Paycheck and Personal Expenses

The Paycheck and Personal Expenses Rule is a one you can optionally include in a Scenario that modifies Account balances.

Dates, Months or Entire Scenario

You can set up your Paycheck and Personal Expenses Rule to run for specific dates (like have it start paying you your social security when you turn 66 years old).

Check out the Dates, Months or Entire Scenario help page for additional help on configuring when this Rule should run.

Apply This Rule To Which Scenario

You can choose to have this Rule apply to just a specific Scenario or have it apply to all Scenarios in this Folder. If your plan does not have Folders and you select “All Scenarios”, the Rule will apply to all Scenarios in your Planner™.

If you select a specific Scenario to apply this Rule and save your changes, a link to the Scenario summary page and a link to rerun the Scenario will also appear beneath the list of Scenarios for your convenience.

Accounts to Modify

The Paycheck and Personal Expenses modifies Account balances by depositing your paycheck and withdrawing your personal expenses.

You can select which Account to deposit your paycheck to and, separately, which Account to withdraw your personal expenses from.

IMPORTANT NOTE: If the Account you are withdrawing your personal expenses from does not have enough in it, the Real Estate Financial Planner™ software will withdraw as much as it can from the Account you designate and make that balance zero, then it will withdraw the remaining amount from the special Default Cash Account (which is special for this very reason – as a go to Account when you don’t have enough money in another Account).

Paycheck

You can determine how much each month to deposit into the Account you’ve previously selected. This is your gross paycheck before taxes (which we will discuss below).

You can use paychecks for income from a job, but there may be times where you might use paycheck to model other types of income like:

  • Your social security benefit
  • Boarder income from roommates
  • Side hustle income from an additional part-time job or side business
  • Money from a pension
  • Monthly payments from a settlement
  • Or any other monthly payment you receive

Optionally, if the income you’re receiving for paycheck goes away once you hit your retirement goal, then you can select Stop Paycheck at Retirement and this Paycheck will go to $0 when any of your Goals for Safe Withdrawal Rate and Cash Flow Toward Target Monthly Income in Retirement hit 100% for the first time. You can use this to stop your salary once you hit your retirement goal.

IMPORTANT NOTE: You paycheck does not come back if your Safe Withdrawal Rate and Cash Flow Toward Target Monthly Income in Retirement goes back below 100%.

You can see Charts of both your Gross Paychecks (which sums up all gross, before tax, paychecks in the Scenario). Below is an example of Gross Paychecks where we are collecting a paycheck until month 583.

Gross Paycheck
Gross Paycheck

Below is the same Scenario except showing the paychecks after taxes have been removed.

Paychecks After Tax
Paychecks After Tax

If we want to look at the same Chart above except adjust for inflation, you can see that we are really being paid the same amount over time when you take into account inflation.

Inflation Adjusted Paychecks After Tax
Inflation Adjusted Paychecks After Tax

Personal Expenses

Personal expenses are your living expenses that are consumed each month. If you are renting a home and paying rent to someone else, you should include that in here.

Here is a sample Chart showing personal expenses but excluding any cost of real estate that is unrented (owner occupant Properties).

Personal Expenses Excluding Real Estate
Personal Expenses Excluding Real Estate

In this particular Scenario, we are renting for the entire 720 month Scenario so expenses just increase with inflation over time. If we adjusted for inflation, you can see we’re really maintaining the same standard of living (inflation adjusted expenses).

Inflation Adjusted Personal Expenses Excluding Real Estate
Inflation Adjusted Personal Expenses Excluding Real Estate

An advanced, rarely used feature available to you is the ability to model renting for a period of time then changing your personal expenses when you buy a Property to owner occupy and live in. Use the Dollar Adjustment After Buying Owner Occupant Property field to designate how much to reduce your personal expenses when you buy an owner occupant property. Once you buy a Property where you are living in it (when monthly rent = 0 on it), the Real Estate Financial Planner™ software will reduce your personal expenses by the Dollar Adjustment After Buying Owner Occupant Property to simulate you stopping paying that amount in rent. Of course, the expense of owning the property (mortgage payment, taxes and insurance) will be calculated and subtracted from the Account you specified on the Property as an expense.

If we take the Scenario above where we are renting and save up money until we have enough for a down payment to buy a Property to live in, then the Chart might look like the one below.

Personal Expenses Excluding Real Estate - 1 Nomad
Personal Expenses Excluding Real Estate – 1 Nomad

In the Chart above, we have higher personal expenses until month 19. In month 19 we had saved up enough money to move out of the property we were renting and buy our first Nomad™ Property where we are living in it. At that point, we stopped paying the $1,400 (adjusted for inflation) in rent. The Chart we just showed you does not include the expenses of the new Nomad™ Property. If you want to see how your personal expenses including the cost of the new Nomad™ Property, we can look at the Chart for Personal Expenses Including Real Estate. That’s show below.

Personal Expenses Including Real Estate - 1 Nomad
Personal Expenses Including Real Estate – 1 Nomad

In the Chart above, our personal expenses actually increased because the cost of buying the Nomad™ Property was more than the amount we were paying in rent. However, 360 months after we buy the Nomad™ Property something magical happens; we pay off the mortgage. Once the mortgage is paid off on the Nomad™ Property our personal expenses including real estate actually goes down and is lower than personal expenses if we just continued renting.

Inflation Adjusted

Is your paycheck the same this month as it will be in 10 years? Or, do you expect to get raises for inflation? How about your personal expenses?

If you check off inflation adjusted the Real Estate Financial Planner™ software will adjust your paycheck, personal expenses, and the dollar adjustment after buying an owner occupant property for inflation over time.

Tax Rate

You can enter in your effective tax rate for both federal and state taxes combined (use the link below the field to look up what yours is if you don’t know). This will subtract this percent from your paycheck each month before depositing it to your Account.

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