How To Build A Financial Spreadsheet In 8 Easy Steps

How To Build A Financial Spreadsheet In 8 Easy Steps
Underwater by Andy Deitsch. Why?

The internet is full of tools to help you understand your money, but there’s arguably nothing more powerful or informative than building your own financial spreadsheet

To Discover If Your SIPP Or SSAS Will Deliver The Money You’ll Need In Retirement, You Should Build Your Own Financial Spreadsheet

Building A Financial Spreadsheet Is Simpler Than It Sounds

This informative series of videos from former hedge fund manager Lars Kroijer could help you build your own financial model, using an Excel spreadsheet.  It’ll help you work out what you need to do to become a millionaire, or just sensibly think about your finances.

In many ways, it’s a road map for your money.  So do you need it? 

The answer to that question is a very firm “YES”.  After all, it’s unlikely you’d begin any journey of length without knowing where you’d like to end up.  So if you’re reading this article on SIPPclub, chances are you’re planning a pretty long journey for your money via a SIPP or a SSAS, which could stretch throughout your working life, into your retirement and beyond to those you leave behind.

So without further ado, please take a look at all of the following videos, with a blank Excel spreadsheet to hand.  Lars will help you build you a financial spreadsheet that’ll serve you in good stead as you navigate throughout life’s financial journey, whether you’re travelling through the choppy waters of volatile stockmarkets or the calm seas of stable interest rates.

Over to you, Lars.

Financial Spreadsheet Video 1

Planning For Millionaire Ambitions, Sensible Regular Savers, Or Anything Else

Starting with a blank excel spreadsheet, together we build a financial model that include multiple savings levels, return expectations, time horizons, and scenarios.  Almost certainly, there is something here for everyone interested in planning finances!

Financial Spreadsheet Video 2

Adding The Lowest Risk Investment And Allocations To Your Financial Spreadsheet

In this video, we add another asset class - the minimum risk asset.  Allocating between that and the equities allows us to have a broad range of risk levels for this simple portfolio.

Financial Spreadsheet Video 3

Adding Volatility Of Investment Returns To Your Financial Spreadsheet

In this video, we add another volatility of returns, appreciating the fact that while we have an expected return, in reality the amounts we make will vary wildly from year to year.  The video also explains "fat tails" and why this is relevant.

Financial Spreadsheet Video 4

Adding Multiple Scenarios Of Investment Returns To Your Financial Spreadsheet

In this video, we add multiple scenarios to the financial model to appreciate that we should expect a broad range of potential outcome for our finances, and that this should educate our thinking about the risk we are willing to take.

Financial Spreadsheet Video 5

Adding Retirement Spending / Cash Needs To Your Financial Spreadsheet

In this video, we add retirement spending to understand better what our cash needs will be in different cases.  Cash needs may be a one time need, or spread out over a period, but the model can be adapted to accommodate most cases.

Financial Spreadsheet Video 6

Using Compound Average Growth Rate (CAGR) Or Average Annual Return In Your Financial Spreadsheet

It is super important in finance to understand the difference between the compound annual growth rate (CAGR) and the average annual growth rate.  In this video, we explain the difference and make sure we use the right one in our return predictions.

Financial Spreadsheet Video 7

Adding A Range Of Asset Allocations To Your Financial Spreadsheet

In this video, we add a range of asset allocations to your spreadsheet so you can easily compare how your choices of risk levels will impact your expected range of outcomes.

Financial Spreadsheet Video 8

Adding An Estimate Of Fees Paid To Your Financial Spreadsheet

In this video, we estimate the fees paid for active versus passive management of your assets, and how it depends on asset levels, risk, returns, etc.

This isn’t the first series of videos Lars has published on YouTube.  Here’s his series entitled Investing Demystified.

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AJ Bell Is Often The Best Value SIPP For Stockmarket Assets

That's our opinion.  Not just because AJ Bell was the first company to offer an online SIPP.  Nor that it's received many prestigious awards.  And not even because the wife of SIPPclub's Founder has an AJ Bell SIPP.  It's because it's one of the most competitive stockmarket SIPPs on the market. 

Over time, charges can wipe out a huge part of your fund.  We like AJ Bell because there are no set-up costs.  If you hold passive funds, which is our preference, or shares, investment trusts, EFTs, gilts or bonds, you pay one small fixed fee no matter how large your fund.  And when you come to draw your benefits either as occasional drawdown or UFPLS payments, there's a small charge for the whole year no matter how many times you access your money (many SIPP and SSAS providers charge more than this for each payment).  However, you should always compare charges in detail, because AJ Bell could be more expensive than other providers, depending on the type of stockmarket assets you hold.

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