Financial Projections Tutorial

In this tutorial, we'll discuss the basics of this powerful tool, so you can start tracking your financial goals in no time! Financial Projections provides an easy-to-use interface that allows you to quickly visualize your financial milestones and goals. With the help of this tool, you'll be able to keep an eye on your financial planning progress and make adjustments accordingly. So let's get started!

In this tutorial:

• Step 0: Acknowledgement and Basic Information
• Step 0.5: Providing Basic Information
• Step 1: Adding General Information to the Profile
• Step 2: Adjusting Inflation for the Profile
• Step 3: Calculating Income Tax for the Profile
• Step 4: Configuring CPF for the Profile
• Step 5: Adding an Income
• Step 6: Adding Expenses
• Step 7: Adding Assets and Related Transactions
• Step 8: Adding Liabilities (No Linked Asset)
• Step 9: Reading the Charts

Step 0: Acknowledgement and Basic Information

When you first create a Financial Projection Profile, you would have entered the following details: Name, Gender, D.O.B.

Step 0.5: Providing Basic Information

Now that you've created a profile with Name, Gender, and D.O.B., you should be at the Charts screen. This is where you'll be able to start tracking your financial milestones and goals. You'll be able to create graphs to visualize and asses your current financial state. Since there is no other information added, the graphs are empty. Let's head on to the next step to provide more details to this profile. Click in the [Profile] tab as shown below.

Step 1: Adding General Information to the Profile

Currently, we are at the General Section of the Profile tab. We will now add general information to the profile. Firstly, let's change the info that you have provided previously. Our client is Jane Doe, born on 1 Jan 1993, and is a woman. Next, let's start by selecting Smoker: [No] as Jane said she does not smoke.

Next, we can add additional important details that Jane has provided. Jane has indicated that she doesn't plan to get married, and instead plans to purchase a BTO at 35. Her main concern is her elderly mother, and what would happen to her if anything were to happen.

Finally, we'll set the Cash Savings Growth Rate to the default of 0.07%. Jane keeps all of her cash savings in her bank account, and the bank is currently offering a 0.07% interest rate. This means that her cash surplus will grow at this rate. If you know of a bank that provides better interest rates, please let her know!

And with that, Step 1 is complete! Now, let's move on to Step 2 by clicking on the Inflation section.

Step 2: Adjusting Inflation for the Profile

Now, we're in the Inflation section of the Profile tab. Here, you can adjust the inflation rate to match the current economic climate. This way, you can ensure that your financial projections are accurate and up to date. The default rate of 3% is based on historical economic data. We shall keep to the default values for Jane's profile.

Now that that is done, we can proceed to Step 3 by clicking on the Income Tax section of the Profile. Remember to save at any opportunity you get!

Step 3: Calculating Income Tax for the Profile

Next we will be providing the details of Jane's income tax on this page. We will start by turning on income tax for this profile. This will automatically tax all of Jane's income at the rates as determined by IRAS.

Once that is done, ensure that Singapore Resident Rates is selected for Jane as she is a Singapore Resident.

Next we will provide the information for Jane's Income Tax Relief. Let's look at her eligible tax reliefs and determine what her total Income Tax Relief is:

From this, we can set Jane's Income Tax Relief as $10000. As Jane is only a mother to her fur kid, she is unfortunately not entitled to any Parenthood Tax Rebates. Therefore, we shall leave that at $0.

With Jane's tax information completed, we can head on over to the final and largest section of her profile, her CPF. Let us proceed to her CPF section by clicking on CPF section on the Profile Tab.

Step 4: Configuring CPF for the Profile

In the final section of Jane's Profile, we shall start configuring her CPF settings. Let's start by enabling CPF settings. This section is quite lengthy, so hang tight!

Jane has worked for 5 years and due to a bad economy, her salary has stagnated at $60k per annum with $6k additional wages each year. Based on prevailing CPF contribution and allocation rates, Jane's CPF accounts can be assumed to have the following balances. 

The next section are values for Basic Healthcare Sum and Basic Retirement Sum. It is recommended to leave the default values as-is, unless there is a major policy change to CPF sums.

Next up, we have the settings for Retirement Schemes. Jane is far from retirement and hasn't made any changes to her CPF Retirement Settings, so we shall leave everything at default values.

As for Employee / Employer Contributions, with her wages at $60k per annum along with $6k additional wages each year, we shall set her AW at 1.2 months.

Jane is not self-employed, therefore we shall turn off Self-Employed MA contribution.

Naturally, as Jane is worried for her mother, she would not have opted out of the Dependants' Protection Scheme (DPS), and we shall leave DPS enabled.

Jane is covered under the Class A Integrated Shield Plan as she doesn't want to worry about money when she falls sick. However, she would not like to reveal her insurer to maintain neutrality in this tutorial, therefore we shall select Jane's Plan Tier as [Class A Plan], and leave both base plan and rider premiums as $0. Upon doing so, the system will determine the average premium across all insurers and calculate Jane's yearly premium costs.

Lastly, Jane was "voluntarily" opted in to CareShield Life. After clicking the [here] link and logging in via SingPass Login, she checked that her exact premium was $253. As the premium payment for CareShield Life is until 67, and the increment for yearly premiums is currently at 2% (2020 to 2025). Once we add these details in to the respective inputs, we are done with the CPF section!

Now that we are done with all the Profile settings, let's move on to Jane's Finances. This is the part where we get to visualise Jane's financial status and plan for her financial milestones. Click on the [Finances] tab to proceed to the next step!

Step 5: Adding an Income

In the Finances tab, let's start by adding Jane's income. Add an income by clicking on the [+] under Income.

As Jane is an employee (not "Self-Employed"), her income should be [Gross Salary] (not "Net Trade Income" as this is for self-employed persons). Select [Gross Salary] to add an income row.

Jane's pay package is $66k per annum. Let's add that in. Remember to check that it is [ /yr ] and not [ /m ], as we are using annual salary. When you add her salary, you can see that her income tax and her CPF employee contribution is generated by the system and added automatically to her expenses.

Next we can add more details to her salary by clicking the icon with the three dots, located on the right end of the income row. This will give you access to more options that can be used to fine tune the accuracy of the projection.

Jane's employer has told her this year that the economy is picking up, and that Jane is overdue for a pay increment. Jane is promised a minimum of 7% pay increment per year until retirement. Assuming that Jane stays with the same employer until retirement, we can add the following details in the expanded options.

You can also choose to change the color for this specific income on the charts by clicking on the colour square on the top-right corner of the expanded options. It isn't quite appropriate that an income be represented in red. Let's change that. Start by clicking on the colour square.

Let's choose a better colour. Blue? Let's go with blue. Use the colour picker to choose your favourite shade of blue.

There we go! Now Jane's Pay Package will appear as this shade of blue in all the charts.

Now that we've added and configured Jane's income, close the expanded options and we can proceed to add expenses.

Step 6: Adding Expenses

Next, we will add Jane's expenses. Add each expense by clicking on the [+] under Expenses.

Jane has the following expenses (that she recalls):

Jane's mother is currently 60 years old. We can assume her life expectancy to be a ripe old age of 90.

With the information provided by Jane, her expenses should look like the following:

Now that we have listed Jane's expenses, we can move on to the next step of this tutorial.

Step 7: Adding Assets and Related Transactions

As Jane wanted to help her mother pay for the 4-Room HDB that they are living in, Jane became the co-owner (Tenancy-in-common) this year so that she can use her CPF to pay for the remaining HDB loan amount. The HDB is worth $400k, and Jane's share is 25%. Jane has to pay off the remaining $50k within 5 years with her CPF. Let's add all of these details to her list of assets.

Add an asset by clicking on the [+] under Assets.

Select [Real Estate] as the asset type to add a Real Estate Asset.

Add the details of the 4-Room HDB with the value of $100k (as Jane's share is 25%). As there is an outstanding loan for the HDB, turn on the Loan toggle to create a linked liability.

Then the Loan toggle is enabled, there will be a linked liability that is created specifically for the HDB.

Enter the loan details with the name 4-Room HDB Loan, along with the outstanding balance of the loan amount of $50k.

Next, expand the row details and adjust the Loan Period to 5 years. When you do this, you can observe that the Repayment Amount will automatically be recalculated by the system, based on the Loan Amount, Loan Period, and the Loan Interest. You can leave the rest of the information as default, as Loan Interest is set as 2.6% (HDB Loan Interest), and CPF OA is used to make the repayments.

Jane is paying the property tax for this HDB, and is renting out one room to her friend. Next, we shall add these transactions to further refine Jane's financial profile. Expand the 4-Room HDB row under Assets, and toggle on Linked Finances.

This will create a row under Cashflow that lets you add the relevant transactions to Jane's 4-Room HDB.

Now, Jane is paying the property tax for this 4-Room HDB. The annual value for this property is $10k. She is taxed owner-occupier tax rates. Therefore, her property tax payable is ($8k x 0%) + ($2k x 4%) = $80. Let's add that in. Click on the [+] and click on [Expense] to add this Property Tax.

Proceed to add the details of Property Tax and $80/yr to this Expense row.

Jane is also renting out one of the rooms to her friend at $500 (friendship price). Let's add an Income to this Asset. Click on the [+] and click on [Income] to add this Rental Income.

Proceed to add the details of Rental and $500/mth to this Income row. Remember to change [ /yr ] to [ /mth ]! In addition, Jane is honest in declaring her rental income even though the rent is paid in cash informally. To calculate her income tax correctly, toggle on [Taxable] for her Rental Income. After you toggle it on, you can see that her income tax has been increased automatically.

Jane has also inherited a 1kg gold bar from her grandfather that she keeps in a safe at home. The value of the gold bar is $60k and we shall conservatively assume that the average annual return (compound) for gold is 4%. She plans to sell it after 20 years. As she can easily sell this gold bar, in the expanded options, toggle on [Liquid Asset]. Let's add this Asset in.

Step 8: Adding Liabilities (No Linked Asset)

We're almost done! Before we take a look at the charts that we have built, we just need to add one last piece of information. Jane just took a renovation loan from a bank to renovate her 4-Room HDB. Lets add this Liability in by clicking on the [+] under Liabilities and selecting [Other Liabilities].

Next, add the details of this Renovation Loan in this liability. The loan amount was $20k with an interest rate (compound) of 3.88%, and a loan tenure of 5 years. The system will automatically calculate the monthly loan repayment based on the details provided.

Aaand we are done! You can now proceed over to the Charts tab to take a look at what we have created!

Step 9: Reading the Charts

The first chart that you will see is the Overview chart. This chart gives an overview of Jane's finances at a glance. By default Jane's Retirement Age is 60. The following information can be derived at a glance from this chart:

1. Jane's income is greater than her expenses until her retirement age. (Blue bar > Red bar)
2. Jane's expenses exceed her income every year after retirement. (Red bar > Blue bar)
3. Although Jane's expenses exceed her income after retirement, she still has enough assets to cover her expenses even if she lives to a 100 years old. (Both Liquid and Total Net Worth lines do not reach zero)

Looking at the income, there is a sudden spike at at the age 49. Let's investigate. Click on the bar with the spike. A side sheet with detailed info will appear from the left. We can see that that spike is due to Jane selling off her gold bar.

Let's delve further into Jane's finances. Click on the [Cash Flow] tab on the Chart page to look at a detailed chart of Jane's cash flow.

The second chart that you will see is the Cash Flow chart. This chart gives an overview of Jane's cash flow at a glance. The following information can be derived at a glance from this chart:

1. A large portion of Jane's income is from her salary. This leaves her very vulnerable to a loss of employment.
2. Jane's cash flow each year after retirement is projected to be negative, with household purchases as the largest expense.
3. The only significant source of income Jane will have after retirement is from her CPF Life payouts, which is insufficient to cover her projected expenses.

After looking at Jane's cash flow, let's look at her net worth. Click on the [Net Worth] tab on the Chart page to look at a detailed chart of Jane's net worth.

The third chart that you will see is the Net Worth chart. This chart gives an overview of Jane's net worth at a glance. The following information can be derived at a glance from this chart:

1. A large portion of Jane's assets is Cash Savings. Jane's assets has a large potential for a higher rate of return if invested correctly.

2. There is a significant amount of balance OA funds even after setting aside her Retirement Sum. Jane can choose to select Enhanced Retirement Sum with a CPF Life Escalating Plan in order to increase her CPF Life payouts.

Now, what if Jane decides to retire at 50? Let's see what happens. Close the information side sheet by clicking on the left most side of the screen with the [ < ] icon.

Change the retirement age to 50 by either clicking on the arrows, or selecting the number and typing it in.

After retirement age has been changed to 50, you can see that Jane's Liquid Net Worth reaches negative, therefore running out of money at the age of 84. This would mean that Jane would have to better utilise her Cash Savings in her earlier years if she goal is to retire at 50.

Lastly, let's head over to Financial Ratios for a more traditional interpretation of Jane's financial profile. Before that, remember to set Jane's Retirement Age back to the original 60. Click on the [Financial Ratios] tab of the Charts page.

In the last tab of the Charts page, we can see the automatically calculated values of Jane's financial profile, in the frequently used Financial Ratios formulas. These numbers represent the current snapshot of her financial health at the current age. As you can see, most of her numbers look healthy, except for her liquidity numbers. This is due to the system detecting that Jane does not have any cash savings, as we did not add any bank balances in her Assets.

You can also check how each of the numbers are calculated by clicking on the [ ... ] button at the bottom of the tab.

Once expanded, each of the ratio's formula and explanation is revealed.

We have come to the end of the basic tutorial. Stay tuned for the advanced tutorial to learn the rest of the features of Financial Projections!