There is a resource that is available to you * right now* for free that if used just one time has the potential to make you excited about investing in a way you could not expect. In fact, you probably have one installed on your computer right now. You can use Microsoft Excel to complete a Future Value equation and determine the amount of money something can grow into given consistent investing over a long period of time and a given interest rate.

Ok. Take a breath. This isn’t going to be hard, and you don’t have to use Excel. So if you’re not a wizard in Excel, you should use this free future value calculator from calculator.net. Alright. Click on that link so you can benefit fully from the following exercise. Good! Now, let’s start playing with numbers.

## BUT MATH IS SCARY, RIGHT???

Before we do, a word on my philosophy when it comes to numbers and math. I disliked math a lot in middle school. Actually, I hated it and here’s why: **SHOWING YOUR WORK IS A RIDICULOUS REQUIREMENT**. There are other ways to verify if a kid knows the math and concepts. For example, a one-on-one period of approximately five minutes could (with a reasonably competent math teacher) reveal if the student is able to get the answer without showing each of eight separate steps on little grid-lined paper. For many kids, showing your work might be helpful in their learning process; however, reducing the score of a test simply because the student did not show their work yet fully understands the concepts and got the right answer is ridiculous.

Fortunately, in 1642 the calculator was invented, and now we can do several steps at once using this fancy device and we won’t have to practice our penmanship writing down a bevy of unnecessary numbers on the aforementioned grid-lined paper. But I digress.

## Actually, Math can be quite cool and motivating

Back to the Future Value Calculator. This calculator can be helpful to show you the cost of something over a long period of time (such as the overconsumption of fancy coffee from a retail coffee chain, paying high costs for cable, or any subscription service.) It can also show you how much you can expect to earn if you consistently put money aside for retirement. Before my financial awakening, it was nothing for me to spend $10 on restaurant food four times a week at work. When I joined the Traffic Unit in 2010, I did that fairly consistently for approximately 5.5 years. So, let’s break that down a bit.

4.33 weeks in a month on average comes out to approximately $173.33 a month in just work food. Yuck. I am about to do the math on how much I spent over 5.5 years given the $40 a week food cost and it is going to make me sick. I know it. Here it goes.

173.33 x 12 = $2,079.96 a year. We’ll say $2,080 for simplification purposes. Then we can multiply $2,080 by 5.5 and we get $11,440. Some days lunch was cheaper, some days it was slightly more expensive, and I probably brought my lunch a dozen times in that 5.5 years, so I think the final number might be closer to $11,000, a sickeningly high number for lunch over 5.5 years.

But that isn’t the real cost. What if I had packed my lunch every day? The cost of lunch would likely have fallen from $10/average to around $2/average or $2,200 over 5.5 years. That would have resulted in a savings of $8,800 over the same time. Wow. What a savings! Simply packing my lunch could have paid for a nice, ten-year-old automobile. Now, we can take the difference and determine what would have happened if we invested the money monthly instead of eating restaurant food with it.

And here is where the Future Value calculator begins to show its value. (See what I did there?) If we assume a consistent cost of $2/meal, that results in the savings of $32/week ($8/meal) resulting in a food cost of $34.64 dollars a month (remember, 4.33 weeks a month.) That’s a savings opportunity of $138.69/month vs. the $173.33/month cost. So we’ll set up a Future Value calculation where we invest $1,664.28 ($138.69 x 12) a year, with a current balance of zero.

Number of periods: 5.5 years, Starting amount: 0. Interest rate: 7%. Periodic deposit: $1,664.28.

Instead of simply multiplying $1,664.28 times 5.5, we use the future value calculator to show our actual investments would yield **$9,900.15**. Had we simply saved the money under the mattress, we only would have yielded $9,153.54, a difference of $746.61.

## Fancy Coffee, Fancy Price-tag

I do enjoy fancy coffee, but not nearly as much as it costs. Many people go to coffee shops every day and spend $5 on coffee.

How much would this cost them if they did it every work day over 30 years? Using the handy Future Value calculator, this is an easy question to answer. 52 weeks in a year at $25 dollars a week is $1,300/year.

Number of periods: 30. Start amount: 0 Interest rate: 7% Periodic Deposit: $1,300. Future value would be $122,799.02. This is a huge amount for coffee. So keep the fancy coffee days for special occasions.

# Finally, the motivating part!

As a government employee, I have access to a 401k and a 457 plan. This means I can defer up to $36,000 a year pre-tax. If you add the $11,000 a year for our Roth IRAs and the $6,750/year with the HSA (that can also be invested in Vanguard index funds), you get to $53,750 a year that you get to put in the Periodic Deposit part of the Future Value calculator. How much would you have if you saved that much and assumed a 7% interest rate over the next 10, 15, or 20 years? Here’s how it shakes out:

Start amount: 0. Interest rate: 7%. Periodic Deposit $53,750.

10 years: **$742,634.08**

15 years: **$1,350,684.93**

20 years: **$2,203,507.11**

There you have it. Consistent savings is the path to large numbers in the bank account, but the best part of the calculator is how it shows you the interest vs. principle amounts below. You can take a gander and see where the interest starts to compound with larger numbers, resulting in huge interest returns vs. the annual principle added.

Take a look! Thanks for reading.