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Your Financial Planning Software Options
Note that no planning tool or software is a replacement for a qualified financial and tax planner! Financial software can provide other data points to consider with your planning partner however.
FarPlanner lets you quickly build items in your plan (like a planned home purchase). It then simulates and mimics your items’ cash flows and account balances over your plan, for decades into the future.
This page compares FarPlanner to other financial planning software options, including budgeting tools (e.g. YNAB, EveryDollar), and retirement planning tools (e.g., MaxiFi, Boldin). See this page for how FarPlanner compares to using spreadsheets.
While FarPlanner is not a real-time day trading tool, it can estimate your plan’s long-range fund needs. You could then consider using these long-range funds to make riskier day trades. This might hedge risks to your finances if your stock bets don’t pan out.
Complement to Budgeting Tools
FarPlanner recommends using a budgeting tool to help control your spending. Budgeting tools let you set monthly spending target amounts for expense categories. For example, you might set a limit of $500 / month for the Dining expense. Ideally, you get into a habit controlling all your actual spending this way each and every month.
FarPlanner provides a financial forecast of your plan. This forecast can be shaped by the actual bank account data you control with your budgeting tool. FarPlanner analyzes your actuals data each time you import payee, amount and category transactions from you bank. Hence, you can then see the impacts of your budgeting efforts on your long term plans.
Continuing the example above, suppose FarPlanner initially tracks and forecasts your Dining spending at $1,000 / month. By following your budget eventually you should only be spending $500 / month across your accounts. Suppose you continue importing your bank accounts’ actuals into FarPlanner. When you re-simulate your plan’s forecast, your plan will track and forecast Dining expenses to $500 / month. Your plan will quickly update to show an extra $6,000 / year in savings, decades into the future.
Saving for Future Goals
Budgeting tools can also help save account funds for specific future goals. However, FarPlanner’s simulation of your plan takes such savings into account automatically. This is because FarPlanner considers all your plan’s future expenses together at once. Only then does FarPlanner suggest how to transfer funds to meet these combined expenses. Hence, there is no need to make specific goals like ‘saving for a house down payment next year‘.
Mimic Retirement Tool Suggestions
Retirement tools can estimate social security income and suggest Roth conversions to reduce taxes later. These suggestions generally require an accurate estimate of future taxes. These tools can also connect you with professional planners for more in depth retirement suggestions.
FarPlanner doesn’t provide such suggestions because it estimates your future income taxes in a simplistic way. FarPlanner is intended to compute a rough estimate of future finances only. FarPlanner is also a calculation tool first and foremost, with no connections with professional planners. You are encouraged to work with professional planners for you planning needs though.
You can update your FarPlanner plan to mimic retirement tools suggestions. For example, adding the social security income transfers and start date suggested by the retirement tool. Same with adding payments for when Medicare expenses should start up. Likewise, to add Roth-conversion account transfers into Roth accounts as suggested by the retirement tool. Re-simulating your plan’s forecast will quickly show the impacts on your long term plan.
Alternative Risk Mitigation Approach
Retirement tools can also estimate the amount of risk your plan’s investments are taking on. Some use modeling techniques like Monte Carlo simulations to mimic random future up and down stock market returns. These tools then show the range of possible outcomes for your plan through retirement. This makes sense if you are directly pulling funds you need now from stocks and bonds. As well see, FarPlanner manages risks by avoiding selling/transferring funds for immediate needs from stocks and bonds.
Farplanner suggests account transfers that reduce market risks before and through retirement. For best results though, add as many items into your FarPlanner plan as possible. This includes adding every current and planned home, car and family member. Farplanner helps ease this data entry effort at least.
Farplanner’s forecast of your completed plan reduces your financial risks in three ways.
The first is by mimicking building and maintaining a cash cushion throughout your future plan. Farplanner computes the cushion based on your planned spending into the future, minus income. This cash cushion helps if the stock market crashes and you lose your income.
The second way FarPlanner reduces risk is my mimicking the impact of inflation on your long term plan. Expense-related cash flow transactions in your FarPlanner plan let you set a transfer amount in today’s dollars. Then, FarPlanner’s simulation to forecast your plan will increase the amount annually by an inflation %. You can change this inflation value to see long term impacts on your plan.
The third way FarPlanner reduces risk is by suggesting transfers between your safe and riskier accounts based on your plan. This is detailed in the next section.
Reducing Risk Across Your Accounts
When saving for retirement or a future expense, you can save funds into your bond or stock funds. The market growth of these funds allow you to save less now assuming consistent market returns. You can later pull funds from your bonds / stocks when you’re ready for retirement or planned expenses.
Suppose you later pull funds from you bonds / stocks to pay for needed expenses anywhere in your future plan. If the bond or stock market crashes at that time, your future net worth could be reduced.
FarPlanner can mimic such risky immediate transfers from bonds / stocks if you set up your plan that way. This is not recommended though.
Instead, FarPlanner supports a less risky approach by enforcing two rules of thumb throughout your entire plan’s future:
- Only pull funds you need now from cash accounts, not from investments like bonds and stocks. The cash cushion computed above is included in the ‘funds you need now‘ amount.
- Don’t pull funds you need in the next few years from stocks.
FarPlanner’s forecasts of your plan consider these rules starting with the first simulated date: tomorrow. They are also considered monthly and annually into your plan’s future. FarPlanner uses these rules to mimic and suggest transfers between your safe and growth accounts. Transfers that are needed to cover your immediate planned expenses are tagged as ‘essential’. Non-essential transfers support your plan’s future needs, and so could be deferred.
You can tell FarPlanner which of your mimicked cash accounts to pull immediate needs from. For shorter-term needs (only a few years into the future) you can specify bond investment accounts to store funds in. For long-term needs, you can specify which of your stock investment accounts to store funds in.
Hence, a stock market crash any time during your completed plan would only impact funds needed many years later. This hopefully gives you time to reduce expenses and wait for the market to rebound as it historically has.
FarPlanner Supports Retirement Concepts Too
Finally, Farplanner supports some retirement concepts, like estimating required minimum distributions (RMDs) from retirement accounts. It also mimics post-retirement draw downs from your taxable, 401k/IRAs, then Roth accounts. FarPlanner also estimates capital gains taxes when drawing down from taxable accounts.
Download and quickly build your FarPlanner plan for free today. Then, see forecast results that complement other planning tools you might be using.