I have two ways of managing inflation in spreadsheets.
- Some spreadsheets are tracking what happens every year and they also look a little into the future. These are done in “actual money” so there is inflation. To be conservative, some of these have future income not inflated.
- Some spreadsheets are only for projecting the future, usually because I’m deciding between different options and need a model for each. These are usually done in “today’s money” so nothing is inflated.
In the top left corner of each spreadsheet it says in red “actual money” or “today’s money”.
While we’re on the subject of my spreadsheets, I’ll mention that the functions I use in spreadsheets are no trickier than “IF” functions. A typical IF function might in effect be “IF this number is greater than the tax-free threshold then tax whatever is above the threshold, otherwise there’s no tax”.