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There is no dearth of financial calculators available on the internet and sometimes novice investors get baffled by the sheer number of calculator links that come up for a simple search query like 'goal sip calculator' or 'goal calculators'. How does then one choose the calculator that will precisely provide an answer to what the investor was looking for in the first place?
There are many calculators available on the internet that can help you find answers to some of your financial planning queries. But here is a list of the basic must-try calculators that everyone should try because these will help you understand the need for a financial plan in the first place and how should you start working towards your financial goals in life.
Inflation Calculator
This calculator will help you do some reality check in life. If you think that you are doing well in life, you have a stable source of income that gives you a decent lifestyle while you still manage to do a bit of savings, then this calculator is going to throw up some surprises. The inflation calculator helps you find the amount you'll need in future to meet your current expenses or how much will an expense costing say Rs. X today cost you after certain no. of years. Historic data shows inflation rate has averaged 7.7% in our country for the period 1969 to 2013. Now you can imagine how inflation can dent your savings in a big way. Hence you need a smart investment plan to beat inflation in the long-term. Let's take an example to simplify it for you. Suppose you want to buy a SUV 4 years later that is costing 10lakhs today. You'll need 12.16lakhs to buy the same SUV after 4 years if inflation averages 5% during this period. Actual inflation could turn out to be higher than our assumption in which case, you'll need more than 12.16 lakhs. For instance, if inflation turns out to be 6% instead of 5%, you'll need 12.62 lakhs for the car.
Goal SIP Calculator
This calculator is the next one you should try once you have figured out how much your future expense for a particular goal requires after adjusting for inflation. It could be a SUV for yourself or a medical degree for your teenage daughter or simply a family vacation aboard after few years. The Goal SIP Calculator helps you calculate the monthly SIP amount you need to invest in a mutual fund over the goal horizon so that you can meet the future expense with ease when it comes due. You need to put the future value of your goal, the time period over which this goal needs to be achieved and the rate of return you expect your investment should give you. Don't forget to add the inflation rate to your expected return else you'll be staring at a huge shortfall when you need to fulfill the goal. In our example, our SUV would require 12.16 lakhs in four years from now at 5% inflation. Thus, you can set goal amount as 12.16 lakhs, time period as 4 years and expected return as 15% which includes 5% inflation. Expected return is your expectations from the investment you are making and will vary for each person. If you are investing with a conservative approach in a balanced fund or fixed income fund, you must lower the expected return as compared to your expectation from an equity mutual fund. The calculator gives you a monthly SIP amount of Rs. 18,642 in our example. This is the amount you need to invest in a mutual fund through monthly SIP where you expect to make 15% annual return.
SIP Calculator
If you are one of those smart investors who has already started planning for his/her life goals and have a few SIPs in place, this calculator is the one for you. It'll tell you the future value of your SIPs and you can compare that with what the inflation calculator gives you. If the future value of your SIP comes out to be more than what the inflation calculator gave you for the same goal, you are really smart! But if the future value given by the SIP calculator turns out to be lower than what the inflation calculator shows, you really need to step-up your SIP now else you will be staring at a shortfall when the time to fulfil your.
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