Forum Discussion
scenario planning
Hi, I need to create a financial model that will be able to let me see the impact of varying several things over the course of 4 years. So, pay inflation increases to 5% in year 3, one of the income ...
Sure, with a simple financial model where year-to-year changes are just a percentage… It's just up to you to decide how many categories to model, what the initial values are, and what those future percentages will be.
See the attached workbook for an example. You would enter numbers in the cells with white background. There are basically just two simple formulas (in the cells with the light grey background): one set for adding some percentage of growth (or reduction, for negative numbers), and one set for calculating the net of income minus outgo. I was able to enter just two formulas, and copy them to other cells as appropriate.
formula for C4 (copied to other cells that calculate income or outgo):
=C3 + (B4 * C3)
formula for N3 (copied to other cells for Net income):
=(C3+E3+G3) - (I3+K3+M3)
(the spaces in the formula are not needed, but they can make the formulas a little easier to read)
Note that this does not include a method to handle one-time income or outgo, like an inheritance or a home remodeling. But you can add additional categories (columns) as you want, with zero values for most years, and change to the formula for Net income.