Archive for the 'Tools & Calculators' Category
Sunday, November 24th, 2013
Time for my annual Black Friday Buzzkill calculator! Can you hear that sound? Sleigh bells a-jingling? Carol singers? No, it’s credit cards a-swiping as part of what is now officially BUY BUY BUY season.
Here’s a mental trick that I use to temper my “self-gifting” urges. We know that every dollar saved now will be worth much more in the future. I made this calculator to help visualize this fact and push me to forgo short-term (temporary) pleasure for long-term gain.
$600 for a cashmere sweater? $7,000 Flatscreen TV? Ouch. This is not to say the occasional splurge is never worth it. (I do like me a steaming hot Peppermint Latte.) Perhaps it is. But I hope that this calculator can provide a little perspective while you are barraged by retailers to buy stuff you really don’t need. Who cares if you get 30% off when it’s so expensive?
Wednesday, April 17th, 2013
AFter calculating the new savings bond rate, I noticed that from March 2012 to March 2013 the inflation rate per the Consumer Price Index was only 1.5% over the past year. Whenever you see the government announce a relatively low inflation numbers, there will always be people shouting “the government manipulates the inflation data!”. I looked into this previously with my post Does The Government Underestimate Inflation Through The CPI? Short answer: Yes they do, but maybe not in the way you think.
Usually, this is followed by the anecdotal argument “Does gas ever go down? Does your rent ever go down?”. It certainly feels like prices are rising quicker than that. My water bill just got hiked another 10%. The thing is, we always notice the increases, but tend not to notice when prices drop. When something is cheaper, we just chalk it up to being great bargain hunters. Truth is, gas prices did go down for a while.
Another way to keep an eye on inflation is with MIT’s Billion Prices Project (previous post) which tracks prices in real-time by grabbing them from websites. By checking on 50,000+ different prices daily covering everything from prescription drugs to clothing to real estate, this alternative inflation measurement has the potential to keep governments “honest” with their numbers.
Index Values: CPI vs. BPP
Read the rest of this entry…
Monday, April 16th, 2012
Since I’ve been reviewing a bunch of portfolio management services, all which are intended to be cheap and use index funds, I thought I’d refresh an old post on how I do basically the same thing myself. I rebalance my portfolio using this very simple Google Docs spreadsheet, which is embedded below*. Yellow cells are those meant to be edited.
1. You have to decide on a desired asset allocation. I personally don’t think there is one perfect portfolio, here are several model portfolios. Below is what I have settled on for now. Details here. You only have to enter this once as long as your target asset allocation stays the same.
2. Choose how often to rebalance. You can do it on a set calendar basis such as annually on your birthday or quarterly. Another method is to only rebalance once your percentages are off by a certain amount, like a tolerance band. I personally check in quarterly to see where I should invest any new cashflows, and if things are really off then I rebalance by selling something.
3. Manually enter your total balances for each asset class. I grab my holdings either from logging in to each individual website (less than 5 for me) or by using an aggregation service like Mint.com. I only hold a limited number of index funds so it’s easy to determine the appropriate asset class for each.
4. Check out the actual breakdown vs. your target breakdown. The spreadsheet shows the actual percentage breakdown vs. the actual breakdown, as well as the dollar amounts of any differences. In the fictitious example shown, I’d feel that I was close enough that I wouldn’t really bother with any rebalancing. If things were really off, I could buy/sell as needed.
I would say this method takes me about 20 minutes each quarter, and I like that it keeps me buying low and selling high. It definitely made the rebound from 2009 pay off more than simply doing nothing or worse, panicking.
(* Note! I am sharing this online in read-only format. If you wish to customize or add your own values, you must make a copy of it (File > Make a copy) over to your own Google Spreasheets account (log in first) or download it as an Excel file (File > Download as). Any requests for edit access to the original public spreadsheet will be denied, because you would be changing the appearance for everyone.)
Thursday, March 15th, 2012
I know that there was some noise when the Mac OS X 10.7 Lion was released and Quicken 2007 for Mac was reported by Intuit to be incompatible with any computer running the new operation system. Next, they release Quicken Essentials for Mac which was a neutered version of Quicken which quickly angered long-time customers even more. So they promised they would rewrite it to work on OS X Lion. Well, it has finally arrived. Cost is $15. Thanks to reader Paul for the tip.
Data migration. According to their FAQ, users can import data from Quicken 2005, 2006 or 2007 for Mac, as well as from Quicken Essentials for Mac. File conversion is not possible for Quicken 2004 for Mac and prior versions.
So now you can pay more to use their 5-year old software, hurray! I still think it’s pretty clear that Intuit isn’t going to spend too much more effort improving Quicken, instead they are spending more money on Mint.com which is online and free to users (ad-supported). Has anyone tried it out yet?
Wednesday, January 11th, 2012
Some of you may be wondering how well your specific portfolio performed last year. Let’s say you started the year with $10,000 and put in another $5,000 throughout the year, and ended up with $16,000. What was your rate of return? Your main goal is simply to separate the effect of new deposits (or withdrawals) and your actual return from investments.
Figuring out your exact personal rate of return requires you to know the exact dates of all your deposits and withdrawals, along with a financial calculator or software program with an IRR function. However, for an simple and quick estimate of your returns, try this calculator instead:
- Get your initial balance. This is probably from your brokerage statements. Try January of last year.
- Tally up any deposits or withdrawals. For example, maybe you put $3,000 in your Roth IRA and also put in 5% of your $40,000 salary into a 401(k). That would be $3,000 + $2,000 = $5,000. If you paid a lot in fees or commissions, include those. No need to worry about the dates.
- Get your final balance. Your December statement is probably available already.
- Find the time elapsed (in years) between your initial and final balances.
- Hit Calculate. An estimate of your annualized return is instantly given.
How Good Is This Estimate?
The calculator assumes that the inflows and outflows are spread evenly around the middle of the year. I originally saw this method in The Four Pillars of Investing (review). However, unless the deposits and withdrawals are very large as compared to the initial balance, the estimates are actually pretty good.
For example, let’s say that you start with $100,000 on 1/1/11, and end up with $120,000 on 1/1/11. If you had net deposits of $10,000 during the year, the calculator above would estimate your return at 9.52%. If the $10,000 was actually deposited all at once on one of these specific days, you would get the following exact returns:
|1/1/11 (very first day)
|6/04/11 (middle of the year)
|1/1/12 (very last day)
I Want Exact Numbers Too!
For everything you ever wanted to know about rate of return and then some, see Gummy Stuff. I must warn you that it’s very math intensive. If you just want to know how to figure out the numbers, see his XIRR page. You’ll need the exact dates of all your fees, commissions, deposits, and withdrawals.
Like this tool? Check out the rest of my Tools and Calculators. I hope they are useful.
Updated and revised for 2012.
Thursday, March 24th, 2011
As far as retirement calculators go, the new one over at the Scottrade Knowledge Center is pretty nice. It does the whole Monte Carlo thing, running theoretical scenarios based on historical data. There are fancy interactive sliders that let you input your current portfolio balances, annual contributions, and your future expenses. The result is a pretty chart:
But the same problem always occurs whenever retirements depend heavily on market returns. If future returns are on the low side of history, I could end up broke* and eating dog food by age 90. If future market returns are high, then I could die with $10 million in the bank. What the heck do I need with that much money at age 90?
One way to avoid this is to have a very conservative portfolio of safe and short-term bonds (or TIPS). This has the slight inconvenient problem of requiring a very high savings rate. (Or lottery winnings, a large inheritance, or other windfall.)
Now, it would be nice to have a way to share the risk with others out over longer periods of time. Give up some of the potential upside, in return for some downside protection. This usually involves an insurance company (annuities) or the government (Social Security). Which do you want to trust with a big chunk of your hard-earned money? It’s a tough call.
* This isn’t technically true. I’m sure in reality, if my portfolio was doing so poorly, I would adjust my spending however I could. But I would have to decrease my standard of living.
Friday, January 7th, 2011
If you haven’t been keeping close track of it, your portfolio’s asset allocation may have shifted significantly over the past year. Your relative mix of assets like stocks, bonds, or real estate has a great impact on the volatility and expected future return of your portfolio.
Morningstar has a bunch of helpful tools for managing your investment portfolio, but many of them require a paid membership. However, one handy trick is that anyone can use many of these premium features for free at the T. Rowe Price website by signing up for a free account with nothing but an e-mail address.
This tool lets you enter all your portfolio holdings, which it then stores for you and allows you to track it with automatically updated prices. You can either track all your future transactions as you go, or just input your updated holdings every few months like I do.
Once you enter your holdings, simply look for the Portfolio X-Ray tab and you’ll have a complete breakdown of the true asset allocation of your overall portfolio. Does your “small cap” fund really own a bunch of mid-caps and large-cap funds? X-Ray will reveal your true exposure to stock style (i.e. Small/Mid/Large, Growth/Blend/Value), geographical regions (i.e. Japan, US) , stock sectors (i.e. Telecom, Energy), average expense ratio, and more.
If you’d rather have a quick peek without needing to register at all – but also without the ability to save your portfolio – try the Morningstar Instant X-Ray tool.
If you already have a target asset allocation in mind, now might be a good time to to rebalance your assets back towards that target. Rebalancing is a way to maintain the risk/reward balance that you have chosen for your investments, and also forces you to buy temporarily under-performing assets and sell over-performing assets (buy low, sell high). If you are looking for a bit more guidance, here are my favorite posts on investing.
Thursday, December 16th, 2010
A lot of people are worrying about inflation or deflation in the future. The most widely used definition of inflation is the Consumer Price Index, which is published monthly by the Bureau of Labor Statistics and is based on a basket of consumer goods using price surveys from cities around the country. This takes a while, so the CPI for December would be published in mid-January.
Professors Roberto Rigobon and Alberto Cavallo at the MIT Sloan School of Management started the Billion Prices Project which, directly pulls data from online retailers from around the world. In the US, the software is tracking 550,000 items from 53 retailers. The best part – since it’s all automated, the numbers are updated daily! The goal is to predict the CPI before they even announce it. You can see from the charts below that the two track reasonably well together.
Daily BPP Index vs. CPI
Annual Inflation (over last 365 days)
If they start to vary widely, which one should be considered inaccurate? Via the NY Times.
Monday, September 13th, 2010
I was watching TV this weekend and kept seeing commercials about ING’s Your Number, which is an online calculator that supposedly helps you plan for retirement by telling you how much you need to save. Here’s one of them if you haven’t heard of them before:
After trying it out and finding out my 7-digit number, I wanted to see what was “under the hood”. Monte carlo simulations? Spits out random number to mess with your head? Maybe my Google-Fu is weak, but I couldn’t find anything except this Your Number worksheet [PDF] from ING dated 2009. The final numbers don’t match up, but it does provide some insight into how the current calculator works. Using this information and trying lots of permutations, I tried to backtrack how each question affects the final output.
Factors and Assumptions
Current age. This factor appears to be used solely to calculate how many years you have left until retirement. Since the ING Your Number is the amount of money you need at the time of retirement, it increases every year with inflation. This is an important fact to note, as needing $1 million today would be the same as needing $2 million 30 years from now due to inflation alone. (Inflation is assumed to be roughly 3% annually.)
Marital status. The calculator says “We’re not trying to pry into your personal life, but whether or not your married has an impact on your number.” Nosy or not, it actually doesn’t seem to matter. I tried all kinds of inputs, but I couldn’t find any that changed based on being married or not. Let me know if I missed something here.
Current household income. At first glance, you’d think your current household income wouldn’t affect Your Number necessarily, since it later on asks for the actual income required during retirement. I noticed that making slight changes in your current income doesn’t affect Your Number at all. However, large changes do – it appears that this number is used to estimate future social security benefits. If your current income is really low, then your future benefits will also be low, which increases Your Number.
Age at retirement. This factor is used twice – once along with your current age to find how long you have until retirement, and again with your death age to find years in retirement. The more years you plan to spend in retirement, the greater Your Number will need to be in order to maintain a margin of safety.
Annual income required during retirement. A recommended amount is 80% of your pre-retirement income, but I hate that rule-of-thumb. Instead, this is probably the hardest part of the calculator because it requires the most personal and in-depth thought. Is your house paid off and are you going to stay in it? How much of your current income goes towards work expenses? What activities do you plan to do in retirement?
Provide income through what age? As noted above, this “death age” is used to calculate the amount of years you’ll spend in retirement. I kind of wish they just assumed 100 or something for this, it seems a bit morbid to guess when you’ll die.
In the end, Your Number is essentially your annual retirement income multiplied by a factor ranging from 5 to 30, depending on how long your retirement horizon is. It could have just told people to multiply by 25 and be just as accurate (or inaccurate) . As you might expect with any calculator that tries to help plan your retirement by asking five questions, Your Number is mostly a marketing gimmick designed to connect you with ING-affiliated financial advisors and insurance salesmen. That doesn’t mean you still don’t want to try it, though, right?
Thursday, August 26th, 2010
I ran across Getting Organized in the Google Era in an airport bookstore last month, and while I wasn’t enamored enough to pay the $23 retail hardcover price, I did add it to my library want list. The author Douglas Merrill was formerly the Chief Information Officer at Google, so I figured he might know something on the topic of organizing data in the digital age. Here are my notes.
First of all, this is not a detailed organizational framework like that of the best-seller Getting Things Done by David Allen. It’s actually more like a series of blog posts that ended up being stretched into a book. Merrill uses a very casual, storytelling style of writing with lots of (sometimes awkward) personal stories and song lyrics mixed in. It skips around a lot, from high-level organizational philosophies to tips on using Gmail to how his girlfriend died of cancer.
In the end, the book’s overall theme did stick to the subtitle of “How to Get Stuff out of Your Head, Find It When You Need It, and Get It Done”, and I did write down a lot of good basic principles from the book. Here they are, paraphrasing:
- Don’t keep stuff in your head, get it out as soon as possible. Write it, type it, say it, whatever. Either paper and digital might be better for any specific task.
- Always trying to multitask can actually make you less efficient overall.
- Stories make it easier to remember information.
- Don’t spend forever organizing your information, just search for what you need. Desktop searching, Google web searches, Gmail e-mail search, online calendars – use them to simplify things.
- When overwhelmed or hitting a roadblock, break big tasks into smaller ones.
- Try to integrate work with life instead of trying to balance them together. When people say the want a “work-life balance”, that’s usually just code for wanting to work less.
Useful Tools and Services
Another good part of the book was his list of software and websites that he found useful in organizing his life. Most are free, but some do cost money. A few are only on Mac OS X. Like I said, this seems like it would make a nice blog post… and now it is one I’m only listing the favorites.
- Google. His favorite search engine, what a surprise. There are lots of little shortcuts in Google that help save you time. Want flight info? Just type the flight number in. UPS Tracking number? Just type it in. Here’s a cheatsheet straight from the source.
- Quicksilver. Desktop search/application management/launcher tool. Mac only. [download, free]
- Gmail. The best feature of Gmail is that you can quickly search through every single one of your e-mails, reducing the need to carefully organize everything. However, using some simple labels and filters can still help you group conversations and topics. Also has good spam filters.
- Adium / Pidgin. Connects to multiple instant messages services all at once. Free. Adium is for Mac, Pidgin is for Windows.
- Dropbox. Easy to use, online shared hard drive in the “cloud”. Good for storing, sharing, and syncing across computers. 2GB free, 50GB for $10/month. [website]
- Things. To-Do List / Task manager software. [download, $49.95]
- Xmarks. Put your web browser bookmarks online so you can sync across computer and access anywhere. Works with Firefox, Internet Explorer, and Safari. [website, free]
- Google Health. Allows you to store and manage all of your health information in one central place. Even though I use a lot of Google stuff, I am still wary of sharing this type of data with Google. [website]
A related book that I also plan on reading soon is Upgrade Your Life by Gina Trapani of Lifehacker.
Thursday, May 20th, 2010
Personal finance software Microsoft Money was discontinued as of mid-2009, but Microsoft recently released Money Plus Sunset Deluxe and Money Plus Sunset Home and Business available for free download.
The stated reason for these editions is to avoid any ongoing online activation/re-activation issues with old software. Do be aware that the online abilities are disabled (no online quotes, no bill payment, no statement downloads initiated by Money, no data sync with MSN Money online services). There will not be any additional support available from Microsoft, only online self-help and through other users.
Money Plus Sunset Deluxe is designed to be a replacement for expired versions of Money Plus Essentials, Money Plus Deluxe, and Money Plus Premium versions. Money Plus Sunset Home and Business is designed to be a replacement for expired versions of Money Plus Home and Business.
Worth a download?
If you’re okay with staying offline, this version of MS Money might serve as an adequate free personal accounting and tracking software for a while longer. You can still manually import MS Money OFX files from your bank or other financial institutions. The Business versions allow to you print invoices. If you have an older version of Money, this is basically a free upgrade to the last edition sold.
Otherwise, it’s probably time to take another look at Intuit Quicken if you still want a full-featured desktop solution, which starts at about $40.
Tuesday, December 1st, 2009
No, I didn’t get an iPhone. But I did get an iPod Touch over Thanksgiving weekend. (Hurray for Amazon matching Apple Store Black Friday prices!) I know, I know, as a financial blogger I’m supposed to shun such trendy toys, but it was a gift! My parents got one for my sister as well as themselves, and I am assigned to teach them how to use it when I visit in December.
(I’m excited because my HTC TouchPro2 with my $30 Sprint SERO can be hacked to share it’s 3G connection as a WiFi Router, so I can get my iTouch online anywhere I have cell coverage. Nearly an iPhone!)
Another perk is that now I can review all those personal finance apps out there. I know there are a lot of budgeting apps, the Mint.com app, and various ones for banks and brokerage companies.
What are your favorite apps? Which ones were worth the money, and which ones weren’t? Which free and non-free apps would you like me to review? Share in the comments below.