# 10bii Calculator for Personal Finance Tutorial

Ever wonder how much of five dollar starbucks really costs you in the long run or how much letting that cash sit in your checking account is really going to cost you as the years go by how about the true cost of credit cards and why despite all the people who default on them they're still powerhouse conglomerates these credit card companies you might be surprised at the answer do you have a hawk's eye on your retirement portfolio and find encouragement through your own financial analysis of that portfolio my name is Joel L sultani and. This is my first video tutorial on the 10 b2i financial calculator you can find this app in the android app store or the apple app store kind of looks like this it's by in a day development for a little bit more information you'll find them at in a day development calm my name is joe la sultani and i'm an average Joe I work as an accountant and office manager I do a little bit of payroll among other things and I really have a avid interest in personal finance I recently joined the dominate your debt group.

Shout out to all those debt dominators out there and I first learned about this calculator as a tool for real estate investors that's the industry I'm in apparently it's a highly valued tool among them when i sat in a workshop I discovered that the same functions could really be applied to personal finance as you'll see our lives do change and.

Do the variables in our finances the intent of this video is to share the idea behind using the financial calculator to gain a grasp on financial success Albert Einstein once said compound interest is the eighth wonder of the world he understands it earns it he who doesn't pays it although it can be purchased as an actual calculator the smartphone is available digitally and you can find some versions on the web site on the web as well.

Let's get started can maximize this I'm going to just go ahead and explain the five simple buttons we're going to be using here all along the top n is the number of periods in the calculation it is the loan or investment term of 10 to 30 years or. However, long you want in months.

We can have 340 months for example let's go ahead and clear this out.

We can have like 300 months once you hit the number and then the end that saves it right there next is the interest per year it's the annualized interest rate right here.

You can do like you know 15 let's say fifteen percent. Okay, and then the PV stands for present value or starting balance of your investment and some of our upcoming examples.

You could go like a thousand dollars and payment that is how much additional funds you're going to be adding or withdrawing over the course of each period.

Let's say you wanted to take out a hundred dollars. Okay, in this case when you're investing you're going to have it in negatives like that. Okay, and future value. This is basically what the end goal is what kind of a future value do you want it allows us to calculate what we want the future balance to be the end of the last period in the scenario.

We could have it be zero or we can have it be a million ideally you're going to fill out four of the five of any of these with information and solve for the fifth for example.

Let's go ahead and jump into some great examples let's look at the opportunity cost section here let's look at the effect of a hundred thousand dollars from inflation in 30 years.

I did a little bit of the homework inflation and here we can see inflation every year but I'm really focused on let's say the last 10 years just kind of where it's stable doubt I've got an average inflation about 2.6 three percent.

We'll use that for inflation 2.63 because that's hurting us we're going to put that there and then let's say we said we're going to do this for 30 years 30 years x 12 12 months 360p payments 360 periods next we've got a hundred thousand dollars we want to see what the effect is one hundred thousand dollars how much is it can be worth with this inflation over 30 years we're not going to be making any changes to this additions or subtractions during these periods we just want to see what it's going to be worth.

Now we calculate for the future value and we see that our hundred thousand dollars is now worth less than half of that at 45 thousand three hundred and ninety dollars goes to show if the saying goes if you're not making it you're losing it with the starting balance of five hundred thousand dollars if I was depositing five hundred dollars a month into a checking account and was absorbing the losses from inflation what would my future value be after five ten twenty years well let's start with five years. Okay, say five hundred thousand dollars and we're putting in I'm sorry that's gotta have to be a negative. Okay, and we're putting in five hundred dollars a month for one hundred and ten thousand dollars at the end of five years.

Even if we're putting money in we're still losing money.

There's a point where you're going to break even the amount of money lost dude in value lost due to inflation is going to match how much money you're putting in let's do 128 months let's get in there it goes lower and lower 20 years same thing and it's going down.

How much would it cost to break even.

Simple is that we just want to know how much would it cost us in payments to keep our initial 500 thousand.

We solved for payment almost eleven hundred dollars every month that's how much you're losing due to inflation at five hundred thousand dollars.

Next question is how long how long would it take for its value to be cut in half.

We want to solve for n.

We have 250 thousand dollars 0 payment after 300 almost 16 months the value of five hundred thousand dollars is cut in half interesting huh my investments to date through the online lending platform Lending Club has netted me an annual thirteen percent return.

We'll use that as an example in most of these scenarios the value of a five-dollar starbucks cup of coffee on thirteen percent return in 10 years.

That's 120 months \$5.00 present value zero payment what's what's that can be worth in 10 years how much is a five dollar starbucks cup of coffee gonna be worth to me hmm 18 bucks alright 20 years that's 240 \$66 Wow let's look at 30 x 12 360 at five dollars starbucks cup of coffee with my thirteen percent return by time i retire in 30 years is going to be 241 dollars that's amazing now keep in mind that doesn't count for inflation.

If you want all you have to do is subtract 13 for my average 2.63 percent and that's what we'll be making in today's dollars.

What is it in today's dollars. Okay, 110 dollars it's a lot of coffee.

Let's say you're in your 20s and you've got more time 480 months 310 dollar starbucks cup of coffee how much would refinancing to a lower interest rate save me let's look at 340 months on a five percent return let's say that's what we're paying an interest on our loan say it's a two hundred thousand dollar loan future value is zero and we're going to solve for payment.

That's what our amortization would look like that's what our monthly payment would be in principal and interest now to find out we want to look at the total interest paid.

We're going to go here select the dimerization and we'll see the total interest paid is 174,000 over the course of 30 years a little less than 30 years let's say I'm 20 months in on the 30-year loan.

Let's go ahead and go back and look at refinancing it.

We're refinancing to a new 30 years. Okay, and let's say we refinance to 3.3 seventy-five percent.

Now we're going to keep the future value at 0 please and advertising well our payment is not only eight hundred and eighty-four dollars how much is that in total interest 118,000 dollars 118 and change that's a difference of sixty three thousand five hundred and three dollars.

In this case I'd say it's pretty safe to refinance if I'm going to keep the loan over the entire duration let's look at the cost of credit card debt. This is really what's going to affect the most of us since we have credit card debts at some point in our lives most credit cards charged somewhere around eighteen percent. Okay, let's say we owe eight thousand dollars and let's say we're paying two hundred dollars month that's going to be probably your minimum payment on eight thousand dollars with a future value of zero because we want to pay it off it's going to take a 62 months 61 and a half months about sixty two months to pay it off it's actually longer than this as credit cards compound interest daily not monthly that's quite a long time at eighteen percent huh opportunity cost of credit card debt total interest paid go ahead and look at the amortization is 4308 dollars.

This. This is the cost. This is the immediate cost of the interest at your pain let's look at the opportunity cost of that 4308 dollars that you paid an interest let's say you had invested that at a thirteen percent return over 30 years how much did what's the real cost of the interest you paid on that debt two hundred and eight thousand dollars makes you really think twice about keeping that interest at that high interest debt around doesn't it now remind you this isn't exact but it'll give you an idea of what we're messing around with here interest really does play a big factor if we're looking at a five percent return on our money it's a lot it's a much different story as is compounded compounded monthly you really want to aim for a high-interest investment but you also want to manage your risk.

The retirement investing and withdrawal scenarios one time ten thousand dollars at age 40 till retirement at a thirteen percent return thirteen percent return we're already at age 40 s.

We have 20 years right let's say we retire at 60 it's 240. Okay, what's that going to be worth to us 132 thousand dollars and change it's not bad let's take a look at 30 years that's 360 what's the time value of that additional ten years it goes up to 400 almost four thousand dollars see the Siri and. This is off the same amount of money. This is why it's not impossible to retire and start saving to retire I'm sorry to start saving it to retire at forty but that additional ten years really does make a big difference let's see what happens if you start working toward it when you're 20 years old managed to save up ten thousand dollars and nothing else that 483 because 1 million seven hundred and sixty-two thousand dollars is that amazing what the additional ten years will do for you there it's compounding and that's the beauty of it let's use and to solve for the future value to find out what an account should be at during any point in time let's say with this \$10,000 we want to know where we can approximate maybe at in ninety two months 26,000 not bad say 200 months 86,000.

As you can see the value grows through compounding interest and we can actually go through and see at any point in this amortization it's really meant for loans in this case principles being added back in.

Really what we're just doing is looking at the balance that crazy. This is per month alright let's look at the monthly contribution requirement to reach 1 million dollars by retirement at age 50.

We only have 10 years 120 months we want 1 million dollars there we go.

We want to find out let's say we have nothing invested right now how much would you need to put in every month to get a million dollars in 10 years at a thirteen percent rate almost forty one hundred dollars a month now let's see if you started saving at age 40 you have 240 months to get to 60 Wow only 882 a month now let's say you started when i started age 30 only two hundred and twenty-eight dollars at a thirteen percent rate to get a million dollars again we're not factoring in inflation here.

We can do 10.3 seven our calculation from earlier. Okay.

That looks that actually looks right in today's dollars I would need to put in about four hundred and nine dollars in a month to reach my goal now let's say some of you young ones are starting at age 20 how much would you need to put in only 141 dollars a month some of you spend more at starbucks a month than that.

We're going to solve for the present value to figure out what your initial investment needs to be for your retirement goal.

Let's say 480 months 10.3 7 interest payment is 0 future value is a million I'm sorry present value is 10,000 we're going to solve for n. This is how many months it would take for you to reach a million dollars in today's currency values i should say off at ten thousand dollars that's forty four point six years let's say we don't make as much let's say we don't want to take a lot of risk how many months would it be little bit more seventy-two years just not attainable at such a low return.

You're going to have to be careful you really want to get that keep a consistently higher return now let's say you have it in a CD or your checking account or something right not even two point three seven percent that's you know after inflation that's like a five percent return good luck I don't think you're going to live to be 194.

That's it's really important that we maintain a high return a consistently high return or at the very least towards the beginning you want to really assume that risk and try to get a high return towards the beginning because as time goes by as you get closer to retirement you don't need is consistently high of a return because you've already made a large portion of your money now we want to solve for interest rate.

Let's say we're looking at 20 years and we have ten thousand dollars right and payment is zero yeah and a future value of a million dollars what consistent interest rate would I need for at 20 years off at ten thousand dollars in order to get a million dollars twenty-three percent now let's look at it at thirty years fifteen percent. Okay, 30 years ten thousand dollars I can make a million dollars off of fifteen percent do 40 years eleven percent eleven and a half how much to withdrawal to draw down to zero based on life expectancy.

You've already got your nest egg million dollars let's make that our present value. Okay, now we've got a future value of zero and let's say we're making after inflation 10.3 seven and we expect to live from the age of 62 let's say 80.

That's 20 years how much can i safely withdrawal about nine thousand nine hundred a month at that consistent return and once again in the amortization we can see where we are at in any step all the way down to zero.

That's everything for now thanks for watching I encourage you to try it out and share some interesting calculations if you have any questions you can reach me at Google master at outlook com thanks again.

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