Goal Planner Calculator

What is a Goal Planner Calculator?

The Goal Planner Calculator is a financial tool that allows users to develop and accomplish their personal financial objectives. Users can enter their goal parameters, such as the desired savings amount, investment timeframe and expected return on investments to determine the yearly and monthly investment needed to achieve their goal. Moreover, this calculator allows users to adjust the future value of the desired savings amount for inflation.

How Can a Goal Planner Calculator Help You?

A Goal Planner Calculator can help you in multiple ways. Some of them are listed below,

1. Clarify your Financial Goals: It will assist you in recognising the monthly investment required to accumulate a certain wealth, i.e., turning vague aspirations into concrete targets. 

2. Calculate Realistic Savings Plan: Depending on the defined target amount, timeline and expected returns, it tells you how much to save regularly to stay on track. 

3. Tracks Progress: By referring to the graph, you can analyze your investment performance and make adjustments if you are running behind on schedule.

4. Helps In Decision-Making: It helps you in comparing different investment options offering different returns and helps you understand how your monthly investment declines or increases across different asset classes.

5. Optimise Time & Resources: With the help of the Goal Planning Calculator, you can understand the impact of starting early or adjusting your investment amounts for inflation. 

How Does a Goal Planner Calculator Work?

A Goal Planner Calculator is simple. It takes a few important details from you, and then you will find out how much you need to save or invest to achieve your financial goal over time. Below is how it generally works:

1. Input your Financial Goal Details: Enter your target amount,  i.e., how much you want to save (eg, ₹ 10,000), the timeline (eg, 5 years), expected rate of return (eg  6%), and whether you want to adjust your future financial goal for inflation or not.

2. Calculation Happens Behind the Scenes: The calculator uses mathematical concepts and formulas to calculate the inflation-adjusted future value and the yearly and monthly investment required to achieve the goal. 

3. Receive a Savings Plan: The calculator gives you a comprehensive overview of your savings or investment plan, visual representations such as progress bar chart, to enhance user experience. 

Formula to Calculate Goal Calculation

The calculator takes the following input values:

1. I want to save (P): Enter your financial goal or the amount you want to save for a future expense.
2. Time Period (T): Enter the number of years across which you wish to save the desired amount.
3. Return on Investment (R): Enter the expected rate of return of your investments
4. Inflation Adjuster: Select whether you wish to adjust your financial goal for inflation or not.

The calculation of the outputs is given below:

1. Future Value of your Financial Goal: If you don’t want your amount to be adjusted for inflation, then this amount is the same as the amount entered as input. However, an inflation adjusted amount can be calculated as:

Inflation-adjusted FV = P * (1 + 6%) ^ T 

Where, 

Inflation-adjusted FV = Financial goal amount adjusted for inflation of 6%

P = The amount you wish to save

T = Investment time period 

Note: 6% is taken as inflation.

2. Yearly Investment Amount = Inflation-adjusted FV / ((((1 + R)^T) – 1) / R) * (1 + R)) 
3. Monthly Investment Needed = Inflation-adjusted FV / ((((1 + (R/12))^(T*12)) – 1) / (R/12) * (1 + (R/12))))

Example of Goal Planning Calculation

If you’re aiming to save ₹10,00,000 over the next 10 years, with an expected return of 12% per year and taking inflation at 6% into account, you’ll want to figure out how much that money will be worth in the future. Then, based on that, you can calculate how much you’d need to invest on a yearly basis or through monthly SIPs to reach your goal. Here is an illustration for the same. 

Based on the information above, 

• P = ₹10,00,000
• T = 10 years
• R = 12%

Case 1: If the we don’t want inflation adjustment, then the outputs are:

• Inflation-adjusted FV = P = ₹10,00,000
• Yearly Investment Amount = 10,00,000 / ((((1 + 12%)^10) – 1) / 12%) * (1 + 12%)) = ₹50,879
• Monthly Investment Needed = 10,00,000 / ((((1 + (12%/12))^(10*12)) – 1) / (12%/12)) * (1 + (12%/12))) = ₹4,304

Case 2: If you want inflation adjustment of 6%, then the outputs are:

• Inflation-adjusted FV = P * (1 + 6%) ^ T = 10,00,000 * (1 + 6%) ^ 10 = ₹17,90,848
• Yearly Investment Amount = 17,90,848 / ((((1 + 12%)^10) – 1) / 12%) * (1 + 12%)) = ₹91,116
• Monthly Investment Needed = 17,90,848 / ((((1 + (12%/12))^(10*12)) – 1) / (12%/12)) * (1 + (12%/12))) = ₹7,708

How to Use the Pocketful Goal Planner Calculator?

You can use the Pocketful Goal Planner calculator using the below mentioned steps:

1. Enter your Goal Amount: Begin by specifying the amount you want to save. Example: ₹ 10,00,000

2. Set your Time Horizon: Adjust the slider to select the investment timeframe for your goal. You have the option to choose a duration ranging from 1 to 40 years. 

3. Select Expected Return on Investment: Just move the slider to pick what you expect to get back each year. For eg, you might anticipate a return of 12%, which lines up with what we see in long-term returns of equity investments.

4. Choose Whether to Adjust for Inflation: Select whether you wish to adjust your goal for inflation (the inflation rate is set at 6%), which means you’re saving more to maintain the purchasing power at the end of the investment period.

5. Get your Investment Plan: Depending on your inputs, Pocketful’s Goal Planner Calculator will instantly display the calculated amounts, i.e., 

• Future Value of Your Financial Goal 
• Yearly Investment Amount
• Monthly Investment Needed

Furthermore, make sure that you save the required amount to reach your financial goals. The calculator also adjusts the goal amount to account for India’s average inflation rate.