How much money is left over after your client spends one year's worth of expenses out of one year's worth of earned income? Start with a Custom Target-Map.
Adjust What you have
On the "What you have" tab set the dates on the source(s) of income to reflect one year's income.
Add the earned income and other incomes streams that are to be included; those that are expected to come in during the timeframe.
Select "Date" from the Date Reference drop-down. Feel free to choose January 1 of the next year as a Start Date and December 31 as the End Date.
Apply estimated loss to taxes.
👉 This will provide one year of spendable income.
Define What you want
Add after-tax Desired Cash Flows on the "What you want" tab. These are the annualized expenses your client is anticipating to spend during the timeframe.
Click "Add Desired Cash-flow" button and fill in the form.
Use annual values for the expense.
Select the "Date" choice from the Date Reference drop-down.
Enter a Start date in the near future and an end date one year later. Match them with the dates of the cash-flow sources you've selected on the "What you have" tab.
Save changes and repeat if necessary for other expenses during the year as desired.
👉 This is the spending money the client would need.
Make a few adjustments
Adjust the Annual Increase of Contributions and Expected Net Return to zero.
Enter "1" (one) in the Duration of Contributions to show the monthly surplus (or deficit) for one year.
See the results - What it Means
In the above example, why is the client underfunded for the year? It is because the tax implication entered on the earned income (25% in our example) has an impact when compared with their spending desires. The client falls $2777 short for each of the 12 months of the year.
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5/2024