OnTrajectoryhas two newfeatures this month: Updating Progress & Cost Basis
1. Updating Progress
While you’ve been able to track your Progress over time in OnTrajectory, we’ve revised the math behind the “Future Projection” of that progress. Previously, only the total between your Trajectory and Progress was considered. Now, we consider each Account’s “% Growth” rate individually, meaning more accurate future projections.
We’ve also made the interface more informative and easier to use, as shown below:
2. Cost Basis
In some situations, you may want to set the “cost basis” for the Starting Balance of an account. This is the amount of un-taxed contributions when it’s first defined in OnTrajectory.
Typically, defining a Cost Basis is only significant if you have a large account with sizable prior growth (such as a mutual fund that’s been growing for some time) and for which you have not paid taxes on the growth. This option is available only for accounts that have a Tax Type of “Tax-Deferred (gains only)”. For more information on Tax Types, see the guide Modeling Accounts and Taxes.
As a reminder, OnTrajectory is completely INDEPENDENT and not affiliated with anyfinancial product or services company. Our goal is to provide the easiest and most flexible tool on the web. Our unbiased approach helps you visualize your long-term financial future unlike any other planner currently available to consumers.
What’s the full financial impact of your coffee habit? This is the explainer for Part 1 of our video series: “How Much is this $hit Costing Me?”
Let’s say you’re a fresh college grad with a mild macchiato addiction. Of course this could alternately be replaced by a weakness for lattes, mochas – or any of a number of delicious coffee concoctions. We’ll assume the habit remains more-or-less consistent over the course of your life.
Now, to the numbers…
Three macchiatos per week, that’s $15. Over the course of one’s life (3,536 weeks * $15), that’s $53,040. Assuming 3% inflation, you’re looking at $115,054. Ouch.
By brewing at home, however, and purchasing one macchiato per week – you could save about $500/yr. What if that $500 was invested in a moderate risk, tax-deferred account? Let’s use OnTrajectory to see the full financial impact.
OnTrajectory takes your unique mix of Income, Expenses, Investments and maps a path into your financial future – each are discussed below.
Income: It looks like our college grad landed a pretty decent job – probably an entry-level computer programmer or something sexy like that. This example assumes an average 5% raise per year until the age of 40 (as shown in the ‘Growth Override’ column). Thereafter, the salary merely keeps up with inflation.
Expenses: This example includes “grouped” expenses (indicated by the orange ‘G’) defined in three unique age ranges: 22-29 includes rent, 30-67 includes the purchase of a home, and 68-90 shows basic expenses dropping during retirement years.
In addition, we see a boat purchase at 45, and a semi-extravagant vacation later in life. Finally, we see the coffee expense broken out separately at $780/year.
Accounts & Taxes: Not much to see here, just a Deposit Account with effective tax-rates based on income level. There doesn’t seem to be any tax-deferred/retirement account or any other types of investments defined.
Subsequently, the financial Trajectory looks like this (in tomorrow’s dollars):
We can clearly see various rates of saving based on income and expenses. The steep increase at 60 is a result of the mortgage being paid-off – but as you can see it wasn’t quite enough, and this individual runs out of cash at the age of 88 and is $139,713 in hole by age 90.
Let’s reduce the coffee expense to $280/year and invest the savings into an account with an average rate of return of 5.04% How did we come up with 5.04%? We took a handful of highly-rated moderate-risk mutual funds (entirely at random) and averaged their 20-year returns. It may not be scientific, but it’s fairly reflective of how a lot of folks invest.
Here’s the result:
Notice that not only do you stay financially afloat throughout life, there’s a tidy $320k surplus at the end (again, in tomorrow’s dollars).
It’s MATH, and it’s power stuff. The truth is, small lifestyle changes CAN have half-million dollar impacts over the course of one’s life. OnTrajectory helps you identify and visualize those impacts. So don’t wait any longer, get OnTrajectory today.
DISCLAIMER: Please be aware that no information contained in this communication should not be considered investing advice. All financial information is solely for educational purposes. Please see your own professional for personal investment advice.
Type “Retirement Calculator” into Google and look at the top 5 results – you’ll see tools from:
They all look something like this:
And here’s what they all have in common:
You must forecast saving the exact same every year until you retire.
Can you factor in a few lean years – like when the kids are off at college?Or can you just plan on taking a big vacation one year? Absolutely not.
You have to spend the exact same amount each year after you retire.
Can you factor in things like paying off your mortgage or planning for a Wedding? Nope, forget it.
All savings/investments earn the same growth.
But we all have multiple accounts, right? Can we at least split out tax-deferred from taxable investments? Not with these tools.
What if we want to “partially” retire during our early 50s and then fully retire a bit later on?
Can we see the effects on my overall financial plan? No way.
How about saving your data?
Can you save the current situation and come back later to see how your’re doing against your assumptions? Nope, not even close.
So what are these tools good for? We would argue, nothing – and they might even be worse than nothing in the sense they tease you with the promise of knowledge, but end up making you feeling nervous and vulnerable.
Which brings me to one more feature they nearly all have in common – they exist to be funnels for connecting you to money professionals or brokerage accounts.
Therefore, the feeling of vulnerability is no accident. These are not tools to answer your questions, but rather to spur you into action – and we find it somewhat defeating that these are the top search results.
Of course, there are other, far better tools for planning your financial future. We think OnTrajectory is the best of them, of course – and we hope you’ll find our combination of ease-of-use and power to be just the right mix to get to usable answers regarding your path to a financially secure future.
It doesn’t matter if you’re happily married or in the throes of a brutal, debilitating divorce. You may have been a conscientious saver, you may have formed wise money-habits – able to navigate narrow budgets with ease. But one morning you’ll wake up and feel the need to buy something – something stupidly significant and attention-getting, and in mid-life that can be expensive.
So, how do you choose which silly thing to buy?
Since we’re talking about stupidity, simply opening your wallet for whatever flashy car/boat/jewel/timeshare catches your eye might seem proper, but there’s a better way to make such a massive and financially burdensome mistake. Because the question is not, can I afford it, right now, in this moment? Rather, the questions are these: What are the long-term effects of this bad decision? How much damage am I really doing? And most importantly, how can I minimize the damage while sating my urge to spend good money on what I don’t need (and will likely under-use)?
Now the tricky thing about a mid-live crisis is that it’s happening mid-life. These are your prime salary years and also when you have the most demands and commitments laid upon you. So even if you can afford the extra payment for whatever ludicrous purchase you’re itching to make – you should judge the impact not only against your 5-10 year plan, but also against the far future of your final years.
We’ll look at 2 scenarios which compare the impact of purchasing a 2016 Convertible Corvette versus a 2011 29′ Sea Ray Sundancer. Our individual has a previous baseline Trajectory concluding at age 90 with approximately $65,000 in assets. As you’ll see, he currently has a spouse, two children, two cars, a mortgage and various other expenses typical of “mid-life”.
The screenshot below illustrates the financial effects of purchasing the Corvette:
As you can see, the result is a $40,000 decrease in overall Trajectory to about $26,000. Note that we assumed use of the Corvette as a regular car, if a different “daily driver” was required, the financial impact would be considerably greater.
Now let’s look at the “boat scenario”:
Although the monthly payment is lower (because one can finance a boat over a longer period of time) the financial impact is far greater. The first problem is that boats can’t be driven to work, so we’re including a car purchase at age 55. And since a 29 foot water craft doesn’t fit in most driveways, we have marina fees that continue until age 70.
In addition, our individual is projected to run out of cash around age 86, creating a shortfall > $90,000 by age 90. OnTrajectory calculates that to make up this shortfall about $100/month additional savings is required.
Of course these illustrations confirm the obvious – buying more expensive toys has greater financial impact. What OnTrajectory let’s us do is more easily quantify the destructive power we’re releasing on our “retirement years” – and, one hopes, help us make poor decisions slightly less poor, whether in a mid-life crisis or during any other period of our lives.
If you place a quarter a day into a tax-deferred, moderate-risk-jar – and because you’re awesome, you give that jar to your favorite great-grand-nephew upon your eternal “rest”: How much is in the jar?
About $43,000, here’s the chart…
Or how about something a little trickier to calculate. Let’s say you replace your car about every 10 years (until you turn 70), how many extra years of retirement can you afford if you pay $400 per month versus $500?
About 6 years — here are the charts…
Or a latte per week? About $100k of inheritance.
Or a bachelor/bachelorette party in Vegas? About a semester of college for your unborn daughter.
Or not taking the 401k match at your job? You don’t even want to know.
And we’re not saying you shouldn’t do these things (except the 401k thing, please do that). Not only because financial models are built on assumptions and assumptions are uncertain, but because lattes are delicious. Wouldn’t it be nice, though, to see the information – to easily adjust various criteria, and display the results all in the context of your own situation?
Consider this scenario:
You’re a middle-aged adult with 2 young kids. Your house/apartment is too small and maybe the schools aren’t so hot. You’ve got a decent job and a growing 401k. But now you also have to think about 529 Plans and maybe an IRA for your spouse who only works part-time – perhaps an HSA too, maybe? How do you know ‘how much house’ to buy, or whether you should buy one at all? Is it better to put the cash in the HSA, the 401k, the IRA, or the 529?
How can anyone do serious planning with so many variables to consider? How can you map the interplay of these choices and run scenarios to clearly see the results?
By Carl Potak – New York – OnTrajectory.com is a financial technology startup offering an easy-to-use, high-fidelity financial planner that maps users’ income, investments, and expenses in an interactive graphical display. Users can easily aggregate their financial data to visualize a simulation of their financial future. The free option is suitable for most users, however, the Power Plan offers users the ability to define their plan more ‘granularly’ and is also free until July 1, 2016.
Sign-up is easy and requires users to answer only four quick questions to get started. From there, users can continue entering monthly and yearly data. The more data they enter, the more accurate their future trajectory will be.
Most investment and retirement calculators are standalone and focus on a specific data point, however OnTrajectory allows dozens of different data points to be calculated together for a more inclusive view of how these aspects can affect your finances. For example, OnTrajectory can help people with college payment calculations, retirement planning, or mortgage planning, and see how they affect their overall financial standing. Of OnTrajectory’s largest competitors that are focused on multiple data points, a large proportion of them are complex to use, don’t offer a free option, and/or require time-consuming signup processes. OnTrajectory differentiates itself from these competitors and addressed those key issues by providing an easy-to-use, high-fidelity, free option with a quick and simple signup process.
The software is friendly to folks with families and allows for the additions of spouses and/or dependents to their trajectory. Additional features allow people to create savings plans, goals for future purchases, designate unexpected emergency funds, and run different financial simulations for any “what if” financial questions they think of. For more advanced simulations, OnTrajectory also has Monte Carlo and Historical analyses.
OnTrajectory encourages people to become financially knowledgeable and successful so they can retire on time or even have an early retirement. This is promoted through their blog Money Matters by OnTrajectory.
OnTrajectory‘s team currently consists six people. Of the six, CEO Tyson Koska and two other technical co-founders from the financial industry are the software engineers working behind-the-scenes. The team also has a serial entrepreneur, Director of Marketing Carl Potak, Director of Community Relations Daniel Kahn, and Video Producer Christopher Yeiser.
Financial journalist Darrow Kirkpatrick from CanIRetireYet.com had this to say: “The initial setup was simple. The user interface is very attractive and intuitive. It feels like they’ve achieved a low barrier to entry… OnTrajectory is in the sweet spot that appeals to me. The site has a slick look and many nice touches.” Barbara Friedberg, another financial journalist, is the founder of Barbara Friedberg Personal Finance and author of “Invest and Beat the Pros.” She endorsed OnTrajectory saying: “[It’s a] very consumer friendly and useful tool… Concept is great… I like that it’s not necessarily just a retirement tool… graphs, charts easy to interpret.”
OnTrajectory does not seek answers to questions like, “How much do I need to retire?” or “How much do my kids need for college?” It addresses a simple, central concern: “What’s my financial trajectory?” i.e. Are you on course for economic independence – or will you financially crash and burn? Here’s how we do that:
Enter your unique Income, Expense, and Savings/Investment Items
Set Age Ranges for each item, as necessary
Enter unique criteria, including Tax and Growth Rates, for each individual Item or Range
Other financial tools (online Retirement Calculators, Investment Simulators, etc.) love to set your goals for you. What’s more, they lack a way to track your progress toward achieving them. OnTrajectory provides a persistent, historical view that adds value to your data the more you come back. Yes, it’s super-simple to get started, but as your situation becomes increasingly complex, so does the information OnTrajectory can provide – here’s how:
Track and save a History of your total progress and project it against your Trajectory
Calculate individual Savings/Investment balances for any future-date
View and analyze all underlying data
Store your unique scenario through a secure connection to our server