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Year-End Financial Forecast

Having a formal, well-organized way of projecting next year’s business results is a very valuable skill. While this skill is great for the development of your career, it is also a cornerstone for prudent personal finance. How else could someone know how they’re doing financially and how to guide their money in the right direction without projecting their budget and their net worth?

Planning and controlling are two very important aspects of this process, especially when there is someone other than you with stake in the game. The following are some tips on how to plan and control successfully.

From a planning perspective:

  • Make sure to establish and quantify realistic goals and milestones. Leave some wiggle room, just in case.
  • Determine what actions you must take in order to achieve your desired goals.
  • Clearly communicate your financial plans both to yourself and to anyone else who may be impacted by or involved in the process.

From a controlling perspective:

  • Take and/or assign responsibilities for each aspect of your finances. This will help clarify your part in the process as well as the parts of everyone else involved.
  • Measure performance periodically in order to keep your progress on track.
  • Motivate yourself and others involved to achieve financial goals.


It is always best to set up and finalize your financial projections before the start of a new year. Life is notoriously unpredictable, after all. Just when plan A is set in motion, life smacks you upside the head and before you know it, plan B is there to pick you up and dust you off. In situations such as this, being able to make simple adjustments to your financial goals will help you stay focused, disciplined and keep moving forward.

Can you imagine setting up a whole new set of financial goals half way through the year and expecting positive results?

For the better part of 2017, my wife and I have been planning and controlling for 2018 and beyond.  She has recently made the decision to change careers and has also been accepted into a 12-month program to obtain her Bachelors of Science in Nursing (BSN).

Remember what I said about life being unpredictable? Well…

Her school is in Philadelphia. We live and work in New York City. See the problem?

They say luck is for the unprepared. I’ve been unprepared for most of my life, patiently waiting for Luck to show up at my door with a pizza and a six-pack. I’m still waiting.

Even so, it’s up to me to drive my finances, so here’s what the plan looks like for 2018:

The chart above illustrates my best estimate for what our net worth will look like for every month in 2018.  I deliberately included some slack in order to underestimate growth in assets and overestimate debt obligations. Slack is built-in for events I can neither control nor predict such as fluctuations in the market, surprise expenses, a mini me showing up at the doorstep in search of his or her father (I’m kidding) et cetera.

Explanations for the aforementioned bar graph are as follows:

[A] The drop from February to March is for a life insurance loan I am pulling from my whole life policies to pay for my wife’s tuition. Instead of racking up school debt at a high compounding interest rate, I am leveraging a life insurance loan that charges at a simple rate.  (See Simple Interest Loan, Funding Compound Returns for further detail.) We can amortize the loan out for as long or as short a period of time as we want depending on our financial situation at the time.  This is one of the many benefits of the life insurance loan.  Once my wife has finished school and established her new career, we will pay down this debt.

[B] Back-to-back decreases are never good. But, just like the drop in [A], this was planned.  In April 2017, I reported a $79k decrease in net worth due to a life insurance loan that was funding two other policies.  As my policies mature and generate cash value, I borrowed at a simple interest rate and filled up another one. My strategy is based on the fact that the compound growth of the policies and tax-deferred accounts will always exceed the simple interest loan. As long as I paid the monthly premiums (which are nothing more than saving to me) I won’t lapse (MEC) the policy.

What do my tax-deferred accounts have to do with all of this? If the tax reform bill passes and I suddenly find myself in a lower tax bracket, I will utilize the backdoor Roth conversion and pay the taxes now rather than later when they go back up.  I’ll use those converted funds to pay down the loans.  If not, business as usual until 59.5.

[C] The remainder of the year includes disciplined savings, investing, compound growth and debt reduction. But again, the growth is based on conservative factors (5%) and doesn’t include bonuses or other positive financial circumstances that are not yet measurable.


As much as I’d love to say “10 years from now, I will be completely financially independent.” with confidence, I just can’t. The chart below details my projected net worth from 2019-2030:

Once my wife completes her BSN program and passes her boards, we plan on starting a family. Those costs have not been baked into my forecast. Other than paying back the life insurance loan, the income from her new career was not incorporated either. Will we be in Philly or New York? What jobs will we have?

With more variables than certainties, the forecast has been planned and controlled so that unknown events couldn’t significantly alter its trajectory. Over time, slow, steady, disciplined saving and investing is the key to becoming financially stable.

How do you forecast your budget/net worth?


Edited by Brianna Roney


  1. Great post and blog. I look forward to following along! When I forecast a drop, it’s really great to offset the drop with some type of physical asset, even if I immediately depreciate the asset a bit. Obviously for education there is nothing tangible, but I’m sure it will increase future earnings possibilities in some way. Also, with the markets so high, it might be good to factor in some type of pullback at some point.

    • Hello Jim, thanks for stopping by. I like how you are always offsetting a drop with an asset of some sort. It’s a great idea. By not offsetting my drops and only growing investments by 5%, I was baking in a market pull back into my net worth immediately. Kinda of like a portfolio-effect rather than trying to time an actual market drop in any one particular month.

      Great comments!

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