Base Expenses (recurring annual expenses such as groceries, transportation, etc.)

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What do Base Expenses consist of?

Base Expenses are the minimum amount of after-tax spending your clients need, excluding items entered on other pages such as debt payments, insurance premiums, savings contributions, etc.

We consider Base Expenses those recurring lifestyle expenses such as groceries, transportation, home maintenance, etc.

You can separate larger one-time or recurring expenses such as vehicle purchases, trips, home renovations, etc. and enter these as Additional Expenses.

Enter Base Expenses in Real dollars (today's dollars) and Snap will automatically index the amount each year with inflation and display this value on the Planning page under the Nominal dollars column. This is the value used for all calculations.

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Where are Base Expenses entered?

A value for your client's annual Base Expenses can be entered under Scenario Setup -> Expenses during the scenario creation before you view the Planning page for this client. The initial amount entered for Base Expenses will be populated for every year of the projections starting at the client's Retirement Age or the plan's first year, whichever is later. (You can edit Start Year for the entered Base Expense value directly on the Planning page.)

If you do have an annual lifestyle budget for your clients, make sure to exclude items from this budget that will be entered into the projections separately such as mortgage payments, insurance premiums, saving contributions, etc. Then enter this Base Expense annual value under the Amount field.

After going to the Planning page for the first time for this client, you can edit the Base Expense value(s) directly on the Planning page. If your projections are for a couple, the editing will typically be done on the Combined Planning page although you do have an Advanced Option to specify individual spending for each spouse.

On the Planning page, you can change the Base Expense value for any year from the CFM Start Age forward. If you go back to Scenario Setup -> Expenses and edit the Base Expenses value, this value will overwrite all years on the Planning page.

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Is a budget for my clients required to create a projection for them?

No, you don't need to immediately know your client's Base Expenses amount to get started with your projection and a budget is not required.

Under Scenario Setup -> Expenses you can leave the Base Expenses value $0 (not blank). Then on the Planning page, you can use one of the following methods to determine a value for Base Expenses.

Snap Projections is designed for the quick creation of projections. The default logic assumes that before retirement, any surplus after-tax cash that isn't being saved or that has been allocated to payments such as mortgage, insurance premiums, or additional expenses is being spent.

This amount is automatically calculated for you and displayed on the Planning pages under Base Expenses (in both real and nominal dollars) in a grey italicized font.

Once the CFM Start age is reached in the projections you can edit the amount for Base Expenses under the Real dollar column in the year that the CFM Start Age is selected. If you prefer to enter the Base Expenses earlier in the projections, move the CFM Start age to the desired year and run the scenario to allow data entry in the Real dollar column. You can only edit values on the Planning page that are blue or purple.

Here are 2 options to complete the Base Expenses data entry on the Planning page if you don't have a budget for your client(s):

1. Use the displayed Base Expense value from the first year of the projections to estimate an amount for retirement. In the above example, in the first year of the projections, this couple is spending $58,329 on their lifestyle, after-tax. Would they like to continue spending the equivalent in retirement? Or perhaps 80% of this amount? Enter the value that you wish.
2. Have the software calculate a Base Expense value for you to deplete the Financial Assets by the final year of the projections. This is called a Sustainable Scenario.

Let's use an example to illustrate. Assuming the clients want to spend $58,000 per year on their basic lifestyle in retirement after tax, we'll enter this under Base Expenses (in real dollars) at age 65. Note that you can copy the value down the projections until a certain age or until the end of the plan. This gives you the flexibility to change the amount over time.

Also, note that the Base Expense value is automatically indexed with inflation and the indexed value is displayed under the Nominal dollars column. This is the value used for all calculations.

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