Sometimes your FI projections might not look like what you expect. In this article, you're going to make sure all your information was accurately entered for your plan. By the end, you will have verified that your projections are showing your current path to financial independence.
Verify all your accounts are entered into WizeFi.
Go to your accounts page, and make sure all your accounts have been entered.
If you are unable to connect all your accounts using Plaid, make sure you create manual accounts to account for these assets, debts, and insurance.
If you exclude any accounts from WizeFi, the program can not calculate an accurate net worth or projections
Confirm the accounts have the correct balance, monthly contributions, interest rates, etc.
People sometimes enter the wrong values for their monthly contributions or interest rates which can have large impacts on their FI projections
Check out this article for a list of potential accounts to add into WizeFi
Verify your income is correct. Now, it's time to dive into your plan, starting with your Income. Click on the "Plan" page and go to the Income tab.
Make sure you've entered all streams of income. If your income fluctuates each month, enter a monthly amount you feel comfortable sticking with every month. You can always change this income later to see how different monthly income amounts can impact your FI date.
Verify your expenses. Click on the Expenses tab and make sure your planned expenses are accurate based on what you plan on spending (not necessarily what you've been spending before). You may need to tweak some of these budget items to get your desired projections.
Verify your 4-step plan. Click on the 4-step plan and check to make sure all your FID has been used and that you don't have negative FID.
If you have FID left to apply, you can apply it to any step. To keep things simple, you can start by applying all of it to Step 1. WizeFi's algorithm automatically assumed that this money will be applied to the next step once your emergency savings target balances have been reached.
If you have negative FID (Financial Independence Dollars), you may see an error appear on screen like this. This is because your income is not enough to cover your expenses and 4-step plan. In this case, WizeFi will assume you borrow this additional $500 per month at an assumed interest rate (which you can customize).
This error usually has significant impacts on your FI projections. In this example, look at how much overspending by $500 per month can impact your FI date. This person will never reach FI, because their debt will continue to compound over time.
Check your FI goals. Click on the Financial Independence Projection to see your new plan and edit your goals. Click on the "Edit Projections" button.
From here, you can modify your FI goals which can alter your FI projections.
Refining your FI plan. If you've followed all of these steps and are still not getting the results you want, continue refining your plan. You can try making the following changes to achieve a better outcome:
Goals: Lower your monthly desired income at FI. Think about what expenses you'll have when you're financially independence.
Exclude other sources of monthly income from this number (rental property, social security, pension, disability, business income).
This monthly income should only include the income required from investments to support your goals.
Expenses: Review your expenses in more detail. Figure out ways to reduce your monthly spending. This will free up more FIDs you can use on the 4-step plan to build wealth quicker.
4-Step plan: Try allocating money differently inside your 4-step plan. See how contributing more to your 401k instead of paying off the house early impacts your financial future.
Income: If you've tried all of the previous steps and still aren't able to reach FI at your desired age, the last option is to increase your income. For now, you can determine exactly how much income you need by adding another income stream, applying this money to your 4-step plan, and figure out how much you need to reach FI at your desired age.
From there, you can create a strategy to increase your income to this desired amount.