Contextual Reporting – Keeping Goals in Context


In personal finance goals are the tangibles and intangibles we want to accomplish. It doesn’t matter what they are, it could be to buy a car, a house, retire with a particular life style, pay for college or any number of other things. All that matters for planning purposes is that they be definable in cash flows and dollars.

Financial planning’s real value kicks in when it’s an ongoing process, not a one-time discreet act or service but a continuous iteration. Life and goals are ever-changing so the tracking of them needs to be relevant and flexible enough to keep us focused on what matters to us, our goals.

So let’s see how Contextual Reporting, the presentation of results in a relevant framework, like actual vs. goal might look. Conventional brokerage statements, reports, and off the shelf software or webware won’t do the job.

Example: John is a male age 35 with a life expectancy of 89 and no intentions of marrying. His current savings is $110,000 and John figures he can save $10,000 per annum until retirement. John believes inflation will be 3% per year and that he’s comfortable using an investment return rate of 6% for his investments pre-retirement and 5% post retirement. John’s conservative and doesn’t want us to consider any benefits from social security. Finally, John would like to retire at 65 and believes he will be able to live on $80,000 per annum in today’s dollars.

Number crunching results in the following:
1) Calculated future value of $80,000 at John’s retirement age will be $194,181
2) Calculated expected savings value at retirement will be $1,412,366
3) Calculated dollars needed for retirement will be $3,768,883
4) Calculated additional savings required to meet shortfall will be $29,681 per annum or $2,336 per month.  When you include John’s planned $10,000 per year above the total plan for savings is $39,861.

After three years John’s Contextually based goal report shows the following:

John’s brokerage statement (conventional static report) for the year ended December 31, 2010 follows:

The contextual report contains significant and relevant information that the brokerage statement does not. First and foremost it keeps John’s goals front and center. It tracks actual savings versus planned, current value versus planned, total returns versus planned and compares returns against a customized benchmark relevant to his investment style. Importantly it reports over the entire goal period rather than annually, as does the brokerage statement. In summary, all reported items are kept in relevant context with the original goals. The contextual report underscores the need for action, the brokerage statement does not.

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About jaysanderscpa

Jay Sanders, CPA/PFS, CFP® "There's lots and lots of Numbers in business and your personal life but only some are relevant. The key is to know which one's matter, worry about them and forget the rest."
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2 Responses to Contextual Reporting – Keeping Goals in Context

  1. Joshua,
    Well said!
    Thank you

  2. Jay,
    Another great post. I couldn’t agree with you more about the fact that tracking needs to be consistent as life doesn’t stop. Our money is flowing daily whether it is in or out, so a quick once over annually or quarterly won’t do. Whatever system you use, it needs to fit your goals, i.e. be contextual to what you are trying to accomplish. The statements sent out from brokerage accounts are contextual for them, but not so much for you. If you’re only relying on the brokerage statemetns, you’re trusting someone who doesn’t care about your future with your livliehood. Take interest and pay close attention. Once it starts to go, it can be a lot of fun to watch!

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