Money Management Masterclass

1. Introduction: Your bank balance look like this each month? Do you wish you knew where the money went? What if you could budget easily to control your expenses? How about quickly seeing where you overspent or saved on your budget? Do you wish you understood the impact that inflation has on your money over time? How about being able to see the effects of changing inflation rates on your purchasing power? Thinking of getting a loan, How about being able to easily work out your monthly payments in advance? How about a mortgage? Do you understand how much you'll pay over the term? How about quickly seeing what an additional down payment could mean for you in the long term? Do you understand how to compare investment performance? What is ROI and agar and why are these important? How about planning for retirement? Have you thought how long your money might last? What if you draw more each year once you retire, or what if you decide to take early retirement? Hi. My name is Arma Janua. I've designed this course to get you thinking about your money. I'll teach you how to easily use my financial management templates to enable you to take control of your finances? Thanks for listening, and welcome to the Money Management Master class. 2. Getting Excel: Let's go over how you can get Excel installed on your machine in case you don't already have it. Start by opening up your favorite browser and then search for microsoft.com. Now, what you get here might be slightly different to what you're seeing on my screen, simply because this is region specific, so you might have a slightly different version. Now, the first option we can look at is what I will be using for this course, which is the Microsoft 365 version of Excel, and you might have a handy link right there, but in case not on the banner at the top, you can see Microsoft 365. There's a few different options in here. If we just go into the four home, you can see here, it gives you the different options to pay monthly or annually, and fortunately, there's actually a tri free for one month option as well. So you can go ahead and try that. Just be sure to cancel your contract if you don't want to get charged every month. If you're on a MAC, there's also the option to buy a Microsoft 365 with the same package as the Windows version. Another option is to buy just the standalone version of Excel in case you're interested in all of these other apps being packaged. And you can find that by going to the search at the top, search for Excel, and let's find it right there, and you'll find a standalone version that you can buy and in both cases, simply follow through with the installation wizards and instructions, and you should be up and running in no time. 3. Budgets Summary: Hello, and welcome to the first section. Here, we're going to look at budgeting. What is budgeting and why is it so important? Probably the most important step of personal finance management begins with basic budgeting, which means understanding your income and how you spend it, dividing that up into your core categories of where that money goes every month or every year. And then thinking about how you can get from that income what you want. How can you set aside what you want for your savings for trips abroad? It's really helpful to be able to actually look at the numbers and then divide that income up and understand what your outgoings will be for the rest of the year. Now, before we go into the detail on how you can use this model every week or every month, however often you want to update it for yourself and your own data, let's just understand this at an overview, so you understand all the worksheets, how they fit together, and you'll see it's really straightforward, and most importantly, it's really useful. L et's start then with our budget tab over here. On the left hand side here, you can see we've got our budget types, so your different expenses such as your mortgage, your car, your utilities, et cetera. And at the end, we've also got our income types here, so other income and salaries, let's say. Then on the right here, we've got our average amount per month, and then to the right of that, we've got our annual amount. Now, underneath all of this, we've got our total budgeted costs per month and annualized and the same for our income. And then finally our net position between our income and our costs. Now, if you're a more visual person, then you can see this graph on the right, that's probably been attracting your attention already. And this is a much cleaner, nicer way of looking at the data Ashley. You can get an idea of how that pie chart splits out between your different costs. What is that as a nominal figure, as well as as a percentage? And then for our smaller categories here, on the other tab, you can see they're broken out separately over here, so you can see them in more detail as well. Okay, once we've got our budgeted category set up, the next step is to get our actual bank statements out. So we'll cover how to get these out, but we're going to stack in all of our bank statements into this worksheet over here called statements. And you can do this, let's say once a month and download your next month statements. And once we've got those statements in, what we're able to do then is look at all of our outgoings, all of the money coming in, the balance, look at the month in the year. And then we're going to summarize our transactions as well against those budgeted categories, and we'll cover how to do all of that in detail. Okay, so moving on with this example data. Let's say we've then categorized all of our transactions for however many months. What we can do then is look at the summary by month. So we can look at what's our money out or money in on a particular month? What's our net inflow outflow? What was our minimum balance in that month, as well as our month end balance. We can further then look at that in a more visual format here. So you can actually look here at the bars which show you your minimum balance in any given month. And you can see these lines here showing you the money going out and the money coming in. Once again, you're going to end up with a really great visualization of your data so you can better understand it at a glance. Okay, so this is great. You can already see how you're going to get so many insights into your data here, but we can go even further. So let's go across to this budget summary tab over here. And over here on the left hand side, you can see we've got our annual budgeted net inflow and outflow, and over here on the right, our monthly budgeted inflow and outflow. So the way this is going to work is, again, we're going to have our budgeted categories here on the left. And then we're going to have our actual spend for the year, our budgeted spend for the year, the positive or negative variance. So if we've gone above budget or if we've made savings against the budget, which you'll see over here. The monthly one repeats in the exact same way. So what you'll have to do with this is, you'll be able to change the month you're looking at. Let's say you could just pull this drop down down and you could say, let me look at the next month here for February, let's say. So this is really useful in order to be able to look at your data in detail, but we can go even further and visualize this once again. Let's take a look at our annual budget variance chart over here on the right. So over here, you'll be able to see your spend against those budgeted categories and whether you've gone over or been below that spend. Now, we've only got a couple of months of data in here, so the annual chart looks a little bit odd. So let's instead look at this monthly budget variance chart, and this will look a lot cleaner. So the way this works is on the left hand side, you start with your budgeted net inflow and outflow. So we said that we would be making a net saving of 183. So that's our starting point. And then what actually happened in the month? Well, so far, this is saying that we've saved against our car payments, clothing, entertainment, et cetera, and we've been down in our other undefined budget in this case. So in the end, we had a saving of 933 against the budget of 183, but this waterfall model really helps you to visualize on which categories did you over or underspend? Okay, so let's change this back to January over here. And then let's look at our monthly budget variance chart over here. Now, the way this works is, on the left hand side, we'll start with our budgeted net inflow outflow for the month. So if we look at our budget over here, we said that we would have net income of 2000 and we would be spending 1,816 pounds over here, so the net saving was 183. So that's our budgeted starting point here. Now, what did we actually do? Well, you can see we actually save 1301. So we had a variance of 1,117. And what this waterfall model here does is really helps us to visualize that. How did we go from the 183 to our actual saving of 1301? And it shows you that 1,200 or so difference between the figures over there. So you can see by category on our budgeted categories where we've gone over on our where have you made the savings over here? So it's a really great way of just seeing how your spending is going month by month. Now we can do the same thing with our annual budget chart. Now the data that we've got is only a couple of months worth in here, so that looks a little bit odd, but it's all built in here for you so that as you populate that and you have multiple years worth of data, you can look at any particular year and see how you did against your own budget. Now, the key takeaway from this is just how visual and easy this is going to be to understand, and hopefully you can already start to see the insights you could get into your own spending and how you might go about having better control over your budgeting and spending in future. Now, you might be thinking, is there a lot of work involved with this? And the answer is absolutely not. This is going to take you maybe 15 minutes once a month, if that as you get quicker, it's going to be even faster than that. And we're going to cover all of that in detail in the next video. Thanks for watching, and I'll see you there. 4. Budgets Detail: Now that we've seen how the budget model works overall, let's build this up with your own data and really understand how this works. To make this really easy to follow, I've added a set of instructions at the front here, and we're going to go through these step by step to see how it all comes together. So let's start with number one, which is entering our categories and values to the budget as we want. So let's click on that, and that should jump you over to our budget work tab here. Now, the way this is set up is that you can change any of the cells colored over here. It's purple on my screen. It might be a slightly different color on yours. But the idea here is, let's say we want to put in a monthly amount for the mortgage. The annualized amount is simply that times 12. But equally, we might want certain categories such as travel, let's say where we want to set aside, let's say 2000 pounds for the entire year, and we want to work out the average amount per month, so it's just going to be that figure divided by 12. If you want to change something here, then it's really simple. So let's say we wanted to increase the utilities amount here 200-300. I'm just going to put -300 in here and press enter. And you can see as soon as I do that, it updates our pie chart here on the right as well. And equally, you can overtype any of the categories in here to make them whatever suits yourself. Now, let's say you want to add in an extra expense category. This is really straightforward. I want you to go to the last expense category here, which is household goods here. Just click over here on the left, right click and click on Insert, that will add a new row for us. Then let's take our row above here. We're just going to select that right click copy down here, right click, paste. And then let's just change this to let's say Jim, and let's change the amount to -25 a month. And you can see here both of our pie charts have been updated on the other category and then the breakdown here on the right for the newly added category. Okay. Now let's head back to our instructions tab over here. So we've entered our categories in value to the budget as we want. And now the next step is to enter those to our budget summary tab as required to match. So again, let's click over here and it will jump us to the right worksheet. So on this worksheet, we need to add in the new category that we've added, and you'll immediately see that this isn't quite right because our final budget here for the month shows that our net inflow or outflow is a positive 83. But if we look at our budget tab, it should be 58 now. So let's go back over here. And what we're going to do here is you'll see a comment here that I've put on how to add the new category. So you're simply going to repeat the same process here. We're just going to click over here, right click, click insert, and then we're going to add in the new category. So it's just Jim as we named it. And then all we have to do is copy these formulas down. So we're just going to select everything over here and again, just copy and paste underneath. And then we want to do the same on the right here. So I'm just going to type in the new category here. And again, I'm going to copy everything over here, and then paste it over here. And now we can see we've got our new gym membership amount over here, and our budget flex we've got on our budget work sheet tab as well. Okay, let's head back to our instructions worksheet over here. So, step three then is downloading your bank statements as a S or S X or CSV format from the bank. And what we're going to do then is put that into our statement stab. So let's take a look at how you can get those statements out. To analyze your bank statements, you're going to be to download of them first. If you've never done this, this is super straightforward. All you have to do is log into your bank Internet banking, go into your account, and somewhere on the page, you'll see an export or a download statements option. And within that, you can pick usually a date range. So let's say I wanted all of my January 2022 transactions. I can just pick my dates here. And once I've done that, there's an option down here where you can see the formats dot IF, you might see dot S. So pick the CSV or the dot LS option and click on Export or download. And once that's run, you can simply click on the file to open it. Now that you've downloaded your statements, we'll move on to step four, which is going to be to sort our bank statements in order from oldest to newest, and we're going to use a sort function to do this. So let's get our data over here that you've downloaded. Now, every single bank statements will look slightly different and we'll cover how to take care of that in terms of the model. But in this case, we've got a transaction date. We've got a transaction type, sort code, account number. We've got a description of the transaction. We've got the money going out of the account over here, and money coming in and finally a balance. So a lot of this might be slightly different, but the core things such as the date, the amounts coming in or out and the balance, as well as a description should be on every single bank statement from any bank that you're downloading from. To sort our data from oldest to newest, then is really easy. We're going to select all of our columns here using left click and moving to the right. And then we're going to click on data at the top here. Click on sort over here, and we're just going to choose transaction date as our sort by column, and our order from oldest to newest and press. And that will put your data in order from oldest to newest. Let's go back to our main spreadsheet over here and check where our next step is. So we're done sorting. The next step number five then is to copy and paste those statements right beneath the end of our last month statements in our statements worksheet over here. And it says, we need to check the final balance matches the actual bank account. So let's do that. So let's take our statements here. So we're just going to select all of this data over here, and I'm not selecting the titles over here, so I'm just going to click over here. Copy go to my statements worksheet here on the main worksheet, and then my titles here are in the exact same order because I've set it up like that initially. So I'm just going to right click over here, and I'm going to paste my data Now, if you're following along with this to better understand it, then in order to get to the same position that I have here, you want to be using the file that I've supplied called MMM Finances initial statement, and you'll just be copying and pasting from that in the same way to end up in the same position. Now that we've got our first month data in, let's go back to the instructions worksheet over here. So we're done with this, and the next step over here is to copy the formulas on the statements worksheet down to cover all of these newly added transactions, and the formulas that you'll be copying will be in the last row before the new data was pasted in. So again, let's just click on this to jump back to our worksheet. So this is super easy. We've already got these formulas over here from column I to M, and we're just going to select all of them over here, and we're just going to hover on this little square on the bottom right, and we're just going to copy these down. And now we've got our formulas set up over here. So the reason for this is we just want to pull out a few key categories that we're going to use to categorize everything later, right? So we want our money coming out, our money coming in, our balance, and then we want our month and year as opposed to just a specific transaction date because we want to look at it at a monthly and at an annual level. And then finally, our summary category over here is going to be all of our budget categories. Let's just pause here for a second, so I can show you what you would do if your statements look slightly different to this. So what we're going to do here is, let's get rid of all of our data here apart from our formulas. So let's get rid of all of the data and, in fact, let's get rid of our headings as well. So I'm going to slip that and press delete. And now let's go across to our initial statements file over here. Now, let's say that you didn't have a couple of these columns. So let's say you didn't have sort code and account number, so I'm just going to get rid of these over here. And let's say that the order of the columns here was also different. So maybe our transaction date wasn't in the first column, but it was over here. So you've got it next to our transaction type. Now let's take our data here. So we're going to select all of this. We're going to copy it, and on our main worksheet over here, we're just going to paste it here at the top. Okay. So there's a couple of extra columns here that we don't need. So let's get rid of those two over here, so I'm going to select right click and delete. Now, when you do that, you probably see that your formulas no longer look right, so we can sort these out very quickly. So our money out is just going to be hit equals, and then we're going to select our debit amount. And then we can just copy that all the way down. Next, we do the same for money in. So it equals, and we're just going to set it to our credit amount cell over here, and we're just going to copy that all the way down. So you can see there's only one place where we've actually got a value, but we see zero otherwise. And then for our balance, the way this is going to work is on your first cell here, you're just going to hit equals, and you can stick it to the balance over here. And then for the form is underneath, the way this works is we take our starting balance here on the previous line, then we're going to take away our money out. So I'm going to say let's do our cell I two here, which is our starting balance. Then I'm going to say take away money out, and then plus money in and hit enter. And then we can just copy that all the way down. And then you should see our balance here. If you happen to have a balance coming out of your statement, should be the exact same figure over here. The reason that we work out balance separately over here, even though you might have it here is because you might have more than one transaction on the same ending date. So let's say you had another transaction here like this. Your ending balance over here might be like this. But when we sort the data out, these transactions might be the other way around, so you might have this transaction happening before this one. So at some point, your ending balance will be the same, but it might not be the same on the exact same line simply because of the way the sorting works. So it's very important that we have this running total over here with the formula. So just par that in mind as to why we're doing Okay. So let's get rid of this line over here, and we're almost there. So the next thing is our month and year. So you can see this formula over here, tries to look at the date and bring that in as a month. So we've got our transaction order slightly different here, so our dates over here. So I'm just going to move this across over to our date, and you can do the same if your dates over in a different column just move this across. Enter, and we can just copy this formula all the way down once again, and everything will be sorted out. Now, before we look at the final summary column over here, let's just talk about one other thing that can possibly happen with your bank statements. Maybe your bank statements don't come out with a debit and credit. Maybe you simply see an amount, and you'll either see a negative or a positive depending on whether the money is going in or out. So for example, let's say all of these figures here were negatives. So I'm just going to change these. And then let's say our income here was a positive, and we effectively didn't have this column here whatsoever. So the way you would get your money out in money in here is very easy. We're just going to change this formula slightly. So let's hit equals and type in f, and then we're going to select our cell over here, D two, and then we're going to put a less than sine and zero. So if d two is less than zero, I it's negative, then put a comma to say what we want to happen. So what we want is the negative of cell D two. So I'm just going to type that in. And put another comma. So if that's not the case, just return zero, and then close the bracket and hit enter. So if the figure in here is a negative, it's going to return that figure with a negative sign at the front, so we have it like we had before, and otherwise it's going to return a zero. So if I just copy this formula all the way down, you'll see we get all of our values apart from where we have our income, and that just reports as a zero. Then we're going to apply a very similar formula here on money in. I'm going to hit equals, I and then I'm going to select d two, and I'm going to put a greater than zero, d two. So I cell d two is greater than zero, then return the value of d two, otherwise zero, close bracket, hit Enter, and just copy this all the way down, and the only place where we have a figure then is in our money in. And you can see we again end up with the correct balance here at the end. Okay, so the final column here then is our budget category, our summary over here. Now, the way this is set up is that you can pull this drop down over here, and you'll be able to see all of the categories you set up on your budget tab over here. So you can categorize all of your different transactions just in the few different examples that you have Now, you can do this manually each time, but actually there's a quicker way to do this because a lot of the transactions that you'll see on your statements from month to month are likely to be the same. So if we just expand our transaction description over here, and let's look at the formula over here. So what we've set up then is a lookup tab, and I'll describe to you how that works. It's really simple. So what we're going to be looking for is these transaction descriptions and we'll have predefined whatever category we want for them because let's say we expect our car tax to be there every time or our utilities bills to be there every time. So the way we've done this then is, we've taken all of our descriptions over here, we've copied them, and we've pasted them over here. And then on the right, you've got all of your budget categories to choose from. So we've chosen them all over here. So, for example, our car, our utilities, fuel, et cetera. And then on our statement tab over here, the way this formula works is, we're going to be wanting to return what's in Column B of lookup. So Column B of our lookup is our budget categories, and it's going to be looking for a match within column A, which is our actual bank descriptions. Then what it's going to be looking to match is whatever is in the description over here. Now, we've changed the data and the ways range here, so I'm just going to move this cell over here. So instead of it being on E three, we're just going to move this across over here to where our description is, and everything else in that formula can stay the same. So we're still looking up B for the look and we're looking up against column A. So if I hit to enter on that, you can see here, it's able to match this description here, this post office description over here. It finds that within our lookup over here, and it says, Well, that's household goods, and it retains that category here. So if I copy this all the way down, you can see we'll get everything set up. So all you have to do with this is every time you have something new you want to add, just add those descriptions over here, select your categories over here, and then let the formula do all the work. So you'll only have a few manual ones to do every single month where you've got one off items in your statements. Okay. So now you've seen how you can change the order of columns here and still have this model and spreadsheet work to how your bank statements might come out. So for the rest of this video, we're going to go back to the original form that I had. So the same title was in headings at the top. So just pick up the starting main file again and pick up the initial statements, and we'll just reset back to how the file was before. Okay, so we're back to where we started. So we've got our main file over here, and then we've got our initial statement transactions over here. So let's copy all of our transactions once again, and we're just going to place them underneath. And then we're just going to copy all of our formulas down over here. And we've already set the format up. So that setting up of the format is only something you'll need to do the first time. So once you've done that once, it's going to be super simple to populate this with data every single month. So we're starting with our fresh template once again, and we're just going to take our initial statements data here. We're going to slip all of this, copy it, and then base it underneath. And then we just have to copy all of our formulas down to cover all of our transactions. And we've got all of our data set up. So everything that we've covered there with the way your bank statements might come out and how you set that up, it's only something you going to need to do the very first time because once the template is set up, everything is going to run much more smoothly and very easily every single month. Okay, next, open up the February 22 statement file, and we're just going to copy all of our data once again from here, and we're going to paste it directly underneath over here. So now we'll have two months of data, and let's copy all of our formulas down here as well. Okay? So immediately, you'll see everything else is working fine apart from our summary over here, which is our budget categorization because the formula isn't able to find these descriptions. So we're going to have to either add them in manually or pick them. So let's just go back to the instruction stab here as well and just confirm that we're doing everything in the right way. So we've taken our new statement, we've sorted it out, we've copied it across Now, we're on to number seven over here, which is any new transactions that aren't assigned a category, we'll have to add them to the lookup table. So we'll do that. And then number eight, as well, if you decide not to add some because they're one off item, you don't expect to see them again, you'll have to manually assign a category there as well in the summary column over here. Okay. So let's go about getting these transactions categorized. So I'm going to pick everything that doesn't have a category over here. So everything apart from our salary, because we can see we had this in the prior month as well with the same description. And because that description exists over here, our formula was able to map it in. So for everything else, let's just copy this across, and we're just going to go over to our lookup tab and pace these underneath. And then we just have to go ahead and pick these categories. So I'm going to pause the video and come back once I've done that. Okay. So just a couple more to do here. So you can see I'm just moving through each of these and picking the category that I want. And then let's just say that I've left one out because I expected to be a one off, and Asha I don't want anything here. So let's just get rid of this one here as well. So once we've mapped all of this, if we go to our statement stab, you can see everything here now is assigned apart from the one we just got rid of. And let's just say we want to pick this one manually, and we're just going to put this two other over here, let's say. Okay? And now we have everything assigned. Okay, whenever you're done with this, it's always a good idea, just to check that the balance over here on the ending transaction actually matches the final balance on your statement. Now, remember, if you've got more than one transaction on the same final date, the order might be slightly different to what you see as a final transaction on your bank statement and what you have in here. But as long as one of these balances matches on that same date, you know you've got this matching. Okay, great. So we're almost done, and we can almost look at the data now. So let's go back to the instruction stab over here. So we're done with Step eight. We've assigned all the categories. Now step nine is, we're going to go to the statements summary worksheet over here, and we're going to copy the formulas down to create a summary for the next month that we've just added in. And then we're going to refresh a pivot table. So super straightforward, let's go to our statements summary over here. And these are just formulas over here. So I'm just going to select all of my formula over here, and we're just going to copy this down. And you can see what this gives us then is for the latest month that we've added in, we can see our money out, our money in, our net inflow and outflow. We can also see the minimum balance in the month, and finally, the end of month balance. Now, this is our pivot table on the right over here, and this is really simple to refresh. You're just going to click anywhere within this pivot table, and you can just right click, and you can click refresh, and you'll see it we'll add the new month in here as well. Now, this is important because when we go to our statements pivot chart over here, this will refresh based on you clicking Refresh over here. So as you add in every single new month and you hit refresh, you're going to see this picture build up of your back statements. Okay, great. So the only other thing to think about here then is your starting month and year might be slightly different whatever I've got here, obviously. So all you want to do here is then enter that first month in the yellow cell and enter it as the last day. So, for example, here, I've entered it as 31 December 2021. Okay. Now let's head back to our instructions worksheet over here, and we're on to step ten, the final step. You can now view your annual and monthly budget variance charts over here, and the statements pivot chart we were looking at to see visualizations of your data. So for our monthly budget variance chart, we can see this is still looking at the previous month of January. So what we want to do here is go to our budget summary tab over here, and let's just pick the month we want to look at. So at the top here, we just want to look at February, you can see everything will update. And now when we move back across here, we can see the breakdown for that month. Now, you also have your annual budget variance chart, but this is really only going to make sense. Once you've got a full year's worth in here, and in the exact same way, you'll be able to pick the year that you want to look at from this dropdown over here. Okay, great. We made it to the end. So you now know how to pull a budget together for your particular data. You know how to set it up for the categories that you want, you know how to pull in your bank statements, you know how to analyze it, how you can look at that data visually. And it's really important that you set this up and do this regularly. So the initial setup has taken a bit of time. But once you've done that, it generally only takes maybe ten to 15 minutes once a month. I'd highly recommend you do that. It's worth waiting for a couple of days after the end of the month because there might be one or two transactions on the last day of that month that just need to push through your statements. So give it a couple of days, put some time aside, and then do this, and you'll have a much better idea of your incoming and outgoing amounts and how you might budget for that in the future for your plans. So hopefully you found that really useful, and thank you very much for listening and watching, and I'll see you in the next one. 5. Inflation: What is inflation? Inflation is the increase in prices on goods over time. Let's say that a product costs one pound, and in a year's time it costs one pound ten pen. That means that the inflation rate on that product is 10% over one year. Let's take a simple example to visualize this. Say that a piece of bread costs one pound at the start, and you're able to buy two of it if you have two pounds in your pocket. Now, each year, as the price of that bread increases, it means that you can buy less and less of that same bread for more money. So if this continues to happen after a period of, let's say 11 or 12 years, and the price of that piece of bread has risen to two pounds, it means where you could buy two, you can now only buy one. Now, the example we saw with the bred is one way of looking at inflation. The other way is to look at what happens to the money in your account. So if you switch over to the inflation calculator tab, we can take a look at some example data here. So I've set this up so that you can amend the inflation rate and see how that has an impact on your money. Let's just say that we start with 10,000 pounds of savings and the inflation rate in the first year is zero. So your savings are worth their full 10,000 pounds. Now, if inflation is running at, let's say 3%, what you can see is, in effect, the purchasing power that you hold is declining every single year. So, you can see very clearly over here that after ten years at a 3% inflation rate, your 10,000 pounds has really become more like 7,400 pounds in terms of its purchasing power. So the physical money that you have is still the same figure, but in terms of what you can buy, it's vastly reduced compared to when you started ten years ago. And that is the impact that inflation has on your savings. L et's talk through this worksheet so you understand how to amend the numbers here if you want to visualize different scenarios. So I've set this up so that you can simply change the inflation rate here. So let's say I wanted to see what the impact of a 5% inflation rate is. Just change in here, hit enter. And I've set this up so that every subsequent year follows the same pattern. If you wanted to change these, you can do these manually, so let's say you wanted to change the inflation rates here to 4% and then running at 2% thereafter. You can do that. And on the right over here, you can see the decline in purchasing power per year. And then you can see the cumulative decline here. And then to the right of that, we've set up our graphs here so we can look at the ten year impact on our savings. And beneath that, you can see the year on year decline in your savings as well. So these numbers are in effect showing you the same data adjust in slightly different ways. So the value of savings has fallen to 7,500 or you've lost 2,400 over that period of time. Finally, you can also change the savings starting point here as well. So let's say I want to start at 5,000 and see the impact. I can do that just as easily. When you change that starting savings number, then, obviously, your final amount will change, but the important thing here is the percentage decline in your purchasing power is going to remain constant depending on the inflation rates you've entered. So whether you start at 10,000 or 5,000, if you had 100% purchasing power, after year ten, your purchasing power is down to 76% on whatever that amount was at the start. To summarize on inflation, then, inflation is the increase in prices on goods over time. In effect, it means that your savings are being eroded over time, and you're able to purchase less of the same products year after year with the same amount of money that you had previously. 6. Simple Loans: Hello, and welcome. In this section, we're going to be talking about loans. Now loans are a really important area of personal finance management, and yet it's an area that a lot of people don't really have in depth and intrinsic understanding of. So I'm going to clear up a lot of those misconceptions here and really help you to get under the skin of loans to understand about the capital amount that you borrow initially, how the APR percentage affects that. How the payments that you make affect that, how making any additional payments can also impact. Once you understand all of these things and how they fit together and you have a couple of visual models in front of you. It will really help for you to understand and plan out for any future loans that you intend to take on. Okay, so we're going to start on this simple loan calculator worksheet over here. And we're just going to start from scratch and keep this really simple, so we understand the basics of how loans work. So I'm not going to assume any pre existing knowledge here as always. So let's take a very simple example over here. Let's say that we know we need to take a loan of 10,000 pounds out, and we know it's going to be over three years or 36 months. And we know that the APR percentage on that is 5%. So everything else that you see in here has just been derived from this. So, for example, the per month rate is simply that 5% divided by 12, and we've also worked out a payment amount per month per year and a total payment amount. So down here, you can see the snapshot of the amount that you're borrowing, the 10,000, and we're going to end up paying approximately an extra 790 pounds. So that's approximately 7.9%. Now, to really break this down on the right here, I've constructed the entire loan schedule out by month out to 36 months. So you can see we start with the 10,000 pounds initially, and we haven't made any payments. And then in month one, what happens? Well, we take our 10,000 pounds and effectively that grows at 5%, except one 12th of that 5%, so let's say 0.42%. So our 10,000 pounds actually grows higher. But then we're making this payment of about 300 pounds here to offset that. So overall, the outstanding loan moves 10000-9742, and this pattern just continues. So you can see the profile of this as we go down, and the 36 month the loan is fully paid off. And the total amount that you've paid over that time, here, you can see the 10790, which we talked about over here. In this case, what that means is, even though we made a payment of 300 pounds in that first month, we really only paid off 258 pounds of that capital, and the other 42 pounds has gone towards paying off the additional amount or the interest on that 10,000 pounds based on our per month rate over here. So let's make this really clear then by adding in a couple of columns over here. So we'll say capital paid and interest paid, and our capital paid is simply going to be our starting amount over here. Less our outstanding loan. So we're going to put that over there, and our interest rate is just going to be our payments made over here, less the capital. If we just pull those forms down all the way, you can see by the end of the 36 months, the capital is fully paid off for 10,000 pounds, and you can see how we've built up towards that 790 pounds over here month by month. Okay. Now let's flip over to our simple loan chart worksheet over here, and we'll get a much clearer picture of this in terms of a visual graph. So what you can see here on the red bars is the outstanding loan. So you can see we start at our 10,000 pound loan, and then it reduces down to our 9742 and so on, and by the end of the 36 months, it's fully paid off. And then the blue lines show the payments being made. So in that first month, we've made 300, second month, we made 600, and you see that continues all the way until we've made the 10,800 pounds in payments by the end. Okay, so now you've got an idea of a simple loan payment schedule. You understand how the starting amount, the payments that you make, how those are profile out over term. And you've got a very simple tool in front of you so that if you want to change the loan amount, you could change the APR percentage, and you could just see over three years, how is that profile out in terms of the reduction on the load and in terms of the amount that you have to make in payments over that period of time. So we'll leave this one here. Thanks very much for watching, and I'll see you the next one. 7. Quick Loan Calculator: Now that you've understood a simple loan calculator example, what I've put together here is what I call the quick loan calculator, because what we can really do is we can work out different parts of the puzzle loan depending on the information that we have. So in front of you, you've got the same example we had previously for the simple loan calculator, which is where We know a loan amount, and we know the term and we know the annualized rate. And really what this calculator works out is, well, what's the amount that we have to pay per month per year? And then what's going to be the payment amount total over the term? And so, again, you'll see the same figures here on a 10,000 pound example of capital. We end up effectively paying an extra 790 pounds. So this calculator in the middle over here is really useful for being able to work out the payments that you need to make per month or per year. If you know A, the capital, B, the number of years and C the APR percentage rate. But what if we wanted to work out how many years it would take to work out a loan? If we knew, let's say, the capital amount, we knew the payments that we could afford or wanted to make per month. And again, we knew the APR. So this will give you exactly that, right? So if you know these three things here in purple, and you can change the values in here, as the key says, then you can work out how many years it's going to take. So let's say this was instead 20,000. We can enter that, and we can see that it would actually take 78 months or seven years to pay this off. And again, we can tweak some of the numbers here. So if we wanted to say, look, if it was 400 pounds a month, then it reduces it to 56 months. Okay, Let's return that to our 10,000 pound example here. And then let's look at the calculator here on the left. So in this case, if we know the loan amount, we know the duration, and we know the payment amount per month, we can work out our APR rate over here. Now, you will see some slight differences in, for example, the payment here being 300, and this has got a slight rounding difference of 299, or we're saying 5% here, and we actually end up with 5.06%. But indicatively, you'll see that all of the numbers are effectively the same. So this is a really useful way of working out that one piece of missing information if you've got the other three. Finally, then, we've also got a handy little graphic on the right hand with the chart. So if we were to change this left hand side calculator to, let's say, 9,000 pounds at our starting capital, we'll see visually the additional amount that gets paid, which is the 1,800 pounds over here on that capital of 9,000 pounds. Now, just to be clear on that, I've reduced the capital 10000-9 thousand pounds, and intuitively, you might have thought I would have had to pay less back in terms of additional or interest, but that's gone up from 800 pounds to 1,800 pounds. Well, that's because remember this calculator here on the left is saying, we know the capital. The term is still three years, and we're still saying we have to pay 300 pounds a month. So the APR must have been a lot higher. So if I put that back to 10,000, We'll see that the APR was 5%. But at 9,000 with the same payments, it means that the APR we would have had must have been 12.25%. Okay. So to summarize, we've covered three different calculators, where if you know three pieces of information, you can effectively find out the fourth. So feel free to experiment with a few different numbers and see what you get. It's a tool that I built for myself because I wanted to understand exactly this, and I think it's something really useful, so I'm happy to talk you through it and hopefully you'll find it just as useful as well. Thanks for watching and I'll see you in the next one. 8. Mortgage Calculator: Hello, and welcome. Now that we've understood simple loans, been through a few loan calculators as well, and you understand what's happening behind the scenes. Let's move on to something a little more complex and more interesting, as well, I would say. And that is the mortgage calculator. Now, a mortgage is likely to be the largest cost that you will bear in terms of a loan in your life. And don't be intimidated by the data that you're looking at in front of you. This is actually super simple, and this is going to be very important for you to understand, how does your mortgage structure really work? And what does it mean for you to be able to make additional payments? What does that mean in terms of the final amount that you pay? What does it mean when you come off a fixed term and you move onto a bank's standard variable rate or SVR? So we're going to cover all of this in detail with some example calculations, and it's something that I think you'll find really useful. So let's talk through a fixed example that I've put in front of us first, right? So what we've got here as usual is a few cells where you can change the values, but let's just leave them as they are for now. And underneath that, we can see a few key metrics that we would want to understand, right? So number one is, how many years does it take to pay off the mortgage. You've taken a certain amount, in this case, 100,000, what have you actually ended up paying over that term? And therefore, the difference between what you've taken out and what you finally paid is the additional or the interest that you've paid, and what is that as a percentage on your starting amount? So in this example, we've taken a finance amount of 100,000 pounds, let's say, We've then said that there's a couple of fixed terms. So normally you'd have a fixed term for two years or five years or ten years, and then you would move to the SVR. In this calculator that I've made, I've made it possible so that you have a couple of fixed terms, and in this case, I've actually made both of the fixed terms the same. So it's a 2.5% rate, and we are making payments of 500 pounds in both cases. And these are running, you can see from the color coding, the first fixed term runs for the first two years, and the next one runs for the next five years. And then thereafter, we move to the banks SVR of 4%, and we're having to make monthly payments of 600 pounds. So that results in us taking just over 20 years to pay back that loan of 100,000 pounds. It means that we paid back 142,000 pounds, which is an additional 42,000 pounds over the hundred k taken initially. So those are the highlights. Now, let's step through the calculations and show you how you can mold the calculations for your own examples. Okay. So let's move to the right over here. So what we've got over here on the right hand side is the monthly schedule in effect. So on the left hand side, we're saying whether it's within a fixed term or not. So we've got our fixed term one and our fixed term two running for effectively the first seven years. Then we've got our years and our months running down the side over here. We start with our capital left to pay. And then what's happening with that is that is effectively being moved in the same way as we did with a simple loan calculator, there's complex calculation I've had to set up to get this working, but in effect, it's doing the same thing as the simple loan calculator you saw earlier, which is the capital that we've got left to pay is growing by the percentage rate over here. But then it's being offset by the fact that we're making this 500 pound payment over here. So in this example, this is a capital and interest repayment mortgage. There are mortgages where you pay back just the interest, but in this case, we're saying we're looking to pay off the entire mortgage after a certain amount of time, right? Okay. And to the right, we've got a column for any additional payments. So if you have the option of making an additional down payment to either reduce your monthly payments thereafter or to shorten the time it takes to pay off the mortgage, we can also play around with that. Then to the right, we've got any of the cumulative additional payments, so Obviously there's no additional payments right now, so there's nothing in here. And then we've got our interest paid and our cumulative interest paid and our capital and cumulative capital. So, for example, in the first month, when we're paying that 500 pounds, 208 of that is effectively paying interest, and 291 is paying the capital. So those numbers together give you the 500. In the next month, we're paying slightly less on the interest side and slightly more on the capital. But again, together, the numbers still come to 500, and these are just cumulative totals here. So by month two, we've paid 416 in cumulative interest, and we've paid off 583 94 in terms of the capital. Okay. And finally on the right hand side, we've got our total amount paid. So that keeps track of all of our payments here at 500 pounds a month until the fixed term ends, and then at 600 pounds a month until the loan is fully paid off. So you could actually scroll down this and find the exact month and point at which this is fully paid off. And you'll find the final figure that we've paid over here with the cumulative capital fully paid off and the total amount that we've had to pay over here. Now, here's a little test for you to see if you've been paying attention. The eagle eye amongst you might have seen that these figures over here have changed slightly. So when we started the video, we had 142,000 for the total paid, and now that's 136,000 pounds. It's just a small error that I noticed in the spreadsheet and I've corrected it. So what you've got in front of you is correct, but I wanted to call it out in case some of you think you're just going crazy and seeing different numbers. Right back to business then. So our table over here then is an annualized table, which is maybe a little bit easier to digest. So again, it shows you the same information as the monthly schedule, but we can now see the total amount being paid by year. So you can see here we're paying 500 times 12, 6,000 pounds a year for the first seven years. And then thereafter, we're paying 600 a month. For all of the years thereafter. So you can see here again, the interest pad over here is the 36 k. We still end up paying off the full amount over here in the capital, so the 100,000, and you can see how the capital left pay reduces over here on the right. Okay, so that's the dry bd done. Let's take a look at some graphs. So let's move across over here to our mortgage payment chart annual. Now, what you can see here then is the green bar is the capital that we've got left to pay. So we start at 100,000 pounds over here. And then by the end of year one, we've got 96,460 left, and we can see how much we've paid in terms of cumulative interest in the red bars. If you hover over that, approximately 2460 pounds. So you can see the profile schedule over here visually, right? So you can see how the capital that you've got left to pay reduces over time, and by the time you finish on just over the teth year, it's all finished. And you can see the total that you pay that 36 k. So that's your cumulative interest by the time you hit your 20th year over here. Now, to the right of this, I also put a monthly chart. If you really want to see it by month for 360 months, then I add it, but I think the annual chart here gives you everything that you probably need. Okay, so the only thing that we haven't really discussed is this additional payment that we talked about over here. So it's important to understand that through your mortgages term, typically after the fixed term ends, you'll have the option to pay additional down payments, sometimes even during the fixed term, within certain parameters, within a certain amount, you'll be able to pay an additional payment. And what that does is one of two things, you would have to talk with your provider about you know, what you want to do with that. So when you make that additional payment, do you want to reduce the time that it takes to pay off and keep your monthly payments the same? Or by making that additional payment, you can still keep the term of the loan the same. So let's say 20 years in this case. But your monthly payments, let's say, move down from that 600 pounds a month or the 500 in the fixed term, down something like 400 pounds. So in this case, what we're going to do is we're going to see how it affects the duration, so we're going to keep our payments fixed. So the 500 during the fixed term and the 600, we'll keep those fixed. But let's just see what happens if we put an additional 10,000 pounds here right at the start in month one. So you can just type in 10,000 in here and hit enter. And you'll see the entire schedule recalculate. So I I scroll to the leftover here, instead of this taking 20 years, it now takes 17.4 years. And again, we're still making the same payments here. So the total that we pay is no longer 136,000. It's actually 127,000. So you've saved almost 9,000 pounds over the term of that deal by paying that additional amount upfront. So, again, if we look at this visually over here, we've now got a third stacked bar. So again, we still start with 100,000 capital to pay. By the second year, we've actually only got 86,000 capital left to pay. Why? Because we paid that additional 10,000 pounds. So it's still a cost, but we've reduced the capital out right there. What that does is it doesn't allow the interest to grow as quickly, especially if you're keeping your monthly payments the same. And so the end result is instead of you paying it off by the 20th year, it's taking you just under 17.5 years. So by the end of it, you can see we've paid that extra 10,000 pounds obviously. We've paid an extra 27,000 pounds in cumulative interest. So our final amount that we've paid is the 127,000. Now, just to be really clear on this, the total amount that we've paid, including that extra 10,000 pounds is 127,000 pounds. So when you look at this chart and you look at the 10,000, and you look at the 27,000 here, we haven't paid 27,000 plus the ten. We haven't paid 37,000 extra. I'm just displaying it over here at the top so you can clearly see the additional amount. But really what it's done is it's reduced this amount over here. Which when we had the 20 year term was 36,000 pounds, it's reduced that interest payment from 36 k down to 27 k. So don't look at these two things combined. That ten k is really already part of this. It is just to be able to show you that separately. One final thing to note here then is, I've structured this so that this works of a maximum of a 30 year mortgage, which is typically the longest. Nowadays you start to see some things go beyond that, but this should be enough to give you an indication. So if you do put figures in here that wouldn't be paid off within 30 years with these parameters, let's say you put 200,000 pounds, and you left everything else the same. You can see you're just going to get errors over here because it doesn't quite work. So what you'll have to do is increase your payment amount, for example. So in this case, let's say we try 100 a month. By the time hits the SVR, you can see that only just gets covered off within the 30 years. And again, everything works as expected, so you get the additional amount that you paid, the total amount that you paid based on your 200,000 pounds. Okay. So that brings us to the end of our section on the mortgage calculator. Hopefully found that useful. And please do have a play around with the numbers. I think this is an area that, you know, people probably really want to understand, but haven't really been able to before. So I know there's a lot of calcators out there on the Internet, for example, but it's something else hopefully you've seen when you actually go through the calculations, you have the full schedules in front of you, and someone can actually talk you through and say, Hey, look, this is how it works. Here's what your additional payments mean. You've got something in front of you that you can really understand. You've got your own graph, you're not reliant on some other third party producing it. So please do play around with it, and thanks very much for listing as always, and I'll see you in the next one. 9. Investments vs Loans: Hello, and welcome. In this section, we're going to start our introduction to modeling investments. As always, we're going to start off very simply, so you have a good understanding of what's happening here behind the scenes. And we're actually going to link back towards our conversations about loans and loan repayments. So this is going to be a nice bridge over here. So one of the first things that I personally wanted to know was, if I have an investment opportunity, and I have the opportunity to repay a loan early or a portion of it early, Well, on paper, which one is better? So what we're looking at here is an investment versus a loan calculator that I've built, and it's going to give us the opportunity to talk about basic investment growth and also to apply to a very useful scenario here. Let's start with our simple example here then. So at the top here, we've got our investment opportunity, and let's say that we've got the opportunity to invest 10,000 pounds. Now, let's say our projected annual growth rate on that investment is 5%. So that's 5% each year, and let's say the investment term is for five years. So what we can do from that is work out our future value. And in this case, that's 12,763. So that means that we've started from our 10,000, it's grown by 5% in the first year, and then it's compounded and grown again on that balance by another 5% and so on and so forth. What that then gives us is a return on investment of 27.63%. So that's an additional 2,763 on top of the 10,000. Next, let's look at the option of repaying our loan early or repaying a portion of it. So to keep things like for like here, let's say we're again looking to pay off 10,000 pounds now. It's the same five years on the term remaining on the loan, and the APR is the same at 5%. So effectively, what we would be doing is, we would be paying an additional 1,323 pounds on the ten K if we let it run through for five years, which you can see here. So it's the difference between our 11 322 and our 10,000. So the additional amount that we pay is effectively 13%. So what we can do now is compare the investment versus the loan. So if we were to pay the loan in full right now, we would be out of pocket 10,000. However, we wouldn't have to make these monthly payments of 189 pounds for 60 months or five years. So we wouldn't have to pay that 11,323. So the difference between these two is effectively the saving that we would make of 1,300 pounds. Now, equally on the investment outlay, we would be setting aside 10,000 pounds now. And we know we worked at the future value of that to be 12 763. So the total extra we would make is that 2.7 k. So the difference between these two proves out to be in favor of the investment by 1,400 pounds. Now, as always, feel free to play around with the number, so you can see the cells highlighted where you can change the numbers. A couple of things to note, this little section here on the loan calculator is actually on the Quick loans worksheet that we looked at earlier. So it's that middle loan calculator where we're working out the payments per month. Now, if you keep the investment amount, the percentage rate and the years the same, then the investment opportunity in this model is always going to be the better one. But the reality isn't as simple as that, because what you've got to think about here when you're making a decision is, if you're making that early loan repayment, you know for a fact exactly how much you're going to save because that percentage rate is likely to be fixed into the future. Was with an investment, you are making the assumption that you're going to grow at this 5% every year for five years, but the reality might be different and your returns might well be volatile, and you don't actually end up with that 5%. What you might want to consider in that case then is, what if that scenario was more like 2%? Well, in that case, you can see that the early loan repayment works out as the better option. In case your investments don't do as well, it's a good idea to think about the different scenarios. Great. We'll wrap up this video here, as always, thanks for watching and I'll see you in the next one. 10. CAGR: Hello, and welcome. In our last video, we talked about this investment versus loan calculator, and we went through a specific example of an initial outlay with a 5% growth rate over a term of five years. And we arrived at this 12,763 figure. Now, what I talked about there briefly was that this rate might not actually apply every year. After all, we can't predict exactly how things are going to progress in the future. So let's think about what that really means. So that 5% in effect is what we would call a compound annual growth rate. So let's switch across to our next worksheet over here, the CAGR calculator, and I'll talk through this. So here we see all of the same parameters as before, the same initial outlay, the same period, and our ROI of 27%, which we saw over here. And we can see that, in effect, what that translates to is a fixed compound annual growth rate of 5%. Now, what does that really mean? Well, let's just break it down over here year by year. So at the start, we have our 10,000 pounds. And then the next year, we've grown that by 5%. And what we're really saying is we are effectively reinvesting any far returns. We're not taking out that extra 500, we're leaving it in there and letting it grow or letting it compound. So what happens is the next year if we're applying the 5%, while it applies to the 10,500, not to the 10,000. So we grow by a little bit more than just 500. So we grew by 500 here, but here we grow by an extra 25. And then that process repeats. So now we apply 5% here to the 11,025. And again, you can see the growth over here is just over 550. And so this process repeats until we get to our final 12 763 figure, which we saw over here. So in this example, we've put our annual growth rate percentage here, which happens to be the same as our compound annual growth rate of 5% every year. But what if we have a volatile annual growth rate? So here's a different example. Again, we start with the 10,000 pounds, but let's say we grow by 8% in the first year, so we end up with 10,800. So we're actually ahead of where we would have been at the 5% level. And then next year, let's say we grow by 5%, four, six, and 2%. I've structured this so that we still land on the same figure here. So if you think about the return on investment, the ROI, it's still 27.6% in both of these examples, but the profile is different as to how we get there, and it's seen much more easily on this graph here. So the green line here is the fixed compound annual growth rate, and the red line is what's actually happening from year to year in the volatile example? A compound annual growth rate is often used to compare the performance of investments. So think about this example. Let's say we've got our 10,000 pounds here, and let's just make the numbers simpler here. So let's say we had a ROI of 100% here, and in this example, also 100%. So our compound annual growth rate here in order to grow from 10,000 pounds to 20,000 pounds, which is 100% ROI, over five years would mean a 14.87% CAGR. But what if in our example over here, we were actually going to grow in half the time at 2.5 years? So you can see the RY still the same on these two investments, but this one has effectively got a CHR of twice that of the one above because it's done that in half the time. So you couldn't just look at the RI. The CAGR often helps to equalize or level the playing field and have an additional metric that you can look up against and say which investment is truly the better one? To summarize then, the return on investment or ROI represents the additional gain that you get on your investment. So in this case, on 10,000 pounds with an ROI of 100%, means that we would end up with 20,000 pounds. The compound annual growth rate or CAGR adds the element of time into the consideration as well. So if you grow over five years or 2.5 years, that changes the CAGR, and the higher the CAGR, it means the investment has generally performed better in the long run. Even though as we've seen, the actual volatility of that investment in reality wouldn't have followed necessarily the same CAGR from year to year. It would have fluctuated up and down. Keep that in mind then if you're ever using CAGR as a metric. You can't simply take the higher CAGR and say outright that this investment is better than another one. You also have to think about the actual underlying volatility. The CAGR is effectively stripping that out and diverging from reality. Okay. Great. So we'll wrap up this presentation here as well. As always, thanks very much for watching, and I'll see you in the next one. 11. Investments Summary: Hello, and welcome. In this video, we're going to be talking about a simple investment summary dashboard. Now that we've had an introduction to investments in general and you understand ROI and CAGR, it's worth thinking about setting up a simple investment summary dashboard for yourself, either for investments you already have or if you're intending on getting started, it's very straightforward and it's something that's going to be super useful. Let's see what this dashboard is made up of then. So on the left hand side in column A, we've simply got our investment type. So in this case, let's say we've got a stocks and shares individual savings account. So you get ISIS in the UK, for example, which are effectively a tax efficient wrapper for holding investments. Then let's say the initial or one off investment that you've put into that is, let's say 10,000 pounds. And let's say it's some that you intend to contribute to every month. So let's say you can put in 100 pounds in here. And then over here on the monthly contributions, there's a very simple formula that says, Well, when did you start putting in those monthly amounts? So in this case, we can pick the year, we can pick the month, and we can pick the day. And then it just compares this to today's date, and it gives you the number of months that we've made contributions for. So in this case, you can see 20 contributions so far since that date. And so we get a total invested of 12,000 pounds. So the initial 10,000 pounds plus 20 lots of a 100 pounds. And then what you can do here is you can fill in this current value for whenever you check in on your investments and you take the latest value, just input that here. And then on the right hand side, you will get a calculation that gives you your gain or loss against what you've invested so far. And you'll also get your ROI, and because we've got the element of time in here, we'll also get our CAGR. So this is a great dashboard that brings together those elements we've talked about in terms of your ROI and your CAGR, which means you can compare your investments against each other and see how they're performing over time. Now, the other two lines here are just further examples. So in this case, let's say we've got another type of investment here, where we've put in 1,000 start with, and again, there's 100 pounds a month, but we started our monthly contributions a year or later here. So there's only been eight contributions so far. So again, we'll get our total invested, and in this case, let's say the current value is actually lower than the total invested amount. So we'll see a loss here in red. And a negative RY and a negative CAGR, respectively. Okay. And then to round this off, we've got one final one over here, which in this case, let's say is a pension. And then underneath all of this, we've got total. So what's the total initial one off investment? What's the total monthly contributions? And so we can work out the total amount invested and our gain or loss on effectively your entire portfolio. So it's a really good idea to be able to bring together all of your investments and de track them yourself all in one place. So hopefully you find that useful and it's something that you use. And as always, thanks for watching, and I'll see you in the next one. 12. Investments Growth Model: Hello, and welcome. In this video, we're going to be looking at an investment growth model. So we've already seen a very simple example with just a few years so that we can understand the concepts of ROI and CAGR. Now, over here, we've got something that runs out a little bit further and with a slightly broader schedule of 25 years. So let's go through this example and I'll show you how to use this. On the right hand side, then, we've got our highlighted cells where we can change the values. So in this model, we can start at zero. We can actually start at a different level. So potentially, we want to start with let's say an initial outlay of 100 pounds being invested in the first year. Then we can pick our projected growth rate. So let's say 5%, and we can also enter a monthly contribution. So let's say 50 pounds a month or 600 pounds for the year. And we can pick our period of investment. So here, I've said 25 years, and immediately on the right hand side, you'll see our future value of 33,000. Now, let's take a look at the schedule on our left here. So over here, we've got our years from zero out to 25. Here is the value that we're putting in. So we're starting at that 1,000 pounds here, and then we're putting in an extra 600 pounds every year. So we can track how much we've put in at the end of each year on a cumulative basis. So by the end of the 25 years here, we've put in 16,000 pounds. And then next to that, we've got our growth model here. Now, there's two variations on this. One is annual and one is monthly. On the monthly model then, we're effectively growing our ending balance from the prior year at the 5% growth rate that we've specified. And on the monthly model, we're effectively saying we're still going at 5% annualized, but we're saying we're growing at one 12th of that per month. So that means that the compounding is happening more frequently. So you can see here that these figures very quickly just overtake the annual growth rate model. So by the time we get to our final year, there's actually quite a wide gap between the monthly growth model and the annual growth model. I've put in these two variations on annual growth and monthly growth models, simply to highlight the difference that the regularity of compounding makes to your investment. It's rare that you'll actually get the opportunity to pick one or the other, but it just highlights the differences in how those open up as the term gets longer and longer. To the right of this then, is what I've labeled up here as growth. This is effectively our RY percentage. And then to the right of that is our compound annual growth rate. So you can see how this changes year on year. And by the end, we're effectively saying to grow from 16,000, as you can see in the red cell here, up to the 33,000 on the monthly growth model, over 25 years, is the same as having a CAGR of 2.97%. To make this ready clear then, let's say we started with that final outlay that we made of 16,000 pounds at the very start in year zero. And then we grew that 16,000 pounds by that 2.97% every single year being compounded, and after 25 years, we'll hit the same 30 3257 as in this example. Now, let's turn our attention to the right to the graphs. And what I've put together is two graphs, one on the annual growth model and one on the monthly growth model. So what you can see here is running along the bottom, we've got our years. So we start over here with our initial 1,000 pounds. That's the purple line. And you can see by the end, we have invested the 16,000 pounds, and that's the same in both cases. And then the bars represent the actual value of our investment. So you can see how that gap starts to widen as you give the investment more time in this example. And by the end, we hit our 32 k mark here on the annual growth model. And if you're lucky enough to have monthly compounding, you'll hit a slightly higher figure of 33,000. Okay, great. So as always, do play around with the numbers, changing that starting point, the percentage rate, your monthly contributions, and the period as well. And just see the different scenarios that you get as you flex those numbers. So we'll wrap this video up here then. As always, thanks for watching, and I'll see you the next one. 13. Investments Growth Model with drawings: Hello, and welcome. In this video, we're going to be looking at an expanded version of our investment growth model that we just saw, this time with drawings and with a couple of additional parameters that we can play around with. So most of the model is the same as we've seen before, but there's a couple of additions here. So what I've put in here is the years of investment in effect, and this time it runs out for 70 years, let's say, and we've also got this column here where you can enter an age. So you'll enter a starting age, and the rest of this will calculate out. And the idea here is that we're going to be looking at as that investment grows, and then at a certain point we start to take that investment back out, let's say, for retirement planning purposes, you know, how long does that money really last? That's what this is designed to help you with. So we've got our in and out amounts here. So in this case, we're starting with 10,000 over here in the starting year. We've got our growth rate here again. We've got a monthly contribution. We've got an annual out amount. So this is what we expect to take out at a certain point. Then we're going to leave this site just for the time being, but we've got an inflation rate in here as well. And then again, we've got our years of investment and the predicted future value after those years. So let's dive into this in detail. Okay, so the model works exactly like the one you've seen before, so we'll start off by putting in 10,000 pounds. And then every year after that, we're putting in this extra 3,600 pounds. So we're tracking cumulatively how much we've put in. So after one year, we've put in 3,600. And then again, we've got our annual and our monthly models in terms of that growth projection. And again, we're working out effectively ROI and a CAGR over here as well. So what we're saying here is then we are effectively pushing this through for the first 25 years. And then after that, we're going to take out this annual amount here. So we've said 40,000 to come out every year. So let's think about what happens here. So our model here has effectively grown with the accumulation of us putting in money and the growth year on year. We've effectively grown a balance of 100,000 up to 391,000, and then we start to take this 40,000 out. So, what's happening here then? Well, our existing balance here has a chance to grow the next year at that same rate that we've put in, so it grows, but then we'll take out that 40,000. So we've lost net ten k. And then the next year, the same thing happens. There's a slightly smaller pot here to grow, so it grows at 8.5%, but now we're growing 380 k, rather than 390 k. But again, we're taking out 40 k. So again, it goes down to 369,000, and this process repeats. And because the pot is getting smaller every single year, there's less of it to grow, and we're still taking out the static 40,000. So you can see eventually the pot dwindles down. And then what we've got is a visualization on the right hand side here, where again, we can look at the annual model, we can look at the monthly model. We can see how this builds up to the age here, let's say, of 55 56 at 390,000, and then it starts to get depleted as we use it up. So in this case, by the age of 72, the entire pot has effectively been used up. Now, on the monthly model, it lasts for a few more years because it grows at a quicker rate early on. And then we still start to take out that 40 k. But again, because it's being compounded every single month, it lasts a little bit longer. So in this case, let's say until the age of 76. So what you can do with this model again is just play around with some of the parameters. So you could change the period of investment, you could change the growth rates and see how quickly that depletes So let's say, for example, that we started with a pot of 50,000 instead of 10,000. So in this case, what you can see actually is, you can see this visual in the graphs immediately that actually the pot never really runs out. Because we've started with that amount, because the growth rate is high enough and our monthly contributions as well, it means that taking out 40,000 actually never depletes the pot. So this would have to be a much higher figure. So let's say you could take out 60,000, and actually, you can see that lasts until 90 or in the monthly model, again, it effectively doesn't run out. Now, let's return our figures to our initial example over here. And let's talk about a couple of additional things we can add in here. So we could also model out, for example, if we after ten years wanted to put in an additional amount in that particular year. So you could just over type in this cell over here. So maybe we could put in another 10,000 at this point, and you can see how that makes the pot last a few more years. So there's flexibility in terms of modeling out additional one off payments here. Okay. And the final one here to consider is we could actually put in an inflation rate. So let's say we put in inflation at 1% per year. Well, you can see how that drastically reduces the duration of the pot. And what's happening there is effectively we're saying, if in today's money, we want to be able to take out 40,000 because we expect we need that for our expenses, but actually inflation is running at 1% every single year. And again, that's compounding in effect every year by 1%. We're saying is the equivalent of that 40,000 now in 25 years time is going to be the same as taking out just short of 52,000 pounds. So you can see that that actually depletes the pot much quicker in this example as well. Okay? So as always, play around with the numbers, get a feel for how the model is working and try out a few different scenarios. What I will say is, use this only as a guide and as an educational tool, obviously. If you are thinking about retiring, I would always advise you get an independent financial advisor. But this is a really useful tool for you to just play around with and understand some of the basics and Hopefully, I've talked you through that, and you can also see the visualizations, which just really help from a simple common sense viewpoint to think about, you know, how do these pots of money grow? What happens when you start taking them out? How quickly do they get depleted? So it's just a really useful all around tool, hopefully that you'll find. So, as always, thanks for watching, and I'll see you in the next one. 14. Investments Fees: Hello, and welcome. In this video, we're going to be talking about investment fees. So whenever you're looking at particular platforms, one of the major things you should be looking for is, what are the fees associated with that platform? So it's always a good idea to read through all of the fine print and understand all of the additional charges which platforms usually have to really get an idea of which platform you prefer from a fees perspective. To give you a very simple visualization of this. Let's take a couple of platforms. So platform A and platform B, very imaginatively named obviously. So let's say we've got a half a percent annual transaction fee on platform A, and there's also a half a percent transaction fee. So depending on the value of the investment, you can see the total fee over here. So on a 100 pound investment, the fee is ten pounds, and that equates to that 1% across those two half percents. And no matter the value of the investment, you can see, we're always going to be paying in effect this percentage based 1% fee. So if you've got a portfolio of 1 million, that's going to be 10,000 pounds in fees per year. Now, let's look at platform B, which has a flat fee. So let's say that charges 120 pounds for the year. So ten pounds a month, let's say, Now, this also has a transaction fee of that half a percent. But obviously, that total fee effectively has a flat element and a percentage element. So if you look at that on an initial value investment of 100, then that total fee is actually 125 pounds, which is 115 pounds more expensive than platform A. So that amounts to having a 12.5% fee. And again, it still stays ahead in the case of 1000020000 pounds investments. But when we get to 30,000 pounds, we've breached the break even point, and as a whole, that percentage fee is now at 0.9% against the 1%. And so you can see as the size of the portfolio grows, the fixed fee basically goes away, and in terms of a percentage, we're trending towards that half a percent transaction fee only. So, as always, the graphs on the right show a much better visualization. So up here, we can see our fees comparison. So we can see the value of our investment on the green bars. The flat line here in the light blue is Platform A's percentage base fee, and then here is a platform B's percentage fee. So it starts off at 12.5%, and then it reaches the break even point somewhere 20-30 thousand pounds of investment. And then thereafter it starts to go down and trends towards the half a percent mark on average. Beneath this, then, you can also see the fee comparison in terms of the nominal amount, so pounds or dollars. So again, you can see how the red bar is slightly ahead in terms of the fees over here at 125 against the ten. And then very quickly, the percentage base fee actually takes over. So by the time you're looking at a portfolio of 1 million, it's fees of 10,000 pounds versus fees of just over 5,000 pounds on platform B. Okay. As a final note, also look out for any other fees when it comes to the types of stocks or shares or investments that you're buying. Always read the fine print, as I say, but this gives you an idea of the kind of thing that you should be looking for. So as always, thanks for watching and I'll see you in the next one. 15. Pension Tracker: Hello, and welcome. In this video, we're going to talk about tracking a particular investment in detail. So in this example here, I've taken some pension transactions, and what we've said is, if we can get this data out, as you have seen with when we're taking out bank statements for the budget, if we can take out a raw feed, if you've got a pension fund, if you've got in the US, you've got an IRA or a Roth IRA, you can usually get the detail of these out in an Excel or a CSV file, and you can place them over here. We can work out a couple of key metrics because we only need to work out, let's say the total amount that we've invested and the current value of the investment, and we can get some useful data out of that. So let's look at this example here. Effectively, we've got all of our dates here for all of our pension contributions. In the next column, we've got the type of contribution here. So there's either a payroll deduction or there's an employer contribution in this case. You might have the name of the fund, whatever that is. Then you'll have, let's say, tax relief that you've received on the amount, the total amount that's been paid from the payroll side or from the employer's contribution. And then your pension, in this case, is usually buying some sort of ETF or fund or stocks and shares, and you're usually buying units of that fund. So in this case, this pension funds price was 620 pens here, and here's how many units we bought. So we can set up a simple calculation here. So we can say, well, how much have we paid on a cumulative basis. So in this case, you can see I'm just setting this equal to this cell over here for what we've paid. And then on every cell below, I'm just setting my formula to be whatever we've paid previously plus whatever is in here, as long as it's a positive, and if it's a negative, we'll just bring in the negative. That's all this formula is doing over here. So we're tracking the total cumulative paid position here. Next, we've got the value of our investment. So here, we're simply taking the number of units bought, and we are multiplying that by the price over here. So we can work out what the value of our investment here is. And again, we're just taking a cumulative view of that as well. So in this case, I'm looking at all of the units we bought and valuing them at the latest price that we have. So by the end of this, we've got our latest view of the value of the investment based on the number of units that we bought and the current price, and we also know how much money we've put in. So if we go to the next worksheet over here on the pension chart, you can see two lines. So the green line is the total amount that we've paid in, and the blue line is the value of that investment over time. So depending on the investment that you're tracking, you might well have statistics available online as well, in which case, great. But if you don't, this is a great way to set up your own calculation and your own graphs. So unlike with a bank statement, the types of investments that we're talking about can really differ in terms of the output. But what I'm showing you here is, whatever that output looks like, you just want to set up a couple of columns, one, which tracks the cumulative amount you've paid in. On every single date, and the other one, the current latest position or value of the investment. And because you've got this by date and you've got these cumulative positions, you can effectively build up a history and you can see how your investment is performing over time. Now, just to quickly show you what you would do if you had your own data in, how would you produce such a graph. So let's just do that from scratch. All you have to do here is select your dates. So I'm just going to select all of these dates all the way down. And then on your keyboard, just hold down the control button and then hold down left click and drag and select all of these over here. So we've got all of our dates, our total paid, and our value of investment selected. And then we're just going to click on Insert up here, and we're just going to choose the graph that we want. So let's just say, we're going to pick this line graph over here. Then I'm going to scroll up to the top and here's our graph over here. And if you just want to see this a little bit more clearly, just right click on here and do move chart, and let's just stick it on a new sheet over here, and you can see we've effectively got the same chart over here. So it's easier as that to produce your own graphs from the data once you have it. So as always, thanks for watching. 16. Summary: Welcome to the end of the course. Congratulations. Let's end by summarizing the key areas we've covered in this course. Firstly, you've seen the importance of budgeting and now have a way to easily and quickly track and compare your spending over time. Secondly, we also looked at inflation and saw an intuitive way of thinking about how this impacts the value of your savings. Next, you now have your own loan calculators, which you can use to see how taking on debt impacts your long term finances. You also have a tool for large loans such as mortgages, so you can model how changes in terms or payment amounts will affect you. We also had an introduction to tracking investments, which can be a great tool to protect and ideally grow your savings. Your goals can differ from protection against inflation with low risk investments to potentially maximizing your wealth over a period of time using riskier options. And it can be useful to compare and think about how changes in performance, time allowed for growth, and when and how quickly you start using those savings, up can all impact your future plans. Finally, I hope you enjoyed this course and that it has provided you with a solid understanding of how to get to grips with your finances. I've really enjoyed creating this course on topics and tools I felt would be useful to everyone and would love to hear your feedback. So all that's left to say is, thank you for watching and all the best for the future.