Top 7 Personal Finance Analysis Posts and Tools

I’m a visual learner. So naturally, most of my favorite posts in the Personal Finance community are the ones with graphs and tables to help you visualize numbers. And boy, there are some good stuff out there.

Be it net worth, saving rate, or investment growth, someone has crunched the number and made an awesome end product for others to view and use for FREE.

I thought I could round up some of my personal favorites here.

This is for my own reference too. This way I don’t have to search through entire websites to find a single post. On that thought, I probably should’ve done this much much sooner.

First of all, The Mad Fientist has a great resources page.  I use his FI Laboratory to visualize my time to FI from time to time, I got about 10 years til full FI the last time I checked.

Saving Rate

The Holy Grail

This post lighted my proverbial FI(financial independence) light bulb, and I have gone back to it countless times since: Mr. Money Mustache’s Shockingly Simple Math behind Early Retirement.

Over the years, I have directed many friends and coworkers to this post. Sadly, no one seemed quite as excited to jump onto the FI train after reading as I was. Still, this remains one of my go-to posts because it illustrates the power of saving rate.

Just to Recap:

Savings Rate (Percent) Working Years Until Retirement
5 66
10 51
20 37
30 28
40 22
50 17
55 14.5
60 12.5
65 10.5
70 8.5
80 5.5
90 under 3

This is a modified version of Mr. Money Mustache’s Original Table. Notice how you’ll have to work almost 50 years longer with a 5% saving rate compared to a 50% saving rate. HOLY SHIT, 50 years! Also note how extra 5% saving rate shave years off your working life (15 years from 5% to 10%) on the lower end of the saving rates spectrum. Just imagine what an epic epiphany I had when I first read this.

This means if you discover the power of high saving rate in your 20s, and you consistently save 40%+ after this amazing discovery. You’ll be looking at FIRE (Financial independence, Retire early) in your 40s or sooner.

Most PF bloggers I read seem to fall into the 40% to 70% saving rate range. I personally fall into the 40% to 55% range in the last few years. I’m going to try for 60% this year.

Saving vs Investment Return

Zach over at FourPillarFreedom has many awesome visuals, graphs and tools for PF number analysis. I highly recommend you go check it out.

In a recent post, he published some tools to help you compare the power of saving vs investment returns on achieving a set money goal (ex. 100K). I quote “But the truth is, the amount of money you save is often more important than the investment returns you earn, especially when you’re just starting out.

I have read many posts that have illustrated the power of high saving rates. Basically as your saving rate goes up, investment return’s impact on your Time to FI decreases.

In Zach’s post, if you save $2000 a month, it takes 3.36 months longer to save 100k at 3% return than at 9% return. But if you save $200 a month, it now takes 9 years 4 months longer at 3% return than at 9% return. A whopping 9 years longer if you saved $200 a month than if you saved $2000 a month!

So if you focus on something you have more control over like the amount you’re saving and investing, you can decrease the effect of something you don’t have control over aka. the stock market.

Investment Growth

I find that when you’re in the Wealth accumulating stage, it can get a bit boring. Things are mostly automated and on track, and I’m still years away from FI. So what do I do to stay engaged?

Finding intermediate goals other than net worth milestones help me stay more motivated. Plus, it’s fun for money nerds like me (and maybe you too?).

Retirement/Net worth if you stop contributing

I first came across the idea of ‘Retirement Freedom’ from Bob at Tawcan, who credited it to Christ at Keepthrifty.

Christ defined Retirement Freedom as “Your retirement accounts are big enough for you to retire at 65 even if you stop contributing today”. 

Here’s the link to his Retiremeent Freedom spreadsheet.

You can play with numbers like the target retirement age, monthly contribution and investment growth rate for different scenarios.

Here are some of my scenarios:

To retire at age 65, with $30000 annual income (in today’s dollars), I can stop contributing this October!

To retire at age 65, with $40000 annual income (in today’s dollars), I can stop contributing Nov 2021.

Saving each 100K will get easier

I like to revisit this table from Zach at FourPillarFreedom:

savingTime6.PNG

I highly recommend you go read the post where the above table came from: The Math Behind why net worth goes crazy after the first 100k.

At every saving level, it gets faster and faster to hit that next 100k. Thanks to the magic of Compound Interest. So don’t be discouraged if you’re starting out, and it feels like it’s taking forever to get to that first 100k.

FIRE Calculators:

I’ve used FIRECalc over the years. It runs your FI numbers against historical market data and spits out your success/failure rates over your retirement time horizon.

Quit your day job calculator is another great tool from Zach at FourPillarFinance. This one is a useful calculator for ‘Barista FI or Partial FI’ where you quit your day job but still bring in some income doing something you enjoy. For me, I’d still work  in my field, but go part time and ideally take regular mini retirements/extended vacations (1 month+) each year. So theoretically if my expenses are $3000 a month, I have already hit the ‘Quit Your Day Job’ number.

 

So There you have it. My personal favorite $$ number crunching posts and tools. I expect to keep updating this list as I come across more awesome stuff.