Transparent by design

Calculation methodology

Every result is produced locally from the assumptions shown in its workspace. Finance Sparrow distinguishes calculation conventions from predictions and keeps model versions visible.

Investment projections

Expected investment returns are interpreted as effective annual rates. After subtracting the annual fee assumption, the model converts the net annual rate to an equivalent monthly rate: (1 + annual rate)^(1/12) − 1. Contributions are added at month end.

Inflation and today’s value

Future values are discounted by (1 + inflation)^years to estimate purchasing power in today’s money. Goal amounts marked as “today’s money” are inflated forward using the same convention.

Retirement planning

The current retirement target is annual expenses at retirement divided by the chosen withdrawal rate. It is a planning shorthand and does not model uncertain market sequences, longevity, tax or country benefits.

Loans

Loans use the conventional nominal annual rate divided by twelve, with payments at month end. The schedule applies interest, then the regular and optional extra payment, until the balance reaches zero.

CAGR, ROI and XIRR

CAGR smooths start and end values across a period. ROI measures total gain relative to cost and ignores time. XIRR numerically finds an annual rate that makes the net present value of dated cash flows zero, using a 365-day year.

Review and corrections

Pure calculation functions have deterministic fixtures for zero-rate and known-answer cases. Model versions change when a formula or meaning changes. Regulated rates and tax rules will not be added without a jurisdiction, source, effective date, review owner and expiry policy.