10 Financial Calculators You Need to be Using!
In order to arrive at any destination we must first determine what is required for the trip to be a successful one. Financial calculators help us assess our current position and they even assist us in determining what is needed to achieve financial milestones. Below I have listed the most commonly needed financial calculators that will be needed on the wealth building journey.
1. Mortgage Calculator. This financial calculator allows you to predict your monthly mortgage payment.
2. Home Affordability Calculator. This useful tool allows you to plug-in your monthly income and debts, then reveals how much home you can afford.
3. Retirement Calculator. If you want to know how much you need to retire, this financial calculator will give you that magic number. It also will tell you your balance left over with the given life expectancy.
4. Interest Paydown Calculator. Use this tool to determine how long your debt will linger, based on the additional payments above your interest. This is very useful for attacking your debt snowball,as explained by Dave Ramsey.
5. College Savings Calculator. This simple financial calculator tells you the future cost of your kid’s college and even gives you the necessary monthly contribution requirements to meet your goal. It even allows you to choose what percent of the bill you intend to pay.
6. Compound Interest Calculator. Do you really want to analyze what the hell “P = C (1 + r/n) nt” means? This is why we use calculators! Compound interest is the secret to wealth. It is when the interest you earn, earns interest. Over time the numbers really look insane. I actually have an app on iPhone for this useful planning tool. I generally use an interest rate of 8% which is the average real return that can be expected using wise investing (long-term, no-load, index funds). *You can view my investments on my recommendations page.
7. Pay Debt Vs. Invest Calculator. Hey sometimes it makes sense to invest rather than invest. If you have $900 of disposable income after your $40,000 student loan minimum payment, should u pay extra or invest? Well there is no simple answer. If your loan was a 4% with a $250 min payment and it would take 160 months to pay off your $40,000 loan using minimum payments and 34 months using the extra funds. However if u invested the difference for 36 months you could have $36,000 sitting in a mutual fund and a loan balance of $31,000. You could continue for another two years and have a balance of $22,000 but $67,000 invested!
8. The “Rule of 72”. This nifty trick allows you to estimate the time it takes to double your money without using any calculator or pencil and paper. Simply divide the interest earned by 72 and the answer is the number of years required to double your money. Okay stop reading and give it a try. $10,000 invested earning 9% interest will become $20,000 in….
9. Time Value of Money. Hopefully you got the answer to previous problem (9/72 =8 years). The time value of money tells us that we need to invest to prevent inflation from eating our money. It also teaches us to plan for the future cost of things. A college education in 15 years will be four times the cost that it will be today. You can’t think that your goal is to save towards today’s tuition rates or spend today’s dollar.
10. Opportunity Costs. The benefit, profit, or value of something given up to acquire something else. This can be time, money, and many other things. In the financial space it centers around monetary opportunities. If I choose to leave $10,000 in my savings account because it makes me feel safe, the opportunity costs will be the difference of the gains from investing those funds.
There are tons of financial calculators out there. I simply have shared ones that I use often. In order to properly plan for the accumulation of wealth, you will need tobe familiar with many of the tools listed above. Thanks for reading, please subscribe to receive posts automatically!
*Disclaimer: This blog is not meant to give financial planning advice, it is simply giving an opinion based on logically data that can be retrieved from sources quoted within this article. There is no affiliation between this blog and any other site. Financial advice should be sought from a certified financial planner and financial decisions should be made per the readers own research and analysis. Investing involves risk and it is advised that no one invest without understanding fully the products that they are purchasing.