Transcript:
In this training, we’ll be reviewing how to enter expenses into your client’s plan.
There is no strict rule for what should be entered as a goal versus an expense, but there is an important visual difference in how they appear within the software.
When something is entered as a goal, you’ll see a trackable bar on the timeline. This allows you to visually review whether your clients are currently on track to meet those goals within their plan.
For regular expenses, go to the plus button in the bottom-right corner of the screen and select Expenses.
Within this section, you’ll see several different expense options.
First, we’re going to enter a Multi-Year Expense.
For this example, we’ll enter the clients’ pre-retirement general living expenses.
This amount will exclude their mortgage because we’ll enter the mortgage separately later in the plan.
We’ll enter an annual expense amount of $90,000.
This is not a tax-deductible expense, and we’ll leave it classified as a Basic Expense so that it receives the highest fulfillment priority within the plan.
We’ll also leave the inflation rate set to 2.5% annually.
Next, go to the Timing section and adjust when the expense ends.
Since we already have a retirement goal in the plan, we want these pre-retirement living expenses to end when retirement begins.
In this example, we’ll set the expense to end at Johnny’s retirement at age 65.
Set that as the End Event and click Done to save.
Once the plan refactors, you’ll see red bars appear on the timeline representing the expenses we just entered.
These expenses begin at $90,000 in the first year and increase over time due to inflation.
You may also notice that in the year with the large family vacation, there is a visible difference between the Basic Need line and the Total Need line.
That difference exists because the family vacation was entered as a Leisure Expense, which is treated as a non-basic expense.
This allows you to visually compare the amount of required expenses versus discretionary or luxury expenses within the plan.
Next, let’s enter an expense that occurs every five years.
Go back to the plus button, return to Expenses, and again select Multi-Year Expense.
This time, we’ll model a car purchase every five years.
Enter the expense amount and select the appropriate priority level.
Then go to the Timing section.
Here, you can adjust the Expense Frequency setting to occur Every 5 Years.
This allows the software to repeat the expense at the selected interval throughout the plan.
We’ll set this expense to begin this year and continue through the “Slowing Down” event.
Set that as the timing and click Done to save.
Once saved, you should now see expense spikes appearing every five years on the chart.
You’ll also notice the difference between the Basic Need line and the Total Need line because this car purchase has been entered as a Luxury Expense.
This visual distinction makes it easier to identify discretionary expenses throughout the plan.
If you want to review these expenses in more detail, go to Year View and open the Expenses section.
Here, you can review all expenses for every year in the plan.
For example, in the first year of the plan, we can see both the car purchase expense and the pre-retirement living expenses for a total expense amount of $135,000.
You can use the slider bar to move through each year of the plan and verify that expenses are occurring as expected.
For example, you can move forward five years and confirm that the next car purchase is being modeled correctly.
This is a great way to check your work and ensure expenses are being entered exactly as intended.
You may also notice that the plan is currently showing red shortfall areas.
That is because we have not yet entered any income or assets into the plan.
As income and assets are added, the software will begin using those resources to fulfill the expenses we’ve entered.
I hope this has been helpful.
If you have any questions, you can click the client’s name in the top-right corner of the screen, select Request Support, enter your message into the text box, and share client access.
Thanks for listening.