Projection Lab - Analysis of Results
https://projectionlab.com/ // https://www.physicianonfire.com/projection-lab/ //
https://www.madfientist.com/projection-lab/
Plans Forecast: Retire by Age 50 / Inv Prop+1 / Inv Prop+2
The Projection Lab is a personal finance simulator that can help you visualize your investments and expenses over time forecasting results in different scenarios for the FI Community.
I’ve subscribed for the 1-Year Plan mainly to use the additional features, as well as the Cash Flow Plan, which I find useful. However, after creating different plans and scenarios based on my family’s financials and investments plan, the tool is mainly targeting US. There are options that we can choose from such as Superannuation and AUD Currency, but the tool is missing many features, as well as miscalculations. It’s not a bug, it’s just never been implemented since the developer isn’t as familiar on how Australian system works. Since I’m dual US and AU Citizens, I’m familiar with both sides.
Regarding Property Investments, Australia can use negative gearing for rental properties, as well as, Offset Accounts to minimize interest payments. US doesn’t. The tool doesn’t offer these features. The tool also doesn’t allow for us to put in Trust Accounts (eg Fiduciary Discretionary Trust), or SMSF. There are also standard tax calculations specific to the US, but not to AU, and we can’t change it in the calculation setting either. For example, property calculates Property Tax, House Maintenance, and Property Insurance. These features should not be % fixed, but the tool calculates these for every property. Epic fail since it skews all of the forecasting and cash flow results, in addition to our effective tax rates since our tax liability calculations aren’t accurate.
I’ve created 3 different scenarios: Retire at Age 50 (home purchase), Retire with 1 Investment Property (home purchase + 1 property), and Retire with 2 Investment Properties (home purchase + 2 properties). Assuming Life until Age 85, which scenario would you think should forecast the highest net worth for? Retire with 2 Investment Properties right? Nope. The tool forecasts that our highest net worth would be scenario 1: Retire at Age 50 (home purchase) only. This also assumes that all of the investment properties are calculated exactly the same, just a few years apart. Net worth estimates for Plan 1: 13.3 mill, Plan 2: 11.5 mill, Plan 3: 11.6 mill. Each of the Plans do not include refinancing mortgages or selling of the properties.
What I plan to do overtime is to continue to utilize this tool for its features, but to do my own calculations using my own template. I don’t require fancy charts, and there’s really no point until the underlying source data is correct and accurate. For example, the tool I can’t determine the market value for the specific investment property. It only tells me how much of the remaining loan is left. That’s not how investment property works in the real world as you would assume that the investment property equity grows overtime. In addition, the tool calculates taxes on rental income without reflecting the reduction of interest payments to account for negative gearing. Although I believe Australia should remove negative gearing completely due to higher property prices as property investors are mainly buying to rent out, that should stabilize the economy since the RBA increasing interest rates is only a band-aid solution, and doesn’t address the main issue here, which is fix the system. It’s a hot and debatable topic, but definitely should be addressed in the future.
There’s much work to be done on the Projection Lab tool. It works, but the results are clearly inaccurate. Nice to look at with all of the visualization and its fancy charts, but I wouldn’t rely 100% on the financials, forecasts, or cash flows calculations until the developer understands how the Australian system works.
