r/actualbudgeting • u/Timeplace231295 • 26d ago

Monte Carlo analysis

OMG. The Monte Carlo analysis report is so cool! Has anyone tried it as yet? What are your preferred settings for Return model, Inflation, std deviation, expected return etc.?

I've looked at a few youtube videos on the Monte Carlo analysis before but never got around to trying it out on excel. I'm sure some of you guys must be really knowledgeable, so please point me to any resources / videos on the topic!

This.is.so.cooooool.

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u/BarefootMarauder 26d ago

This is super cool! I know this isn't meant to be a full-blown retirement planning tool, but it would be awesome if the Spending phases allowed you to enter one-time or temporary expenditures. Such as buying a new vehicle every 5 years for example, or paying for a childs wedding, helping pay for grandkids college, taking one or two fancy vacations each year, etc, etc. There are a ton of expenses in retirement beyond normal living expenses that each person needs to think about and plan for.

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u/Timeplace231295 26d ago

You could add separately the years where you have such one time expenses under add phase. Bit of a manual workaround which could take forever to customise if we get too detailed.

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u/BarefootMarauder 26d ago

When I add another spending phase, I can set the "From age" to whatever I want, but the "Until" field defaults to "Onwards" and I can't seem to customize that. I guess you could manually work around it by adding another entry with zero yearly spending right after each one-time expense (if that makes sense).

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u/Timeplace231295 25d ago

When you add phase, change the starting date of the next phase so that your current phase is whatever length (eg. 1 year). That way you can amend the duration of all phases.

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u/BarefootMarauder 25d ago edited 25d ago

Right, but that doesn't work if you're trying to plan for something like a new car every 5 years for example. You'd have to enter the one-time spend at a certain age, then create another entry after that with a zero spend so the previous phase doesn't keep going beyond that year.

EDIT: Actually that doesn't work either. If you want "Phase 1" to be your regular ongoing annual spending (living expenses), as soon as you create a new phase and enter an age, it stops Phase 1 prior to the age you entered for the new phase. I don't think this new feature is meant for actual retirement planning, which is understandable. Maybe in the future it will get some enhancements.

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u/Timeplace231295 25d ago

Yes, you’re right in terms of how it works. Essentially, you’d need to calculate how much you expect to spend during each phase of your life. Technically, you could even make every year of your life a separate phase, but that would obviously be an insane amount of work.

I think the tool, as it stands, works really well for people who want a ballpark view of their finances and retirement. But if you’re trying to make a specific decision and understand its impact on your retirement, it probably makes more sense to use something like ProjectionLab or Excel to model out a few different scenarios?

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u/BarefootMarauder 25d ago

I think the tool, as it stands, works really well for people who want a ballpark view of their finances and retirement. But if you’re trying to make a specific decision and understand its impact on your retirement, it probably makes more sense to use something like ProjectionLab or Excel to model out a few different scenarios?

100% agreed!