Where will you be financially in 25 years?

smithy009

Hi folks,

I'm trying to do a long-term budget which takes into accounts "major" events over the next 25 years e.g. kids education, uni (£9k/yr!), daughters weddings to pay for, reducing mortgages payments, care homes for parents, desired pension amounts, savings, investments, inflation etc), as well as estimated income, growth in savings, pensions etc (to retirement).

How do you plan long-term? My IFA didn't have his own long-term plan, so no help there!

Has anyone found a good budgeting tools (maybe software or online) or have you developed you own excel template which you would be willing to share (exlcluding personal data!) which takes these areas into account? I'm particularly interested from the "family budget planning" perspective as I have young kids.

I am on top of annual budgets, but even annual budgets feels quite short-term when trying to think ahead. I know it is hard to predict the future, but I am looking for a road map which will helps.

Also, can you recommend any good books which takes a layman through the long-term financial planning process step-by-step.

Thanks!
Smithy

knightfox

I cant really help you. I invest in Shares & property in the long run these will be okay. I never invest in things I dont understand. Lifes little turns means its hard to plan in advance.

As for your question fincially in 25 years time. If taxes keep going up the I shall be abroad.

smithy009

Anyone else?

jimjames

I'd suggest having a look at some of the articles on the MOtley Fool site, some are written from a humourous viewpoint but with a serious message underneath.

https://www.fool.co.uk

Loughton_Monkey

See below.

Loughton_Monkey

There are many tools available for Annual Budgetting, but I don't know of any longer term tool.

Speaking from experience, I can only suggest building your own one a spreadsheet. I did this for myself when I was about 50. My objective was to model future salary, savings, growth in pensions and investments to see if I could retire at 55. In the event, the model was extremely useful, and acted as an excellent 'motivator' to try and stick to the thrust of it.

In the event, I actually managed to retire just 4 months after my 55th birthday, and 5 years on, I am still broadly sticking to the same model - although I have updated it. Currently, it now models the rest of my life!

On the assumption you can use Excel (or similar) and wish to do it for yourself, here are a few tips:

1. Keep all assumptions (Inflation, Interest Rates, Pension growth rates, house price inflation etc.) on a single tab. That way you know where all the assumptions are and can change them easily.

2. Then create a tab for each main 'feature' of your economic situation. For example, separate tabs for Routine Spending, Pensions, House Value, Insurance, Savings. In your case, one for 'Children' perhaps. Each tab draws its assumptions from the Assumptions tab.

3. Create a Summary tab which draws together "Balance b/f" [under headings, say, Savings, Investments, House, Pension Values] then columns for "In/Out", and then "Balances c/f" unter same headings - and totals.

4. Now you can start playing around with different assumptions, changing each one individually and seeing the 'sensitivity' of each one. Use the "Goal Seek" facility as a good way to calculate what changes to assumptions will achieve the desired 'result'.

In my own case, my 'Long Term Model' obviously then becomes the basis for a more detailed Annual Budget. Here, I tend to use "Quicken" to manage my annual financial situation.

As to the annual budget, I set it up with about 30 different expenditure types, under major headings like "Utilities, Housekeeping, Purchases, Motoring etc...". Nothing magic in all this, but I faithfully keep the annual total the same. Short of an earthquake, I could not overspend. This is because the annual total is 'reasonable', and when I do monthly reconciliation of actual versus budget, and I have overspent in one category, I will automatically reduce another to compensate.

sonyhamster

Hopefully I'll have a mortgage

jinkster

Knightfox - the desert is always warm this time of year!

knightfox

jinkster wrote: »

Knightfox - the desert is always warm this time of year!

That is the problem a tax heaven thats warms. Switzerland is great, but it snows. I dont like snow.

It will probably be Bermuda.

smithy009

Thanks Loughton Monkey - that's a great overview of a good way of doing this. Interesting to see how close he plan was to reality - my thinking is it's better to have one than not.

Out of interest, what figure(s) do you use to work out:

Average Inflation
Average Interest Rates
Average Pension growth rates
Average house price inflation

over the years?

Could you also expand on (3) with maybe an example. Daft question, but what is b/f and c/f?

Does anyone else have there way of doing this and any other suggestions?