Understanding Flex Spending and How It Works

Flex Spending lets your projected spending adjust automatically based on portfolio performance. It helps you simulate realistic lifestyle changes during market ups and downs, so you can see how flexible spending decisions might affect your Chance of Success.

Spending is a customizable subset of your total Expenses. Flex rules apply only to Spending, not all Expenses.

This distinction gives you control over which parts of your plan can flex with market conditions. For example, you might include travel or hobbies but exclude taxes or debt payments. This setup keeps Flex focused on spending that can realistically change, without distorting your plan with fixed expenses.

Configuring What Counts as Spending

You can choose which categories are included in your Spending metric.

To configure this:

• In your Plan view, hover over the Spending metric on the right sidebar.
• Click Customize Metric.
• Select which items to include, such as Tax Liability, Mortgage Payments, Mortgage Principal, or Consumer Debt Principal.
• Save your changes to update the Spending metric automatically.

All Spending is part of your Expenses, but not all Expenses are counted as Spending. Only Spending can flex when your rules are triggered.

Tagging Expenses for Flex Spending

Each expense in your plan can be tagged to define how it behaves when Flex Spending is active. These tags determine whether an expense counts toward your Spending metric and how it responds to your Flex rules.

When creating or editing an expense, you’ll find a Flexibility section where you can assign one of the following tags:

• Essential: Represents core living costs that typically stay constant.
• Discretionary: Covers lifestyle or optional expenses such as travel, hobbies, or dining out. These are the most likely to flex when markets change.
• Not Spending: Excludes the expense entirely from the Spending metric. These items do not flex and are not included in Spending calculations.

Some events, such as Travel, Vacation, Wedding, and Charity, start tagged as Discretionary by default.

Enabling and Setting Rules

• Go to Settings > Flexibility > Flex Spending
• Click Add Rule to create thresholds that define when and how spending changes
• Flex Spending is off by default. Once enabled, your plan automatically applies your rules as portfolio performance moves relative to all-time highs.
• You can include Spending, Essential Spending, Discretionary Spending, or Spending Flex metrics when configuring Monte Carlo tests to analyze how flexible spending affects your plan’s probability of success.

How Flex Spending Works

Flex Spending compares your portfolio’s performance to previous all-time highs (ATH). When performance moves above or below those highs, your Flex rules determine how spending adjusts. It excludes contributions and withdrawals, so it reflects only market performance.

For example:

• When performance is ↓ 30%, flex discretionary spending ↓ 50%
• When performance is ↑ 10%, flex discretionary spending ↑ 20%

These rules apply automatically as your plan runs, adjusting discretionary spending according to the thresholds you’ve defined.

Flex Spending vs. Withdrawal Strategies

Flex Spending makes rule-based adjustments to the Spending you’ve already defined, while Withdrawal Strategies replace most expense items with predefined patterns. Both can be tested in Plan or Chance of Success modes, but only Flex Spending reflects your actual expense setup and flexibility rules.