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Sometimes people ask me how to calculate the numbers I use in my examples. Well, it depends on the example. Sometimes I download historical stock or index prices into a spreadsheet and model the growth. Often it’s using an online compound growth calculator. But for something simple, you can do it right on your calculator!β
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Here’s how this formula works: If you want to grow a number by 10% you multiply it by 1.1. So 10% growth on 10,000 is 10,000 X 1.1 = 11,000.β
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If you want to grow it by 10% TWICE, you just multiply it by 1.1 again. So two years of 10% growth on 10,000 would be 10,000 X 1.1 X 1.1 = 12,100.β
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Note that you can rewrite 1.1 X 1.1 as 1.1 ^ 2. (The power operator ^ is shown on the calculator as xΚΈ). β
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So 10% growth of 10,000 for two years is 10,000 X 1.1 ^ 2. So if you want to do 40 years, just enter the formula shown in this example!β
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Did you know about the scientific calculator on your iPhone?! Is this too much math!? β
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Thanks to @mattyj48 for the idea!β
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As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.β
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-Jeremyβ
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