Date: Thu, 13 May 2004 15:27:38 CST
From: noreplysoccer@hotmail.com (Jim)
Newsgroups: misc.invest.financial-plan
Subject:  Re: Tax Model Help
Message-ID:  
References:  <40A232EA.5E2@nonono.us>
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	=5u3W

Chemmy  wrote in message news:<40A232EA.5E2@nonono.us>...
> I'm trying to build an Excel model for my future finances, so I can run 
> through some different scenarios.  For example, look at the effects on 
> my long term situation if I put more money into the house vs. putting 
> more money into retirement.
> 
> What has me stumped is what I should try to plug in for wrinkles in the 
> tax code.  The mortgage interest deduction is pretty straightforward and 
> easy to model.  But I'm starting to wonder about the proliferation of 
> tax-exemptions, tax-deferred accounts, tax credits, deductions, etc. for 
> things like child care, commuting, health care, etc.
> 
> Obviously, these things are supposed to act as incentives to do things 
> that the government wants me to do, but I'm confused how to create any 
> kind of reasonable way of telling what the costs and benefits are.
> 
> One place it gets tricky is that you can end up diverting a substantial 
> amount of money to these accounts which are then pulled out of your 
> general pool of cash, and your budgeting gets very complicated.  For 
> example, I can assume $1,200 a year goes into my pre-tax commuter 
> account, but my actual commuting costs are more than that, so I have to 
> be careful to keep two figures for commuting (amount deducted from my 
> paycheck, additional costs above the limit for the account) and then 
> reconcile with the tax benefits.
> 
> Would it make more sense to build the model on the assumption that I'm 
> not doing any of these things, and just plug in a set % for income tax 
> every year going forward into the future?  
> 
> I'm afraid that the steady increase in deductions, accounts, credits, 
> etc. has made the tax code far too complex to help make any real life 
> longterm plans.  Add in the uncertainty that these provisions will be 
> around and unchanged for any long period in the future, and it's unclear 
> to me how to do any planning without throwing out the effects of these 
> pieces and just model on a few different percentages going to taxes.

My personal opinion is I can give someone a detailed financial picture
of what my next 12-24 months will look like.  Anything beyond 18+
months is a SWAG.

I save for retirement, which is 30+ years away, save for a house which
may or may not be purchased in the next year and spend as little as
possible, and buy life insturance to cover some of the un expected,
but overall detailed planning is quite difficult, IMO.

If I need help with the 2-5 year planning part, I would be consulting
a professional.