Chemmy <chemmy[at]nonono.us> wrote in message news:<40A232EA.5E2[at]nonono.us> ...
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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.

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.