Follow
A Simple Investment Calculator Works Magic….
Are your investments on track to provide enough money for what you want in YOUR life? OR do you need to take action ASAP to reach your goals? In this post, you’ll find out with this powerful yet simple investment calculator that gives you a good estimate of how much your savings will be worth in the future. And of this is all based on where you are right now so you can tweak your financial plan.
Don’t Lose Sight of What You Want
Like many women, for years I avoided addressing my long term financial future with plenty of very valid reasons. For example, kids, home management, parents, errands, earning an income with a focus only on the present moment, and even shorter term investing. While positive cash flow and income to support it are certainly worthy of your daily attention, so is the foundation you’re building for the future. Financial security for life is the major reason you invest. Yet, it’s easy to lose sight of this reality when dealing with daily life.
Focus on the Future, At Least a Little
We all tend to address more urgent and pressing issues than thinking in terms of 10, 20, or even 5 years into the future. I get it! Right now, current expenses include a long delayed, now mandatory master bathroom remodel (thanks to a leak!), a new oven, and property taxes. While my husband and I are both entrepreneurs loving our work, in my late fifties I am more aware of that upcoming day when we will want to really scale back our work time. Most people call this “retirement”, when you’ll passively live off of your money. While passive income exists, work equates to greater wealth accumulation.
Backtrack a few years when the worry of outliving my money was one of those wicked, middle of the night fears, which can feel overwhelming at 3 a.m., but are easy to shove during the light of day. Back then, being “busy” kept me too busy to address my financial fears head on.
Then one morning that I still remember clearly, I got a big awakening. While enjoying my morning ritual of tea over largo music at my breakfast table, I read an article about the amount of money it would take to maintain our current lifestyle during retirement.
Beer or Champagne?
The article broke the retirement savings levels into 4 lifestyle categories:
- Beer and Peanuts
- Filet Mignon and Champagne
- Private Jet Travel
- Private Jet Owner
Holy cow! I don’t even drink beer and we were barely up to that category!
Suddenly, what had once been “important but not urgent” became very urgent. I realized that each passing year was another missed opportunity to create my own financial destiny. Yet, I was too focused on the present (lifestyle spending and income) to truly secure my future. I knew in that moment unless I made some changes immediately, our nice lifestyle, complete with organic food, a couple of nice vacations every year, and a comfortable home, would be a challenge to maintain for life.
Calculated Tweaks
The changes I made began with the clarity that came from a simple investment calculator. So, I created this same calculator on my site. (Click here to use my free investment calculator.) I’ll show you in this post how to use it so you can see if you’re on track to make your money last your lifetime. Play with your own numbers and discover the magic of making your money work FOR you, instead of the other way around! You can use this investment calculator for short-term goals, but take time to consider your long-term future, or retirement. Consider your financial independence number.
If you don’t have the exact numbers to enter, that’s okay. Go with your best guesstimate for now! The main thing is to take two minutes to do this right now. Take imperfect action! The world of investing is imperfect actions; it’s about estimates and probabilities.
Conservative Estimates
You’re definitely not going to know the exact amount to enter for the interest rate, which you can also call investment return here. This number is an unknown. Financial planners and advisors have to use estimates, and you can, too. I suggest conservative estimates.
Here’s all you need to do…
- Invested Amount-Enter your approximate current savings right now. This is the amount of money that you have invested to grow over time.
- Annual Addition-Enter about how much you will add every year to your savings. Note: This is a great place to get inspired to choose the $50 clearance boots over the almost as good $300 fully priced boots!
- Interest Rate-Enter about how much your investments will grow each year. This is the big unknown. Note: For a well-diversified portfolio in stocks, bonds and cash, 5 to 8% is generally obtainable, on average, over long periods of time exceeding 20 years. Money in a savings account earning interest only will earn the going interest rate, which is now 1 to 2%.
- Number of Years-Enter the number of years until your goal (retirement, financial independence, college, dream trip).
- Compounding Percentage-Enter the % of investment earnings you’ll leave in your account to compound
As you can see, better investment returns and additional income sources can be used to improve your wealth accumulation. These are the keys that drive your financial future!
Basic Yet Effective
This is a very basic calculator. Many calculators have pension, social security, and other factors. Some calculators have so many potential entries that they can be overwhelming, leading to procrastination. If you want all of this, you can Google and find more complex investment calculators. Taxation and inflation are two important factors that you may want to consider, as well.
This is a great starting calculator for anyone to gain powerful insight into whether or not what you are doing now is taking you where you want to be in the future! This little tool will either get you motivated to earn and grow more money, OR help you relax about enjoying your money. Regardless, this investment calculator is sure to inspire you to reach your financial goals!