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The math behind RRIFmetic (pdf)

Goal Based Computing

The Burger Quotient

Tax Accuracy

Reverse Tax Engine

Live Rich - Die Broke

Done your T-zero yet?


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Goal Based Computing
The reason we work, save, and agonize over our investments is not because we love to focus on our assets and liabilities. Rather it is because we desire a smooth predictable lifestyle out to a certain age, and (perhaps) provide an estate to pass on to our survivors. Setting our lifestyle and estate goals, then letting the computer calculate the cash flows -- salary, inheritence, movement of capital between registered, equity and non-registered assets, and so on -- is what goal-based computing is all about. This is allows you to interactively explore "what-if scenarios".

The Burger Quotient
The Burger Quotient (BQ) is a measure of lifestyle. Your BQ represents that annual maximum lifestyle which, if followed, will be sustainable to a set age. In other words, you want a smooth, predictable income (after tax/inflation) over your entire lifespan such that on your 95th birthday you will walk into the bank and deplete/exhaust your retirement savings to the dollar. It is a lifestyle annuity......another way of saying 'I want to maximize my burger intake (lifestyle) and just die broke'.

Tax Accuracy
Taxation math is known and fixed. The laws of compound interest and inflation aren't subject to interpretation. The RRIF minimum rules, the algorithm which generates CPP, OAS, etc... these are all published and available to anyone. Why then should there be such a variety of financial planning software "solutions"? And why is there such large variablity in their results?

Reverse Tax Engine
RRIFmetic takes the standard taxation formula (which applies the tax rules to your salary, age, province, investment income and so on to derive your net income) and rewrites it in terms of investment cash flows (capital moving in and out of your registered and nonregistered investments). This reverse tax engine allows you to specify all the known values such as salary profile, age, future capital gains, etc., as well as a desired lifestyle or net income profile and it tells you what your capital will do under those circumstances. Spreadsheet-based programs don't come close to performing this calculation. NPX is the only other program which does!

Live Rich - Die Broke
We would all like to know: what is our maximum achievable lifestyle while still leaving behind an estate of a certain value (perhaps $0)? What are the optimal cash flows (moving capital into and out of our registered, nonregistered and equity pools) that allow us to achieve these goals? RRIFmetic can tell you precisely.

Done your T-zero yet?
The main difference between the "T0" and the annual T1 you prepare at tax time is that, with a T0, you enter your net income/lifestyle as data, rather than the other way round. In other words, you specify what your lifestyle will be. This is a bottom-up calculation.... it works 'from', rather than 'to', net income.


 

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