Here I am giving you a formula to calculate the future maturity value of an investment. The positive side of this formula is, it is taking care of the inflation adjusted calculation. This is also useful to calculate the inflation adjusted future expense of your family compare with present expense. Knowing this formula is a must while doing the financial plan because of its capacity to predict and calculated inflation adjusted future returns from your investment portfolio.
Financial planners frequently using this formula to calculate the inflation adjusted future expense amount requirements for there clients by identifying there present expenses. They are also using this formula to identify the possible inflation adjusted returns that meet the above expense amount. Comparing both results, they will be able to identify and advise the proper investment vehicles for there clients.Suppose your monthly expense is 5000 (any currency or in any country) and the inflation rate is 7%, you required to know what will be the monthly expense after 15 years instead of present 5000? You can use this formula:
=Present expense amount * (1+inflation%)^number of years
Example to the above given scenario with 7% inflation and after 15 years:
=5000*(1+7%)^15 = 13795 /-
5000 = present monthly expense
7% = is the inflation rate
15 = Number of years
13795 = is the amount you required per month after 15 years with an inflation rate of 7%The same formula you can use to identify the maturity value of your investment after a period of time. In this case, the 7% will changed to the interest percentage you are receiving to your investments.
You can also read the article about how the compounding interest formula works. This is very useful to identify the real rate of returns after a period of time in a compound basis interest calculation.
Hope you enjoyed the same and I have not missed any major points. If so, do not forget to comment here and inform to modify this article.