Recommended Consumption, why higher than actual consumption?
I am a new ESP+ user and have been creating and testing my first plan over the past two weeks. It has taken a bit of getting used to but I am coming around to the idea of backing into a consumption figure rather than keying in a budgeted figure. Using the manual's descriptions I have been testing the "current consumption" amount by proofing against the same inputs in an excel spreadsheet. I got it to tie out to within a few hundred dollars.
But here is my question: why is ESP+ recommending a higher "recommended consumption" than my actual "current consumption" by almost 60% more?
Thanks in advance.
RSS
Call me to discuss. 617 834-2148. thanks, Larry
There's quite a few possibilities, but in general, the program is showing that if you don't spend more now (consumption) you'll have to spend more later, i.e., raise your consumption later. Since the program is set to smooth consumption (unless you tell it differently in "standard of living index" in assumptions), it is telling you to raise your level of consumption. I should say, "suggesting" or recommending. If you prefer to match it up with your current consumption, use the SOL index mentioned above, or create a reserve fund, or a number of other things.
Finally, look a the very top of the program. It should say 2.15.5 If not, please update the program before you do more calculations. Just go to My ESPlanner and download and run the Update file in your "downloads" tab.
Dan
Larry -- thank you for offering to speak to me. Dan -- thanks for your reply, which I have just now seen. Let me consider using the "standard of living index" or "reserve fund" and if I have additional questions I will come back here and post another question. I have to come up with some solution before my wife finds out we are not consuming enough ;).
Matt G
Think of the "recommend consumption" as an upper limit on your spending. Basically, if you exceed this number, given the data your economy isn't sustainable. If you spend less than that number, your economy has some slack in it that may be necessary in the event of something unforeseen. You can adjust your standard of living or you can build up a "reserve fund" or increase contributions to retirement accounts or ... all of which will have the effect of sucking funds out of your personal economy.
Best,
Dick Munroe