Putting the time value of money to work for you

Picture this. It is the winter of 2045, you are retired and you have had enough of the cold winter days and long dark evenings. You would love to turn the lock on your front door for a few months and head south to the sunshine, perhaps inviting some friends to join you for Christmas lunch on the veranda, overlooking the sea.

Value of Euro about to be shredded

How much money will you have when you retire

 

Or perhaps you are a traditionalist, and you like the idea of spending Christmas at home, but wouldn’t it be lovely to treat the grandchildren to something special, like a trip to Lapland to see Santa and his reindeer.

For many  people reading this article, these options will be out of their reach in 2045, primarily because they will lack the financial resources to make it happen.

Today, the average person in their thirties or forties can expect to live to 90 and beyond, and surely it is worth spending a couple of hours understanding how your future will unfold over the following decades. The rewards could be well worth your while, giving you real choices which you can only dream about right now. The alternative is to find yourself locked into an existence where you will have plenty of time to look back and regret the decisions you made.

As an example, a bar of chocolate in 1985 cost 30c and today it costs about €1. By the time 2045 comes around you can expect a chocolate bar to cost say €3. Clearly you should take this rise in prices into account when planning for your future, otherwise you are going to be very disappointed when you get there.

Wouldn’t it be great if there was some way for ordinary people to realistically understand how much the money they are saving today will really buy them in the future. In fact there is such a method and it is known as the Net Present Value (NPV) technique. It has been in existence since the 1930’s and today it is widely used by businesses to help them make long term investment decisions. In fact this technique should also be used to help you plan for the future.

Ablata.com has developed a suite of short videos which show you how to assemble the data and make the NPV calculations which help you make better long term investment decisions. Remember that it is the same technique that is used both at a business and at a personal level. Therefore if you learn this method you can apply it immediately within your current business to help choose the best business projects,  but also you can use it at a personal level to optimise how your personal investments perform. So learning how to carry out the NPV calculation could be good for your short term career, which in turn will lead to higher remuneration, which you can then invest with an eagle eye, to make your dreams come true.

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