Using Financial Calculators to Gain Control of Your Finances

Jon DulinBy: Jon Dulin

February 21, 2018February 21, 2018

Using Financial Calculators to Gain Control of Your Finances

In the old days, if you wanted to figure out how you were doing financially, you had to sit down with a pen, paper, and a calculator and do some math. But as technology has advanced and more people took an interest in their finances, more and more financial calculators began to pop up.

Today, there are hundreds, if not thousands of financial calculators for you to choose from. There are calculators for budgeting, investing, and paying off debt. Just about every topic is covered by a financial calculator and if it’s not, you can use a closely related one to get a rough answer.

As great as this sounds though, not all financial calculators are created equal. Many have shortcomings that could lead you down the wrong path.

Today I am going to show you what to look for in financial calculators so that you can choose the one that best fits your needs.

3 Things To Look For In Financial Calculators

#1. Understand How It Works

All calculators when forecasting the future need to have built in parameters in order for them to work. You need to know how they work in order to get a good idea.

For example, when looking at a retirement planning calculator, does it estimate stock market return using average returns, historical returns, or a monte carlo simulation? On the surface this might not seem like a big issue, but it is.

Using average returns means the calculator is simply relying on a random annual return assumption. This could lead to a higher ending balance than you might otherwise realize in the real world.

And if you enter your data into a calculator that uses average returns and one that uses historical returns, you are going to get two different answers even if you enter in the exact same financial details.

The bottom line is to make sure you know how the calculator works. Otherwise you might get a result that looks good on paper but has no possibility in real life.

#2. Ease Of Use

There are some great financial calculators out there. Then there are some that are virtually worthless. And then you have some really good ones but they are impossible to use. By this I mean the page has so many advertisements that you cannot figure out what is an ad and what is the calculator.

The point of a financial calculator is to help you get the information you want. So make sure you end up picking one that does this easily for you. If you find one you love but it is next to impossible to use, note the features you like and search some more for a similar one that is easier to use.

#3. Ability To Save

Most calculators out there are for one time use only. You plug in your numbers, get your result and you are done. While this is perfectly fine for estimating how much your money will grow, if you are doing any kind of long-term planning, the last thing you want is to have to re-enter all of your information every time you want an update.

Many free calculators allow you to save your data. Some might require you create a free account. While I am not a huge fan of this, I have done it for some calculators that I find extremely valuable.

Top Financial Calculators

Now that you know what to look for in financial calculators, I am going to share some of my favorites on a few popular personal finance topics.

  • Budgeting: I enjoy this calculator for its ease of use and how detailed you can get.
  • Net worth: I use a spreadsheet to calculate my net worth. But if you want to use a calculator, this is a good option.
  • Debt reduction: You can’t go wrong using a calculator from the debt destroyer Dave Ramsey. Here is his calculator.
  • Retirement planning: Hands down this is the one I like the most. It takes a little to get used to but, is very powerful and accurate.

Remember, there are many others out there for these categories, the ones listed are my favorites. Also remember there are many other financial calculators for other personal finance topics as well.

Final Thoughts

Using financial calculators to help you get a handle on your finances is a great thing to do. I regularly use them to answer my burning money questions. If you haven’t started to use any, I highly recommend you do.

You will learn a lot about your money and how saving and growing it can help you reach your financial goals. And using a calculator to show you reaching your goals is a great way to stay motivated over the long term.

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Jon Dulin

About the Author:

Jon writes for Money Smart Guides, a personal finance blog that helps readers get out of debt and start investing for their future. He has been investing since he was 16 and has learned a lot through the years. He uses these investment lessons to help him be a more successful investor today. Also check out his contributions to Compounding Pennies and ETF Trends.

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