excel
http://www.wisebread.com/taxonomy/term/13466/all
en-USHow to Calculate Future Value, and Why It Matters
http://www.wisebread.com/how-to-calculate-future-value-and-why-it-matters
<div class="field field-type-filefield field-field-blog-image">
<div class="field-items">
<div class="field-item odd">
<a href="/how-to-calculate-future-value-and-why-it-matters" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/crystal_ball.jpg" alt="Crystal ball" title="Crystal ball" class="imagecache imagecache-250w" width="250" height="144" /></a> </div>
</div>
</div>
<p>I love financial functions on spreadsheets, and one of my favorites is <a href="http://office.microsoft.com/en-us/excel-help/fv-function-HP010342545.aspx">@FV</a>. This function enables you to calculate the <a href="http://www.buyupside.com/articles_other/excelfvfunction.htm">future value</a> of a stream of payments. You have to make assumptions about interest rates, but you can use the function to project the value of investments. For example, a simple-to-make formula lets you know that if you set aside $2,000 per year for 10 years and earn 5% each year, you'll have $25,000 at the end of the term. (See also: <a href="http://www.wisebread.com/investing-101-5-essential-steps">Investing 101: 5 Essential Steps</a>)</p>
<h3>Where to Find Future Value (@FV) Functions</h3>
<p>You'll find @FV available in spreadsheets from Microsoft (Excel), Google Drive (or its predecessor Google Docs), Open Office, and more. Look for financial and other types of functions on the toolbar under "Insert" or the icon that looks like an E. I particularly like Microsoft's version because there are prompts embedded in the function that help me write the formula.</p>
<h3>How to Write an @FV Formula</h3>
<p>To create a formula that calculates future value, put in a series of numbers based on your best estimate. In Excel, the formula is @FV (rate, nper, pmt, [pv], [type]). Here's what those abbreviated words and acronyms mean:</p>
<p><strong>Rate</strong></p>
<p>The rate is the interest rate or investment return that you'll earn over the life of the investment. You can enter this number in a couple of ways. For example, 6% annual rate could be entered as 6% or .06. Note that if you are making payments monthly or quarterly, then you would need to divide the interest rate by 12 (months) or 4 (quarters). Enter .06/12 for monthly payments; .06/4, quarterly payments.</p>
<p><strong>NPER</strong></p>
<p>NPER is the number of time periods in which you will make payments or contributions. For example, if you are planning on contributing $2,000 to a Traditional IRA, Roth IRA, or SEP-IRA for 20 years, then the number of periods equals 20. However, if you are contributing $300 monthly to a 401(k) over 20 years, then the number of periods is 20 (years) X 12 (months) = 240. (Remember to divide your interest rate by the number of periods if you are making contributions periodically during the year; the interest rate for the 401(k) formula would be .06/12, which is the interest rate divided by number of months).</p>
<p><strong>PMT</strong></p>
<p>This number is the fixed payment or contribution made without fail over the number of periods specified.</p>
<p><strong>PV</strong></p>
<p>This number is the present value, upfront contribution, or the starting balance of the investment.</p>
<p>Typically, when I do future value calculations on a stream of payments, I use "0" (that is, zero) as the present value because the account is new and has no value yet. But, in reality, you often start saving with a base amount (see my calculations of the future value of current retirement savings in <a href="http://www.wisebread.com/how-much-money-will-you-need-to-retire">How Much Money Will You Need to Retire?</a> spreadsheet). For example, you can calculate the future value of your 401(k) in 20 years based on a 5% interest rate, annual contribution of $3,000, and amount that you have amassed in the account. If the account value is $12,000 now, then the formula is @FV (5%,20,-3000,-12000,0) = $131,037.</p>
<p>Note that you can omit the present value altogether if the starting account balance is zero.</p>
<p><strong>Type</strong></p>
<p>The type references the timing of payments or contributions. This entry is optional, and I usually put this value as "0" (zero) for simplicity's sake. But you are supposed to put "0" if the contribution or payment will be made at the end of the period (for example, December 31, 2012) and "1" if you make the contribution at the beginning of the year (for example, January 1, 2012) as interest will accrue and investment gains will presumably be made throughout the year if you start earlier rather than later.</p>
<p>Do the calculations both ways to see the difference. For example, if you save $5,000 yearly for 25 years and earn 5% but start at the beginning of the year (type = 1), then the future value is over $250,000, but if you wait until the end of the year to invest (type = 0), then the value grows to $238,635.</p>
<h3>Why Calculating Future Value Matters</h3>
<p>You may want to know what the value of your savings and investments will be worth in the future. In my article <a href="http://www.gobankingrates.com/personal-finance-olympics/mindless-ways-save-million-julie-rains/">Mindless Ways to Save a Million</a>, I illustrated how various account balances could grow over a working lifetime through <a href="http://www.wisebread.com/pay-yourself-first-what-it-means-and-how-to-do-it">automatic savings</a>, such as direct deposits, drafts, automated investments, and regular contributions. Specifically, I looked at how the following types of accounts may grow:</p>
<ul>
<li>Regular savings</li>
<li>401(K)</li>
<li>IRA (Traditional or Roth)</li>
<li>SEP-IRA (IRA for self-employed individuals)</li>
<li>HSA (tied to a high-deductible health plan)</li>
</ul>
<p>You will likely experience varying rates of interest and investment returns on these accounts. For illustration purposes, I calculated future value using interest rates and investment returns that ranged from 1% to 8%. If you make regular deposits to these accounts over 30 years (in amounts ranging from $100 per month to $8,000 per year) and don't cash them out, then you can expect to save more than $1.5 million.</p>
<p>The difficult aspects of this scenario are:</p>
<ol>
<li>Investing without fail over a period of 30 years</li>
<li>Earning high enough investment returns consistently</li>
</ol>
<p>Nevertheless, formulas using the @FV function show the potential for future value. So, if you want to know whether saving X amount each year is really worth it, use the future value function to help you make a decision.</p>
<p><em>Do you use the @FV to calculate possibilities? How has this formula shaped your decisions? </em></p>
<a href="http://www.wisebread.com/how-to-calculate-future-value-and-why-it-matters" class="sharethis-link" title="How to Calculate Future Value, and Why It Matters" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/julie-rains">Julie Rains</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div>InvestmentRetirementTechnologyexcelfinancial calculationsfuture valueWed, 01 Aug 2012 10:24:41 +0000Julie Rains945274 at http://www.wisebread.comExcel: The Most Underrated Software You Already Own
http://www.wisebread.com/excel-the-most-underrated-software-you-already-own
<div class="field field-type-filefield field-field-blog-image">
<div class="field-items">
<div class="field-item odd">
<a href="/excel-the-most-underrated-software-you-already-own" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/iStock_000015680335Small_2.jpg" alt="Surprised man opening computer" title="Surprised man opening computer" class="imagecache imagecache-250w" width="250" height="137" /></a> </div>
</div>
</div>
<p>There’s a program on your computer you’ve used hundreds of times that can do all kinds of amazing things:</p>
<ul>
<li>It can grab information from the web and create crazy calculations and fancy charts.<br />
</li>
<li>It can take pretty much any kind of data file and allow you to play with the data in an infinite number of ways.<br />
</li>
<li>It can take thousands of pages of text and give you a really good idea of what the main points are.<br />
</li>
<li>It can make a lot of processes automatic and save you hundreds of hours of mindless work.<br />
</li>
<li>It can beat Garry Kasparov at chess.*</li>
</ul>
<p>Microsoft Excel is one of those programs we’ve all used at least a little bit, but most of us haven’t even scratched the surface of what it can do.</p>
<p>There’s a reason why Excel costs $139 and Microsoft Office costs $279 — this is really powerful software that’s capable of some truly amazing things.</p>
<p>But very few of us take full advantage of it.</p>
<h2>The Power of Excel</h2>
<p>I got my first exposure to Excel’s power a few years ago with an incredible <a href="http://www.thewriterscoin.com/2011/03/25/excel-and-efficiency/">stock-analysis spreadsheet</a> that blew my mind. Then, a couple of weeks ago, I got stuck with a really tedious project and decided to <a href="http://www.thewriterscoin.com/2011/03/18/when-its-ok-to-disobey-your-boss/">disobey my boss</a> — I found a better way thanks to some developing ninja Excel skills.</p>
<p>It saved me from wasting a bunch of hours of my day, and it made me look like a smart dude. (See also: <a href="http://www.wisebread.com/5-efficient-ways-to-boost-productivity">5 Efficient Ways to Boost Productivity</a>)</p>
<p>But let’s face it — learning Excel isn’t fun unless it’s going to help you solve an immediate problem. It’s like an umbrella — we only care about it when we need it. Once we’re done, we throw it in the back of the closet and forget about it. But it pays off to learn some of the basics for the next time you run into a roadblock.</p>
<h2>Learn by Doing</h2>
<p>The next time you get stuck with a tedious task of collecting or organizing data, Google what you’re trying to do along with “excel,” and you’ll get an answer. You may find it tricky, because you have to come up with the overall plan and then figure out how Excel can help. But odds are there is a way Excel can make things easier for you.</p>
<p>So if you’re trying to take thousands of emails and you want to parse out some of the data, you’d search for "parsing data excel." It won’t work 100% of the time, and you may have to learn some Excel lingo, but <a href="http://www.wisebread.com/how-to-become-an-expert">eventually you'll get it</a>.</p>
<p>There are other places to pick up some Excel basics. <a href="http://blogs.office.com/b/microsoft-excel/">Microsoft’s Excel blog</a> is a good place to start. And pay attention to any and all Excel sheets you come across to see how they do certain tasks.</p>
<p>Most important of all: If you meet people who are masters at Excel, ask tons of questions, get their email addresses, follow them on Twitter, and follow them on Facebook. These people will be a HUGE help as you learn all the cool, advanced stuff Excel can do. Believe it or not, people are still more useful than Google.</p>
<h2>Improving Your Value</h2>
<p>Excel is a powerful piece of software than can help you not only be more efficient at work, but make you look good. If you get really good at it and become the “go to” person for any and all advanced Excel tasks, you’ve just become one of the most valuable people at your workplace.</p>
<p>Think about it this way — if you’re the doorway to getting things done faster and more efficiently, you just turned yourself into a VIP. And VIPs are invaluable to every company.</p>
<p>Anyone else out there have a story of how Excel made your job easier and/or made you look good?</p>
<p><em>*Microsoft Excel may or may not be actually able to beat Garry Kasparov at chess.</em></p>
<a href="http://www.wisebread.com/excel-the-most-underrated-software-you-already-own" class="sharethis-link" title="Excel: The Most Underrated Software You Already Own" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/carlos-portocarrero">Carlos Portocarrero</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/topic/life-hacks/technology">Technology articles from Wise Bread</a>.</div></div>Education & TrainingProductivityTechnologycomputer softwareefficiencyexcelMicrosoftMon, 25 Apr 2011 09:36:56 +0000Carlos Portocarrero525856 at http://www.wisebread.com