Author Topic: How long to FI?  (Read 4399 times)

uppy

  • Stubble
  • **
  • Posts: 217
  • Location: Belize
How long to FI?
« on: February 07, 2014, 05:34:54 PM »
Noob investment math question here. How do I calculate the number of years to reach $X using compound interest formulas?

I thought I remembered the formula but I can't get it to make any sense...trying to calculate years to FI given a certain amount $ invested annually at say 7% interest rate of return.

In other words, how do I add in the amount I am investing each year into the formula?
« Last Edit: February 07, 2014, 05:38:47 PM by jrez »

juanofthesedays

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Re: How long to FI?
« Reply #1 on: February 07, 2014, 09:35:01 PM »
Have you tried using goal seek and a =fv() function in excel?

uppy

  • Stubble
  • **
  • Posts: 217
  • Location: Belize
Re: How long to FI?
« Reply #2 on: February 08, 2014, 09:49:25 AM »
Have you tried using goal seek and a =fv() function in excel?

Thanks juanofthesedays.

What's "goal seek"? I looked up and used an =fv() function and got these numbers:

$33,000 invested at the end of each year @ 7% interest would yield $455,942.78 at the end of 10 years.

Does this seem correct? I used "=FV(0.07;10;-33000;0;0)"



arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28444
  • Age: -997
  • Location: Seattle, WA
Re: How long to FI?
« Reply #3 on: February 08, 2014, 10:00:15 AM »
There's some basic tools like:
www.mustachecalc.com
and
www.networthify.com/calculator/earlyretirement

And an advanced, but amazing, tool in:
www.cfiresim.com
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

pom

  • Bristles
  • ***
  • Posts: 288
  • Location: Paris, France
Re: How long to FI?
« Reply #4 on: February 08, 2014, 10:02:12 AM »
Yes, it is correct.

Dont forget to take inflation into account. Usually I just reduce my expected return on assets by the expected inflation rate, it is a very good approximation.

Goalseek is under data, scenario analysis ... anyway in my version of excel.

You can also use the solver add on. To install it you can go to option, add on and chose the solver. It is a pretty cool tool for excel.

uppy

  • Stubble
  • **
  • Posts: 217
  • Location: Belize
Re: How long to FI?
« Reply #5 on: February 08, 2014, 11:14:13 AM »
Yes, it is correct.

Dont forget to take inflation into account. Usually I just reduce my expected return on assets by the expected inflation rate, it is a very good approximation.

Goalseek is under data, scenario analysis ... anyway in my version of excel.

You can also use the solver add on. To install it you can go to option, add on and chose the solver. It is a pretty cool tool for excel.

Awesome. I am actually using Calc, but it's usually pretty much the same.

Thanks all for the tips.

Re. Inflation rates: how do you estimate future rates of inflation? Historically it looks a little all over the place.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28444
  • Age: -997
  • Location: Seattle, WA
Re: How long to FI?
« Reply #6 on: February 08, 2014, 12:40:44 PM »
Re. Inflation rates: how do you estimate future rates of inflation? Historically it looks a little all over the place.

I use historical inflation (and returns) via cFIREsim
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

pom

  • Bristles
  • ***
  • Posts: 288
  • Location: Paris, France
Re: How long to FI?
« Reply #7 on: February 20, 2014, 08:34:08 AM »
Re. Inflation rates: how do you estimate future rates of inflation? Historically it looks a little all over the place.

I usually use 3% in average. The important thing is that the assumption that you makes is consistent with your return assumption.

You can't have 12% long term return on stock with a 2% inflation rate for exemple.