Financial calculators offer oversimplified projection and can come apart easily; why you must not take these as final word
financial goals and aspirations. We detest not being in command of our journey. Like an anxious mother, we fuss over the math.
How much money do I need for my retirement and for the kids’ higher studies? How much should I invest towards these goals? However, not many of us can count on a trusted financial adviser to show us the way. So we turn to online financial calculators. With just a few key taps, these nifty tools help us magically get a fix on the numbers.
But are these calculators really putting us on the right track or misguiding us with their instant remedies?
Online financial calculators are quite intuitive, helping you distill complex goals—retirement, children’s higher studies, house purchase—into a single figure. To arrive at that magic figure, the calculator will ask you to plug in a few numbers initially, along with some basic assumptions. For instance, a retirement calculator will ask you to feed in your current age and household expenses.
Next, it will ask you to make certain assumptions regarding your life expectancy, future expected rate of inflation, expected return from investments before and after retirement, etc. After the variables are fed in, the calculator gets cracking and instantly presents a set of numbers.
Suppose you indicated monthly expenses of Rs.75,000 at age 35, expected to grow at 6% every year till retirement at 60. The financial calculator suggests you need Rs.38.6 lakh to support your lifestyle immediately on retirement.
