Calculate Future Living Cost

I mention before that the Real Inflation you should care about is Your Own Inflation Rate, not those published by goverment or experts ... ( read here for old post )

In other to calculate future living cost, first you list down your living cost now.  The 4 basis of living standard are Cloth you wear, Food you eat, Place you stay in and Transport that brings you around.

Then determine your own inflation rate.

Lastly using the FV formula to calculate your future living cost.

PV - Present Value ie. $570 x 12

i - interest rate ie. 3% or 0.03

n - number of years ie. 17 and 20

FV - Future Value, ie. the results I shared below

( more on FV formula )

For exampe, using above figures, the cost of living for

17 years later is $11,305.48

20 years later is $12,353.80

instead of only $6,840 a year today.

if you don't have calculator at hand, you can also use Rule of 72 to do a quick estimation in your head.

Rule of 72 - a quick calculation check

There are only 3 numbers involved:

1. 72

2. Interest rate

3. Number of years to Double your money

(Number of years to Double your money) = 72 / (interestRate)

or

(interestRate) = 72 / (Number of years to Double your money)

For example, back in the last posting where it says :

CAR is the BIGGEST Threat in Malaysia Personal Finance Planning

There are one of the calculation says $3 in 1995 to $11 in 2008 is 10%.

Basically there are about 14 years from 1995 to 2008.

$3 double once is $6 and $6 double again is $12 (close to $11).

So it takes $3 to double Twice  in 14 years or 

it doubles every 7 years !

72 /  7 = 10

So doubling every 7 years means the interest rate is about 10% !!

more formulas

Other than the common formula and also rule of 72, these are useful formulas too ...

Compound Interest Future Value

FV = PV * ( 1 + i )^N

PV = present value

FV = future value (maturity value)

i = interest rate in percent per period

N = number of periods

Annuity

FV = PMT * [ ( ( 1 + i )^N - 1 ) / i ]

FV = future value (maturity value)

PMT = payment per period

i = interest rate in percent per period

N = number of periods

Simple Interest Amortized Loan Formula

PV * ( 1 + i )^N = PMT * [ ( 1 + i )^N - 1 ] / i

PMT = the payment per period

i = interest rate in percent per period

PV = loan / mortgage amount

N = number of periods

Online Calculators