Deterministic simulation: your first step
A deterministic simulation is the simplest form of financial projection. Three fixed assumptions (a constant return, stable inflation, regular contributions) are enough to draw a single trajectory of your wealth. It is your Plan A: the straight line to financial independence.
Example: $200/month at 7% for 25 years
Starting capital: $10,000. Contribution: $200/month ($2,400/year). Return: 7% per year. Result after 25 years: ~$215,000. Of which ~$70,000 was contributed by you and ~$145,000 from compound interest. The curve is smooth, regular, reassuring... but reality is never that smooth.
How does it actually work?
Each year, the simulator applies the same recipe: current capital + monthly contributions + annual return β inflation. The result? A curve that rises (or falls) predictably. No surprises, no randomness. Just math, and nothing else.
β οΈ The limits you need to know
Reality never follows a straight line. Markets fluctuate: +25% one year, -15% the next. The deterministic simulation does not capture this volatility. You can be perfectly on track on paper and watch a crash at the wrong moment erase three years of progress. That is precisely the risk Monte Carlo lets you quantify (probability, magnitude, recovery time).
Key Takeaways
- 1Deterministic simulation = fixed annual return. Easy to read, blind to real volatility.
- 2Yearly formula: Capital Γ (1 + Return) + Contributions β Inflation.
- 3Useful to frame a goal or compare two scenarios. Not enough to commit to a FIRE departure.
- 4Always pair with Monte Carlo. A crash at the wrong moment changes everything.
Keep going
Frequently asked questions
A deterministic simulation uses fixed assumptions (return, inflation, contributions) to project your capital year by year via a mechanical formula: Capital Γ (1 + Return) + Contributions β Inflation. The result is a smooth, reproducible curve, useful to compare scenarios but disconnected from real volatility.
Deterministic to quickly answer 'how much should I save per month?' or compare two strategies (stay in France vs Portugal). Monte Carlo to validate the final FIRE plan robustness, since only this method captures sequence risk and the probability of running out of money.
6-7% for a 100% stocks portfolio (long-term real return), 5% for 80/20, 4% for 60/40, 2.5-3% for 40/60. These figures are already net of inflation. Using nominal returns (8-10%) is misleading: you forget the erosion of purchasing power.
No. It gives a mathematical target but ignores the #1 FIRE risk: a crash at the wrong moment. Our recommendation: use deterministic to map the trajectory, then validate the final go/no-go with Monte Carlo (ideally with stochastic inflation and fat tails enabled).