## With great excel power comes great responsibility...

### What is excel?

Do I even need to ask the question. Microsoft excel or just excel for short is by far the greatest piece of software to ever be created (in my opinion). If you've not heard of excel and you want to build wealth then you've got an even harder struggle if you're not using excel.

Excel is a spreadsheet that can be coded to perform simple to complex mathematics. However it can be used for much more than that. The practical uses for excel are extremely wide ranging especially in the world of finance. I would bet that there isn't a single medium sized Company out there in the world that isn't using excel.

### Personal uses for excel

What's so great about excel? Well I use excel for many different reasons:

1) Budgets - this is absolutely key. I could not track my spending without an excel spreadsheet. I have a formula that simply calculates the net of my earnings and spending each month and then takes the total net month cash and tracks my total net cash saved to date. I also have two other formulas to calculate my monthly savings percentage and the percentage of costs that are more or less fixed.

2) Stock valuations - I love investing in Companies listed on stock markets. Before investing I build a discounted cash flow. This is an excel spreadsheet where I make some assumptions about the possible investment and use these assumptions to project out the future revenues, costs and balance sheet of the Company. I use formulas to calculate the cash flow from these figures. The cash flows are then discounted such that future cash flows are in today's terms. Excel calculates the total of these discounted cash flows to give me a rough idea as to the valuation today. I then decide on this basis whether the Company is being over or under valued by the stockmarket.

3) Personal asset analysis - I use excel to track my net worth. I input all of my assets and any debts in order to calculate a total net worth.

4) Affordability analysis - when I bought my flat I used excel to calculate what I could afford. I input my total net worth and made some estimates as to how that might grow over time. I input the ideal Equity that I'd like to have in the property. I also input my salary and the likely affordability multiple that the Bank would use to assess whether I would be eligible for a mortgage. Excel has an inbuilt function called goal seek which automatically calculates what my net worth/ income would need to be in order to afford a particular flat. Alternatively you could use it to determine what property you can afford today.

5) Pension projections - finally, I use excel to roughly calculate what the size of my pension pot will be when I come to retire. I can use the estimates to play with the assumptions to tell me if I need to be contributing more into my pension or if I need to be seeking a higher return, or even if it's worth putting into a pension full stop or whether I should put my money elsewhere.

### Excel coaching

If you're not using excel or are struggling with it then you need to get yourself up to scratch.

Get in touch if you would like excel coaching, lessons or have a particular excel related query.