Overview
Financial modeling is a tool used to predict the future - helping you understand how your income, expenses, savings, and investments could change over time.
To make these projections, Canwi does the complex calculations for you - but it’s useful to understand some basic concepts, like inflation, wage growth, and how future values can be shown in today’s dollars (so they make sense).
Projection 1: A simple projection (without any adjustments)
Let’s start with a basic scenario:
You earn $80,000 per year.
Your living expenses are $50,000 per year.
Your remaining cash flow (income minus expenses) is $30,000 per year.
If nothing changed over time, your financial projection would look like this:
Category | 2025 | 2026 | 2027 | 2028 |
Income | $80,000 | $80,000 | $80,000 | $80,000 |
Expenses | $50,000 | $50,000 | $50,000 | $50,000 |
Net Cash Flow | $30,000 | $30,000 | $30,000 | $30,000 |
💡 The problem? This isn’t how money works in real life - prices go up over time due to inflation.
Projection 2: Accounting for Inflation
Inflation means the cost of goods and services rises over time. This affects your everyday spending—things like groceries, rent, fuel, and entertainment gradually get more expensive.
If we assume expenses increase by 2.5% per year, but income stays flat, our financial projection changes:
Category | 2025 | 2026 | 2027 | 2028 |
Income | $80,000 | $80,000 | $80,000 | $80,000 |
Expenses | $50,000 | $51,250 | $52,531 | $53,845 |
Net Cash Flow | $30,000 | $28,750 | $27,469 | $26,155 |
💡 The impact? Even though your salary stays the same, your available cash flow shrinks over time because everyday costs increase.
Projection 3: Accounting for Wage Growth
In reality, most people receive pay increases over time.
If we assume your income grows by 3.7% per year, while expenses still rise by 2.5%, the financial projection now looks like this:
Category | 2025 | 2026 | 2027 | 2028 |
Income | $80,000 | $82,960 | $86,030 | $89,213 |
Expenses | $50,000 | $51,250 | $52,531 | $53,845 |
Net Cash Flow | $30,000 | $31,710 | $33,498 | $35,368 |
💡 How this helps you:
This projection shows you whether you’re on track to meet your goals or whether you might need to adjust - maybe by saving more, changing spending habits, or earning extra income.
How Canwi Accounts for inflation
You can read more in the Inflation overview page
Since both income and expenses rise over time, Canwi automatically adjusts for:
Factor | How It’s Applied | Why It Matters |
Wage Growth (WPI) | Increases your salary over time. | Ensures future earnings reflect pay raises and inflation adjustments. |
Consumer Price Inflation (CPI) | Increases future expenses over time. | Reflects rising costs of groceries, rent, and other living expenses. |