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Benefit of Spending Less
Reducing your spending can be worth more than you might think. Use this calculator to see just how much your budget reductions may be worth if you were to invest them. View the value of this new potential nestegg both with and without taxes factored in.
Definitions
- Monthly savings
- The total amount that you could invest per month by spending less. This amount is calculated by adding up your potential entertainment, budget and utility savings.
- Annual rate of return
- This is the annually compounded rate of return you expect from your investments. The actual rate of return is largely dependant on the type of investments you select. For example, for the last thirty years the average annual rate of return for domestic equity stocks has been about 10%. Savings accounts at a bank pay as little as 2%.
- Years to save
- The total number of years you plan to save.
- Federal tax rate
- The federal tax rate you expect to pay on your taxable investments.
- State tax rate
- The state tax rate you expect to pay on your taxable investments.
- Total savings before taxes
- Total value of your savings before taxes are taken into account. Most regular savings accounts and investment accounts are taxable. However, if your savings is being invested into a tax deferred or tax free investment this total may be important to you.
- Total savings after taxes
- The total amount you would have accumulated in a taxable account. All taxes are assumed to be paid as your earnings accrue.
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