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ROP Forecast Types

 More on Forecast Types

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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?

  1. 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.
  2. 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.
  3. 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