Sunday, November 2, 2008

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
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.