If you could instantly visualize your financial future…

crystalball…what would you want to see? I recently asked this of an Excel workshop I was teaching. There was one stipulation—nothing speculative, like, “Will I get a raise next year?” or “Will the Dow hit 20,000?” They had just seen an example of saving for a child’s college education, showing progress year-by-year for each plan they tried.

Here are some of the questions they came up with.

  • If I invest $200,000 now at 6%, how much will I have in 10 years?
  • If I pay an extra $100 a month to principal, how soon will I pay off the loan?
  • How much am I spending and for what?
  • How can I save to make a down payment on a house in two years?
  • What profit percentage do I have to make to earn $3000 per month on the jewelry I make?
  • If I make $2000 a month at a 45% commission, how much will I have at year-end?
  • Can I afford to buy a more expensive house, even though I’m retiring in a year?

This was a little two-hour workshop, in which I taught them five basic skills:

  • Play “what-if” to see how your plans or assumptions change the answer
  • Get Excel to write simple formulas for you
  • Name input cells to make the formulas play nice
  • AutoFill formulas to build a sophisticated model from one or two simple formulas
  • Use Goal Seek to work the problem backwards

I asked the question because I wanted to see what other skills they would need to learn to help them answer the financial questions that interested them. I was surprised that the five skills were all they needed! In fact, all of these can all be done using only addition, subtraction, and multiplication.

Some of the questions were even simpler. Tracking your spending can be done just by entering your expenditures and their categories in a spreadsheet. You can then use sort and filter to see which categories are costing you the most. Yes, it takes discipline, but the techniques are easy. One simple formula can keep track of your balance.

In future posts, I’ll show you how to answer these questions.

Now, my question to you is, what would you ask? Do you have a financial question that you think can’t be answered using the simple techniques? Please leave your most challenging question as a comment.

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