After completing a financial independence simulation in NumberWalk, an Excel file is generated. For example, similar results can be generated by loading this sample input data . This guide provides assistance in understanding what this data means for financial independence planning.
Excel Structure: Cashflow and Fund Flows
NumberWalk results are organized into four main sheets:
Summary Sheet: Overall Picture
The Summary sheet tracks money's cash flow each year:
| Column | Description | Example |
|---|---|---|
| Beginning Balance (BOY BAL) | Starting funds at the beginning of the year | $500,000 |
| Expenses (BOY Expenses) | Money set aside for that year's costs | $45,000 |
| Balance After Expenses | What remains to earn returns | $455,000 |
| Net Return % | Overall investment return for the year | 8.0% |
| Investment Returns (P/L) | What investments earned/lost | $36,400 |
| Income | Additional money from sources like rental income | $15,000 |
| Ending Balance (EOY BAL) | Year-end total becoming next year's starting point | $506,400 |
The cashflow simulation automatically terminates when the remaining balance becomes insufficient to cover the next year's projected expenses.
Warning Signs to Watch For
- Early End: Simulation stops before the planned maximum age
Expenses Sheet: Where Money Goes
The Expenses sheet provides a detailed breakdown of spending over time:
Key Features to Understand
-
Minimum Spending Mode: During market downturns,
discretionary expenses (shown in red) can be temporarily reduced by
applying a percentage to the inflation-adjusted amount. When markets
recover, expenses automatically return to their full
inflation-adjusted levels.
Example: Starting with a $10,000 yearly travel budget in Year 1, it grows to $10,500 in Year 2 and $11,025 in Year 3 with 5% inflation. In Year 4, during a market downturn, setting it to 80% reduces it to $8,820 (80% of $11,576). In Year 5, still in downturn, it becomes $9,261 (80% of $12,155). When markets recover in Year 6, it returns to the full inflation-adjusted amount of $12,763 ($12,155 x 1.05).
- High-Inflation Categories: Medical expenses and healthcare costs often experience inflation rates significantly higher than general inflation. These expenses tend to grow exponentially (due to compounding effects of specialized inflation rates) in later years and can rapidly deplete funds if not properly accounted for.
- Big-Ticket Items: One-time or periodic major purchases can substantially impact portfolio growth.
- Expense Evolution: Watch how spending categories shift in importance over time (e.g., travel early, healthcare later)
Cash-in Incomes Sheet: Money Sources
This sheet maps money flowing into various funds besides investment returns:
Key Elements to Understand
- Income Timeline: Track how income sources change
- Increase Patterns: See how each income source increase over time
- Deposit Destinations: Where each income source goes (which affects returns)
- Income Stability: Evaluate how reliable various income streams are
Funds Sheet: Fund Flows
The most detailed sheet showing how money flows through each investment account:
Understanding Fund Activity
For each fund, the following details are provided:
| Column | Description | Example |
|---|---|---|
| Beginning Balance | Starting amount in the fund at the beginning of the year | $300,000 |
| Expenses | Withdrawals based on fund access rules | $20,000 |
| Remaining Balance | What's left after expenses are withdrawn | $280,000 |
| Return Rate | Percentage gained/lost that year | 7.2% |
| Profit/Loss | Actual dollar amount gained/lost from investments | $20,160 |
| Deposits | New money coming into the fund | $12,000 |
| Rebalancing | Money transferred between funds to maintain target allocations based on end-of-year balances; can be 0 during "bad market" periods if rebalancing pause is enabled | $5,000 |
| Ending Balance | Final amount after all transactions, becomes next year's starting point | $317,160 |
Note: The rebalancing strategy shown above uses personalized historical returns to identify "bad market" conditions based on user-defined thresholds (e.g., 3% in Martin's case).
Note: Withdrawals are primarily taken from the safer pension fund. When this causes the pension fund to fall below its target allocation, rebalancing normally transfers money from riskier funds to restore the balance. During market downturns (when pause-rebalance is activated or risky funds perform poorly), little or no money is transferred to the pension fund. Conversely, during strong markets, rebalancing may transfer more than was withdrawn for expenses. Effectively, expenses come entirely from the safer fund during downturns, but are partially or fully offset by transfers from risky funds during favorable markets.
Critical Insights from the Funds Sheet
- Return Differences: Compare how different fund types respond to market conditions
- Rebalancing Strategy: Watch how portfolios maintain target allocations over time
- Rebalancing Pauses: Observe how pausing rebalancing during market downturns if it bring positive or negative impact on the portfolio
- Fund Access Rules: See how withdrawal restrictions affect which funds cover expenses
- Access-Aware Rebalancing: The system prevents rebalancing into or out of funds that aren't eligible for withdrawals, even if deposits are allowed. This critical safeguard ensures money isn't trapped in inaccessible accounts during FIRE when liquidity matters most. The system prioritizes fund accessibility over strict allocation percentages, even if it means temporary allocation drift.
- Risk Management: Observe protective strategies activating during market downturns
- Simulation Value: Multiple simulations help test whether risk management settings match expectations and personal risk tolerance
Risk Management in Action
Beyond the Simulations: Preparing for the Unexpected
While NumberWalk simulations allow you to test different scenarios and strategies, it's important to recognize the limitations of any planning tool:
- Unplannable Events: Some life events are too extreme or unpredictable to reasonably include in simulations, such as extended serious illnesses with massive medical costs spanning many years.
- Real-time Adjustments: In actual situation, you'll need to make tactical adjustments to your financial strategy that high-level plans cannot anticipate. Market conditions may require reactions that aren't captured in simulations.
- Historical Simulations Limitations: These simulations use actual historical market returns. But strategies that look promising in theory may yield minimal or no practical benefit when in reality. NumberWalk is to give you a sandbox to test the theories (e.g. pause rebalance, move to conservative) against real historical data. This helps you personally judge whether certain protective measures are worth implementing.
- Psychological Readiness: Simulations help with financial preparedness but cannot fully prepare you for the emotional aspects of managing money during market volatility.
- Policy Changes: Future changes to tax laws, healthcare systems, or social security benefits may significantly impact retirement outcomes in ways that cannot be predicted.
Fund's Sustainability strategies
While acknowledging the limitations of simulations, there are several practical strategies to enhance fund sustainability
Extracting Value from NumberWalk Results
The NumberWalk Excel represent a personalized simulation of financial independence path based on individual circumstances. These results offer help on:
- Balancing of spending patterns to support desired lifestyles
- Exploration of alternative approaches
- Visualization of fund flows during market volatility
Conclusion
By understanding the data and its implications, users can prepare for their financial independence path and make necessary adjustment.