Excel Formula question

gotWXdagain

gotWXdagain

Polished Member
So I'm tooling around in Excel and I'm looking for a formula that will answer this question:

If I put X dollars in a savings account this year, and adjust X for wage increase minus COLA each year thereafter, and account interest is Y rate, how much will I have in Z years?

Obviously there's going to be alot of ballpark there so I'll just estimate that if a wage increases 5% and COLA increases 3%, then wage increase minus COLA would be 2%. Again, completely ballparking here, but it'll be a good way to gauge what I'll be left over with at the finish line.

This is personal savings, and will supplement my 401K and whatever miracle SS nets me in 3-4 decades from now.
 
gotWXdagain said:
So I'm tooling around in Excel and I'm looking for a formula that will answer this question:

If I put X dollars in a savings account this year, and adjust X for wage increase minus COLA each year thereafter, and account interest is Y rate, how much will I have in Z years?

Obviously there's going to be alot of ballpark there so I'll just estimate that if a wage increases 5% and COLA increases 3%, then wage increase minus COLA would be 2%. Again, completely ballparking here, but it'll be a good way to gauge what I'll be left over with at the finish line.

This is personal savings, and will supplement my 401K and whatever miracle SS nets me in 3-4 decades from now.
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First, you're going to be wealthy. No, you will be (if you aren't already). Trust me. So kick back and relax. Your biggest problem will be allocating the best place for your investment dollars.

IMO, any cash above your emergency funds should be invested or have plans to be invested. I like to hold two years worth of expenses in cash for us - our jobs can go away at any time and it can be hard to find another, but that's just IMO. You will have another number in your mind.

Above that, assuming you are maxing your 401k and IRA, any funds should be placed in a brokerage account and either held in equities or slated for investment elsewhere like real estate.

Retirement accounts have some serious limitations - namely that you can't touch the 401k money until you turn 59 1/2 (unless you calculate withdrawals and quit your job) so it's good to have a post-tax account with a large balance as well. It allows immense flexibility - one good example is buying a house. It's always complicated to get financing lined up (and costly). If you purchase a house with cash you can then obtain a mortgage at your leisure and pull the money back out and invest it back into equities.

Another example is semi-early retirement...if your post-tax brokerage pulls in decent yearly income, you can use it to fund your lifestyle outside of what you are living, or slow down at work and bid minimum hours, etc. etc.

Remember, the only thing money can't buy is time, so make the most of it.
 
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gotWXdagain said:
So I'm tooling around in Excel and I'm looking for a formula that will answer this question:

If I put X dollars in a savings account this year, and adjust X for wage increase minus COLA each year thereafter, and account interest is Y rate, how much will I have in Z years?

Obviously there's going to be alot of ballpark there so I'll just estimate that if a wage increases 5% and COLA increases 3%, then wage increase minus COLA would be 2%. Again, completely ballparking here, but it'll be a good way to gauge what I'll be left over with at the finish line.
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It's been a week, so maybe you've found the answer already.

It sounds like you'd like to calculate the future value of an account, whereby you invest x dollars this year, then invest 2% more the next year, etc, at a constant interest rate for a certain number of years, assuming that you'll earn a constant interest rate.

As far as I know, there is no "formula" that will calculate a future value for uneven cash flows, however it's easy enough to build a model in excel that will help you find the answer. Here's a good one. If you still need help with it, PM me your email address and I'll send you a sample spreadsheet you can try.

 
I did something like that actually, just built a basic table where the end value of each year was how much I put in that year plus what was already there, taking into account ROIs, interest, and raises.
 
wheelsup said:
Why are you not investing your savings?!?

With inflation you will LOSE money keeping it in a bank account bearing <3% interest!
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1. For starters, I don't quite have enough right now, although based on how things are going I might be able to starting toward the end of the year.

2. My formula isn't really tied to one account, and it's just an idealistic projection.
 
wheelsup said:
Yes that's my point. Don't keep too much cash in savings.
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I think what he's saying is that for the average American, any financial savings vehicle that even comes close to matching inflation is simply out of reach.


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gotWXdagain said:
I think what he's saying is that for the average American, any financial savings vehicle that even comes close to matching inflation is simply out of reach.


Sent from my iPad using Tapatalk Pro
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I disagree. Brokerage accounts are free and many funds have very little minimum buy in. Vanguard is an excellent source of low fee index funds. People not giving priority to saving is an education problem and the benchmark of 10%-20% savings rate is so low it's laughable.
 
gotWXdagain said:
I think what he's saying is that for the average American, any financial savings vehicle that even comes close to matching inflation is simply out of reach.


Sent from my iPad using Tapatalk Pro
Click to expand...
You could get a brokerage account and invest in short term TIPS
 
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