Spending Smarter - Daily Spending Calculator: Definitions

(Calculator | Example | Definitions | Application Notes)

	At what (future) age do you plan to retire? If you are already retired, or want to fix another point in time, put some age in the future. For example, if you want to compare across 10 years, simply add 10 years to your current age. Expected Inflation Rate (p.a.) It is a bit tricky to project item-specific inflation rates over long time horizons, but a good estimate for the inflation rate should be something between 1% and 5% per annum. Expected (nominal) Investment Return (p.a.) In theory, if you do not spend money on the following items, you would be savings the funds at the following interest rate. For example, the money might be placed in a bank account, or might be invested in a mutual fund. Daily/Weekly Habit Please enter a number for the number of units you purchase per day or week. (Selected from the Weekly/Daily field) Total This is the total amount you spend on this item per week. It is the sum of the daily purchases, multiplied by seven days per week, and then multiplied by the price. And, this is added to the weekly purchases. Per Unit, Cost This is an estimate, assuming the average inflation rate is applicable to the item in question, over the entire time horizon. If you refrain today, how many units can you afford per WEEK in retirement? If, instead of spending the money today, you save it at the above mentioned interest rate, then when you retire, you will be able to afford many more of these same items... We assume average retirement of 20 years. Total Weekly Discretionary Habit Spending. In any given week, this is the total amount that you spend on the above discretionary items. Total Spent Until Retirement If you multiply your daily spending by the number of days until retirement, you obtain the total amount spent. Future (nominal) Value if You Save Instead If, instead of spending the money, you invest the funds at the above interest rate, you will have the following amount of money when you retire.