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Income Shortfall

All cash flows (Income and Expenses @ Budget, Asset Capital (optional), Asset Income, Contributions, Distributions, and Liabilities) come from and/or go to Savings.

When Expenses exceed Income in a period, Savings will be used to balance (the) Budget.

In any period when the balance of Savings is not sufficient to cover a Budget deficit, a period shortfall is created and the amount of the Shortfall will appear in the Shortfall column indicating that action needs to be taken.

There are six basic action options:

• Lower the goal.
• Extend the capital accumulation period.
• Go back into Budget and either increase Income or reduce Expenses.
  
• Transfer Assets into a higher income producing and/or greater capital growth potential investments.
• Liquidate an inflation adjusted portion of Assets at the time of a cash flow Shortfall.
  
• Capital infusion.

Shortfalls may be for single or multiple periods; as shown above.

The columns to the right of Income Shortfall show the inflation adjusted impact on the amount of capital that will have to be liquidated to balance the budget if other actions, as listed above, are not taken and the impact on Total Assets.

Inflation Adjusted Income Shortfall Calculation

The Shortfall calculation takes into consideration the fact that if assets are to be liquidated to balance a current budget, future Asset income will be reduced because prior assets have been reduced.

Loss of Total Assets will appear to have a significant decline because of the compounding effects of the loss of Asset income due to prior Asset liquidation and the impact inflation has on the amount of Assets that must be liquidated and the balance of Total Assets.