Financial Planning and Forecasting
The Financial Plan page in Peak Budget allows you to visualize your financial trajectory over the next 30 years. Each category in your budget is forecasted based on your goals, and you can see this data represented in an interactive chart. Clicking on any Category Group within the chart will reveal its Categories, providing a detailed breakdown of your forecast.
Growth Rate Inputs
At the top right of the Financial Plan page, you'll find the Growth Rate Inputs button. Selecting this will open a settings panel where you can customize how each category is forecasted. There are three key settings available for each category:
1. Contribution Growth
- This setting represents the annual rate at which your goal contributions increase over time.
- Example: The cost of groceries rises due to inflation. If you currently budget $500 per month for groceries, this amount will need to grow in the future to maintain the same purchasing power.
2. Interest Rate
- This setting represents the expected rate of return or interest on the available balance within a category.
- Example: Your mortgage might have a fixed interest rate, while your investment account could have an expected annual return. The available balance in the category will increase by this rate each year.
3. Withdrawal Rate
- This setting represents the percentage of the available balance that will be used each year.
- Example:
- Groceries would have a 100% withdrawal rate since you spend this money each month.
- An emergency fund might have a 10% withdrawal rate, as it is used only occasionally.
- A retirement account might have a 0% withdrawal rate, meaning you do not plan to withdraw from it.
Milestones
Peak Budget also allows you to set Milestones, which track financial goals across multiple categories. Each milestone consists of:
- A Name to identify the milestone.
- A Target Amount that represents the financial goal.
- A Set of Categories that contribute to the milestone.
Tracking Your Milestones
Peak Budget continuously monitors the total available balance for the selected categories and tracks progress over time. For each milestone, you'll see:
- Current Available Balance
- Contributions for the Current Month
- Contributions for the Past 3, 6, and 12 Months
- Projected Achievement Date
How Forecasting Works
The entire financial forecast is goal-driven. Each category has an available balance today, and Peak Budget projects how this balance will evolve over time based on:
- Your category goal
- The Contribution Growth rate
- The Interest Rate
- The Withdrawal Rate
This allows you to see not just where your finances stand today, but also where they are headed in the future, helping you make informed financial decisions and achieve your long-term goals with confidence.