More on Forecast Types
Looking at a chart of your account or collection balances is a good start to knowing if you are getting richer or poorer. However the real power comes in forecasting future values. Where are the balances likely to trend to in 2 years, 5 years or even 20 years time?
Forecasts are applied to open accounts. Obviously a closed account has no future value so calculating a forecast for it does not make sense. Likewise, a forecast for a collection is calculated by adding together the forecasts of all open accounts that make up that collection.
You use the FORECAST TYPE screen to set or change the forecast for a selected account.
What Types of Forecasts Can I Use?
- Let Richer or Poorer find the best CURVED LINE FIT to your real data. This is useful for accounts that grow or reduce in a smooth compounding way (e.g. savings accounts, home loans). Behind the scenes this uses a Quadratic Simple Regression. Note: as this uses your real balance data, the more you have entered the more accurate the forecast is likely to be.
- Let Richer or Poorer find the best STRAIGHT LINE FIT to your real data. This is useful for accounts that grow or reduce in a smooth straight forward way (e.g. transaction accounts). Behind the scenes this uses a Linear Simple Regression. Note: as this uses your real balance data, the more you have entered the more accurate the forecast is likely to be.
- You provide SET VALUES with which to forecast including an annual interest rate and a monthly deposit or withdrawal amount. This is useful for accounts where you know these values (e.g. a mortgage loan, a target savings account).
Give Me Some Examples of "SET VALUE" Forecasts
- You have a savings account that is earning 3.5% annual interest and you deposit $100 each month:
- Annual Interest = +3.5
- Monthly Payment = +100
- You have a savings account that is earning 5.2% annual interest and you withdraw $230 each month:
- Annual Interest = +5.2
- Monthly Payment = -230
- You have a Mortgage (home loan) that has an annual interest rate of 6.3% but you pay off $2,300 per month:
- Annual Interest = -6.3
- Monthly Payment = +2300
- You have a Credit Card that has an annual interest rate of 15.6% and your overall balance each month increases by $100:
- Annual Interest = -15.6
- Monthly Payment = -100
- You have a transaction account with no interest and the balance moves around a lot. You want to forecast it to show whatever the final balance is:
- Annual Interest = 0
- Monthly Payment = 0