Every once in a while I really start thinking about the time value of money, and I decided to come up with a way to figure out how much potential interest I’m losing by buying a product instead of investing that same amount for retirement. This calculator is the result.
Enter your age now, and the purchase price of something you’d like to buy. If you wish, adjust the retirement age and interest rate. Then click Calculate. And see just how much you give up by buying something now instead of saving for the future.
UPDATE: A friend pointed out to me that (1) this doesn't include inflation, and (2) 8% is too high of a rate for the default. My response: (1) no, it doesn't include inflation; but inflation doesn't change the amount of money at the end of the investment period, just its value; so a calculator like this is still accurate. I added a field to show what that dollar amount is worth in today's dollars. (2) 8% is quite achievable in long term investment accounts like those for retirement, which is what I was illustrating here. If you are investing in money market or savings accounts, the interest rate will be drastically lower.
2 comments:
So basically...stop eating out so much.
Got it!
This is pretty awesome. Oh yeah, and depressing. I like the comment by Lalis!
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