RSSOne of the fundamental principles of finance is the concept that $ 1 today worth more than $ 1 a year from now. The reason is two-fold.First, a dollar will probably buy fewer goods and services in the future due to the destructive power of inflation. Second, if I have the dollar in my hand today, I can invest it and earn aa return in the form of dividends, interest or capital gains.The best advice anyone can ever give you money is to firmly establish this concept of money in the head. The key to financial prosperity is the potential value of every dollar that comes into your hands. In fact, I think of cash as a seed - you can eat either (spend it) or invest it (sow it).
To illustrate this, let's assume a $ 20 bill on the side of the road.They are faced with
two possibilities: You can use the money in your retirement account tax-free stick or go to invite for dinner. "It's only twenty dollars!" Say to yourself and go for the dinner. In reality you are spending far more. With the time value of money formula calculated to invest the real economic cost is not the money.
To illustrate this, let's assume a $ 20 bill on the side of the road.They are faced with
two possibilities: You can use the money in your retirement account tax-free stick or go to invite for dinner. "It's only twenty dollars!" Say to yourself and go for the dinner. In reality you are spending far more. With the time value of money formula calculated to invest the real economic cost is not the money.
FV = pmt (1+i)n
FV = Future Value
Pmt = Payment
I = Rate of return you expect to earn
N = Number of years
FV = Future Value
Pmt = Payment
I = Rate of return you expect to earn
N = Number of years
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