Current consumption
I'm new to using ESPlanner 2.9.74. In the Help manual it says that current consumption is the household's current income - sum of current current savings - current special expenditures - current taxes - current life insurance - current housing expenditures.
I used the main and detailed reports to find the values:
current income: main/total income/total income
current savings: main/current recommendations/current amount:savings
current special expenditures: main/total spending/special expenditures
current taxes: detailed/taxes/total taxes
current life insurance: main/current recommendations/life insurance premium
current housing expenditures: detailed/housing/expenditures
When I calculate current consumption with those values, I do not get what ESP displays in main/current recommendations/current amount:consumption. ESP reports that I'm consuming $4221 less than I calculate with the above formula.
What am I missing here?
Thanks !
Rats. I noticed I posted this in the Life Insurance topic by mistake and I can't figure out how to move it. Sorry.
RSS
I will check the Help manual to make sure that it's clear.
But here's how to see the relationship of these numbers.
1. Go to the Total Spending tab and you will see that the column on the far right, Total Spending, is the sum of all the numbers in that row (including consumption).
2. Next go to the Regular Assets tab and notice that Total Income minus Spending, Taxes, and Saving equals zero.
3. Thus, Total Income minus Taxes and Saving will get you a first subtotal (i.e. total spending). Then Total Spending minus everything in columns E-L (I won't list them all here but you can see them on the Total Spending tab) equals Consumption.
Consumption is household consumption. If you are single, it equals Living Standard. If you are married and or have children, "living standard" is consumption scaled to reflect the cost of children (default is 70%) and that two can live as cheaply as 1.6.
Sometimes I've used the shorthand of saying Consumption equals Total income minus taxes, housing, term insurance, special expenditures, and retirement contributions. But it can be more than that as you see in the Total Spending sheet where Consumption is what's left to spend after all those things as well as net contributions to reserve fund and special bequests.
I hope that is clear.
Best,
Dan
Hi Dan,
Thanks for the reply. If I put together the items you mention, it appears current consumption is calculated by taking
total income
-taxes (Fed, State, FICA)
-savings
-special expenditures
-housing expenditures
-life insurance premiums
-net contributions to reserve fund
-contributions to retirement account
-excess funerals and bequests (I feel any funeral is a bit excessive!)
-Medicare part B premiums
The items taxes though life insurance premiums are mentioned in the Help Manual, but the last four--contributions to reserve fund through Medicare part B--are not.
I was missing contributions to my retirement account. When I included those, my calculations came to just $1 more than ESP displayed, which I suspect is due to ESP doing the calculation before rounding the values for display.
Thanks again for your help.
Ken
Yes, I think it would be helpful to make that more explicit in the Help.
Will do.
Best,
Dan
Dan,
To get my consumption to agree with the Current Recommendations I have to deduct the regular asset income as well which is driving consumption down to an unrealistic level. Is that right? There may be other issues that I need to address that help explain the low level but I'd like to get a handle on consumption before I proceed.
If regular asset income should be deducted, can you explain the concept. I would assume that these funds would be available for consumption.
Thanks,
Al
P.S. The Glossary defines consumption as "refers to all expenditures by the household other than special expenditures, housing
expenditures, taxes, and insurance premiums." It would be helpful if there was more detailed and specific definition. For those of us who want to take the time, I'd recommend clear mathematical definitions. It might minimize support questions--at least, from me.
Hi Al:
Here's a full view of how to look at the economy:
H and Wife non-asset income (Social Security, labor income)
+ Special Receipts (could be anything such as Alimony, Inheritance, etc.)
+ H and W retirement income withdrawals
+ Regular Asset Income
=Total Income
- Taxes
+ any Saving that is pulled from Regular Assets
- any Saving that is added to Regular Assets
= Total Spending
Total Spending
-Medicare Part B,
-Life Ins. premiums,
-Excess Funeral and Bequests,
-H and W Retirement,
-Housing Expenditures,
-Contribution to Reserve,
-Special Expenditures.
=Consumption.
Consumption is then scaled to the number of adults and children in the family and called "Per-adult living Standard."
So when you see Consumption, you know that Saving (or de-saving) is not going to be subtracted or added to it.
If you take just three pages--Regular Assets, Total Income, and Total Spending--and lay them out and put all the numbers from the first year in a spreadsheet, you'll see the mathmatical relationship that I just outlined above.
--Dan