Thought these little formulas might come in handy for people working on their big plans for the future (especially those without access to excel or fin. calcs)
n
FV = PV * (1 + r)
PV = FV
------------
n
(1 + r)
Where FV = Future Value
PV = Present Value
r = rate of return
n = number of years (or time periods)
Example One:
Say I want to retire in 15 years time with $1000 p.w. income in todays dollars
Assume an average inflation rate of 3%
15
FV = 1000 * (1.03)
= $1,558
In other words, would need to aim at earning $1,558 in 15 years time to have the same purchasing power as $1,000 today.
Example Two:
I want to accumulate one million dollars in todays dollars.
Again, assume inflation averages 3%
Using the 2nd formula above,
after 10 years you would need $1,343,916
after 15 years - $1,557,967
after 20 years - $1,806,111
Or
One million dollars in 10 years is $744,094 in todays dollars
15 years is $641,861
20 years is $553,676
Hope these formulas come in handy (or at least provide some fun) for one or two of you out there in forum land.
Lily
n
FV = PV * (1 + r)
PV = FV
------------
n
(1 + r)
Where FV = Future Value
PV = Present Value
r = rate of return
n = number of years (or time periods)
Example One:
Say I want to retire in 15 years time with $1000 p.w. income in todays dollars
Assume an average inflation rate of 3%
15
FV = 1000 * (1.03)
= $1,558
In other words, would need to aim at earning $1,558 in 15 years time to have the same purchasing power as $1,000 today.
Example Two:
I want to accumulate one million dollars in todays dollars.
Again, assume inflation averages 3%
Using the 2nd formula above,
after 10 years you would need $1,343,916
after 15 years - $1,557,967
after 20 years - $1,806,111
Or
One million dollars in 10 years is $744,094 in todays dollars
15 years is $641,861
20 years is $553,676
Hope these formulas come in handy (or at least provide some fun) for one or two of you out there in forum land.
Lily