Time Value of Money

The basic thing in financial management is about Time Value of Money. In this article I'll talk specifically about investing and the value of the money in the future, while ignoring the other factor (inflation, etc). When we invest our assets, we have a hope that our assets will grow much more than nowadays. We would like to receive the highest return as possible. Unfortunately, sometimes people tend to invest their assets into a "not so profitable" media, which only makes a small return in the future.

So, how we determine which media is profitable in the future?

SIMPLE, we called it as Time Value of Money, which indicates the money that we invest will grow in the future. And here is how to calculate our money in the future:

For example, in 2014 I invest my $1.000 money in X Bank with interest 10% p.a for 2 years. So how much money will I in 2016? Here how to calculate:

It is easy right? So in 2016 I have $1.210 in my bank account and I have a return for $210 in 2 years.
This formula is simple, but it is very practical to count the return of your investment in the future. With this formula, you can figure out whether the investment is profitable or not.
Also if you want to have like example $2.000 in 5 years, how much money should you invest now? You can use this formula, just do the reverse.
If you have any concern, please comment below and I'll give you my assistance.


Regards,

Kevin Glanz
Financial Planner