In the previous tutorial we discussed the fundamental ideas of building models and doing “What-If?” analysis. Now we need to take these ideas and put them into practice so you can see how this works. To do this I will create a simple model of savings over time. Now, I do want to be clear that this is a very over-simplified model and should not be taken as a good predictor of actual results. The idea is to illustrate the techniques involved in building a model and doing “What-If?” analysis.
So. what are the variables, parameters, assumptions, etc. that we need? I have identified these in my model:
- An initial amount of money already saved. This is the starting amount you have.
- An amount of money you add to your savings each year.
- The rate of return on your savings
For the remainder of the show notes please see http://www.ahuka.com/?page_id=761
A copy of the spreadsheet created for this program can be found at http://www.ahuka.com/?attachment_id=763