything that I forecast, including reserving a large amount of money for 'surprise medical expenses' and a large amount for 'transfer to daughter', we still end up, at the end of that period, with about forty percent of our current assets.

The terror comes in when I wonder if that picked out of thin air number for surprise medical expenses is a reasonable number (it comes from a combination of wishful thinking and an estimate of what we would have to pay for health care coverage should my wife quit her job), or whether that estimate for adding a room and elevator to our house really will cost much more, or, for that matter, whether it's a good idea at all.

Its also true that although I can primly write trip every two years, thinking that those years are when we go to Europe; and the intervening ones are when we tour the US, the fact is that in my heart I'm thinking France Every Year.  That's about ten thousand dollars a throw.  You can only do that so often before it begins to affect the bottom line.  And though I like to think that if we just had a house in France....thats not likely.

I remember when I first started to model our expenses, about 25 years ago, when I realized that my off-the-cuff estimate of what we spent each month was in fact about 40% of what we actually spent.  That was startling.  This -- well, its not so bad.  Looking at the numbers keeps me grounded.


Tabor said...

You are better than 80% of the world in that most people fly by the seat of their pants, I hope the generation that follows has good retirement, but I am worried.

Cerulean Bill said...

Me, too. I was talking to our banker and said that I'd like to plan to transfer a certain amount of money to my daughter, in twenty years. He said Fine, we can arrange that, but you do realize that in twenty years that will be worth about 50 or 60 percent of what it's worth now, right? So perhaps you might want to think a little higher?

Ah. Yeah. Inflation. Right.