Question for someone good in math (Formula)

by SuperRyan

Posted: 9 years ago 3 replies

OFF TOPIC

Let's say I have $100,000 in the bank. ($Z)

I want to know how many years I can live without working
if my monthly expenses are $X and inflation is Y% per year.

What would be formula I need to put in excel to have this number?

Thank you

Ryan

whateverpedia 9 years ago

You also need to factor in the interest rate your money is earning in the bank.

I'm not sure how the formula looks when written on paper, however it's easy to work out using Excel or a financial calculator.
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- Star Man 9 years ago
  
  Originally Posted by SuperRyan
  
  Let's say I have $100,000 in the bank. ()
  
  No, why not tell how much you actually have?
  
  Originally Posted by whateverpedia
  
  You also need to factor in the interest rate your money is earning in the bank.
  
  That's right. You have to factor in that 0% interest.
  
  Originally Posted by whateverpedia
  
  I'm not sure how the formula looks when written on paper
  
  How can you not be sure?
  
  m = month, let's say October.
  remainder(m) = remainder(m-1) - [ expenses(m) * (1+inflation) ]
  At the end of October you'll have whatever you had at the end of September less October's expenses. The inflation doesn't affect the money in your bank account. The amount stays the same, the buying power decreases. So you can omit the inflation factor altogether, because your expenses will reflect it anyway. Or if your expected monthly expenses are constant then you multiply it with the inflation as shown in above formula. If you expect to spend $1K a month and the inflation is 6%/year. Then your actual monthly expenses will be 1K * 1 + (6%/12) = 1000 * 1.005 (0.5% month) = $1,005
  
  How it looks written on paper depends on your handwriting.
  
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David Beroff 9 years ago

Here's how it would look:

It turns out that $100k won't even last four years, not long enough for inflation to make a significant difference, (in comparison to being able to predict future events very accurately). At 3% constant inflation, $2,000 of expenses will turn into $2,239.96 by the last month, (month 46).

The relevant formulas are:
C6: =C1
B7: =$C$2 * (1 + $C$3) ^ (A7 / 12)
C7: =C6 - B7
A8: =A7 + 1

and then copy/paste down for as many rows as is necessary.

The B column is multiplying the current expenses by the inflation rate to the power of the amount of future time in years, (i.e., number of months divided by 12).
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