What is a financial plan
A financial plan is a roadmap for your money. It helps you see whether you're on track to afford the things you want in life - whether that’s buying a home, taking a career break, having kids, or retiring comfortably.
Your financial plan is built on projections - estimates of how your income, expenses, and savings will look over time based on; the choices you make and inflation impacts.
Deterministic vs. stochastic models
There are two common approaches to financial modelling:
Deterministic modelling (what Canwi uses for the core planning experience):
Your plan shows one clear path based on the numbers you enter. For example, if you earn $100,000 and assume your salary grows at 3% per year, the model will project $103,000 next year, $106,090 the year after, and so on. Everything flows directly from your assumptions, so it’s simple and transparent.Stochastic modelling (coming soon to Canwi Plus):
Methods like Monte Carlo simulations or historical backtesting model many possible scenarios (sometimes hundreds or thousands) to show the range of outcomes. This lets you see not only a likely path, but also how resilient your plan could be under different conditions - like periods of low salary growth or poor market returns.
To understand more about how we calculate the deterministic projection in Canwi read; Calculations and order of operations
Where to find / build your financial plan
You can access and build your financial plan from the Plan screen
When you first access this screen you won't have any events so you'll be seeing what your projected future finances looks like if you:
Continue earning your current income (taking into account inflation)
Continue to make repayments on debts you've added in onboarding
Continue with your current living expenses (taking in to account inflation)
The default view of the planning screen is the "Board" view, this view shows a year by year simulation of your future finances and allows you to "Add New Events" to simulate future decisions.
By default you'll have a projected Cashflow line chart shown as well. Here you can see the Projected Income (Post-Tax) in blue and projected Expenses in orange.
You may notice that your projected cashflow has some fluctations in future years even without events.
For example - if you have a Help Debt which will be paid off in future you'll notice that your Post-Tax income will rise in a future year (in the screenshot below you can see the increase in the blue line in 2029 caused by a Help debt being paid off.
As another example - in this scenario the Annual Expenses is reduced from 2028 as a Car Loan finishes being paid off.
You might also notice that there's a subtle increase in the blue Income line but not in the orange Expenses line. This is showing the impact of Wage Growth and Consumer Price Inflation whilst the projection is shown in Today's dollars. For more information read the articles below on how Financial Projections work and Actual Currency vs Today's dollars.