Calculator Inputs
Example Data Table
| Scenario | Current amount | Inflation | Years | Future equivalent | Purchasing power if unchanged |
|---|---|---|---|---|---|
| Moderate inflation | $10,000.00 | 5% | 10 | $16,288.95 | $6,139.13 |
| High inflation | $50,000.00 | 10% | 7 | $97,435.86 | $25,657.91 |
| Monthly compounding | $25,000.00 | 6% | 15 | $61,352.34 | $10,187.06 |
| Short horizon | $1,200.00 | 8% | 3 | $1,511.65 | $952.60 |
Formula Used
- Inflation factor: F = (1 + i/m)^(m·t)
- Future equivalent (same purchasing power): FV = PV · F
- Purchasing power of unchanged amount: Real(PV) = PV / F
- Erosion: Erosion% = (1 − 1/F) · 100
- Approx. real return: Real ≈ (1+r)/(1+i) − 1
Contributions are modeled as an annual growing series paid at each year-end. The growth rate increases the yearly deposit, while the return grows the accumulated balance.
How to Use This Calculator
- Enter your current amount, inflation rate, and time horizon.
- Select a compounding frequency that matches your assumptions.
- Optionally add income, expenses, return, and contribution settings.
- Click Calculate to view results above the form.
- Use Download CSV or Download PDF for reports.
Purchasing Power Erosion Over Time
Inflation works like a fee on cash. At 5% a year, prices rise about 1.63× over 10 years, so a 10,000 budget behaves like 6,139 today. Use the factor in this calculator to convert any present value into its future equivalent. As a shortcut, the rule of 72 estimates a doubling in roughly 72/5 ≈ 14.4 years. Even moderate inflation compounds quickly over multi‑decade goals.
Budget Projections for Essential Expenses
Fixed budgets fail when variable prices move. Enter your monthly expense to project a like‑for‑like lifestyle cost. For example, 2,000 per month at 6% inflation becomes about 4,793 after 15 years (≈2.40×). If your housing and food mix inflates faster than the headline rate, test a higher scenario. Comparing two rates shows how sensitive long horizons are to small differences.
Income Targets and Pay Benchmarks
Income must grow to keep real purchasing power stable. The calculator estimates the future salary needed to match today’s annual income using the same inflation factor. If you earn 60,000 now and inflation averages 3% for 20 years, the matching income is about 108,367 (≈1.81×). Use this as a negotiation benchmark and to size emergency funds, insurance cover, and retirement contributions.
Real Returns Versus Nominal Returns
Nominal investment returns can look healthy while real outcomes lag. Add a nominal return assumption to see inflation‑adjusted growth. The calculator also shows an approximate real return: (1+r)/(1+i) − 1. For instance, 7% nominal with 5% inflation is roughly 1.90% real. When real return is low, higher savings rates and shorter cash horizons usually matter more than chasing yield. Compare real results to your objective.
Savings Contributions and Plan Resilience
Regular contributions can offset inflation if they grow with income. This tool models annual deposits that increase by a chosen growth rate and compound at your return assumption. Compare the inflation‑adjusted portfolio total to your current purchasing power goal. If the real total falls short, adjust one lever: extend the horizon, raise the annual contribution, increase contribution growth, or reduce the target spending level through budgeting.
FAQs
What does “future equivalent” mean?
It is the amount you would need in the future to buy what your current amount buys today, given the inflation rate and horizon you selected.
Why is purchasing power shown “in today’s money”?
It converts a future nominal value back into today’s currency value by dividing by the inflation factor, helping you compare goals and budgets on a consistent basis.
Which inflation rate should I use?
Start with a long‑run average for your country, then run conservative and high scenarios. Essentials like housing and food may inflate faster than overall consumer prices.
How does compounding frequency change results?
More frequent compounding slightly increases the inflation factor and investment growth for the same annual rates. Pick the frequency that best matches how your assumptions are quoted.
How are contributions modeled?
Contributions are added at each year‑end and can grow annually by your selected contribution growth rate. The tool then compounds the accumulated balance using your return assumption.
Can I rely on these numbers for decisions?
Use results for planning and scenario testing, not as guarantees. Actual inflation, returns, taxes, and fees vary. Confirm key decisions with up‑to‑date local data and professional advice.