Using the Investment Saving Calculator with Quicken 2004

By Stephen L. Nelson

The folks at Intuit provide several nifty little calculators (most are dialog boxes) with Quicken. At the very least, the calculators should make your work easier. And if you invest a little time, you should gain some enormously valuable perspectives on your financial affairs.

Adding up the savings

Suppose that you want to know how much you’ll accumulate if you save $2,000 a year for 35 years, using a stock mutual fund that you anticipate will earn 10 percent annually. Use the Investment Savings Calculator to estimate how much you should ultimately accumulate. To use it, follow these steps:

1. Choose Planning –> Financial Calculators –> Savings.

Quicken displays the Investment Savings Calculator dialog box.

2. Enter what you’ve already accumulated as your Opening Savings Balance.

Move the cursor to the Opening Savings Balance text box and then type the amount of your current investments. If this amount is zero, for example, type 0.

3. Enter the Annual Yield that you expect your investments to earn.

Move the cursor to the Annual Yield text box and type the percent. If you plan to invest in the stock market and expect your savings to match the market’s usual return of about 10 percent, for example, type 10 (don’t type .10).

4. Indicate how long you plan to let your investments earn income.

Move the cursor to the Number Of drop-down list box and select the time period appropriate to your investment planning. (Usually, you will select Years.) Then move the cursor to the Number Of text box and indicate how long (enter the number of time periods) you want to maintain these investments. For example, if you select Years in the drop-down list box and you plan to let your investments grow for 35 years, you enter 35.

5. Enter the amount you plan to add to your investments every period.

Move cursor to the Contribution Each text box and enter the amount you plan to add.

6. Enter the anticipated inflation rate.

Move the cursor to the Predicted Inflation text box and enter the inflation rate. By the way, over the twentieth century, the inflation rate had averaged just over 3 percent.

7. Indicate whether you plan to increase your annual contribution as a result of inflation.

Select the Inflate Contributions check box if you plan to annually increase — by the annual inflation rate — the amount you add to your investment portfolio. Don’t select the check box if you don’t want to inflate the payments.

8. After you enter all the information, click Calculate.

The Ending Savings Balance field shows how much you’ll accumulate in present-day, uninflated dollars: $137,363.54. Hmmm. Nice.

If you want to know the amount you’ll accumulate in future-day, inflated dollars, deselect the Ending Balance in Today’s $ check box.

To get more information on the annual deposits, balances, and so on, click the Schedule button, which appears at the bottom of the Investment Savings Calculator dialog box. Quicken whips up a quick little report showing the annual deposits and ending balance for each year you plan to add into the savings. Try it. You may like it.

Trying to become a millionaire

So, you want to be a millionaire some day.

To find out how to realize this childhood dream, use the Calculate For option buttons, which appear on the Investment Savings Calculator dialog box. With these buttons, you click the financial variable (Opening Savings Balance, Regular Contribution, or Ending Savings Balance) you want to calculate. For example, to determine the annual amount you need to contribute to your investment so that your portfolio reaches $1,000,000, here’s what you do:

1. Select the Regular Contribution option button.

2. Select the Inflate Contributions check box.

3. Deselect the Ending Balance in Today’s $ check box.

4. Enter all the other input variables.

Remember to set the Ending Savings Balance text box to 1000000 (the Ending Savings Balance field becomes a text box after you select the Regular Contribution option).

The Investment Savings Calculator computes how much you need to save annually to hit your $1,000,000 target.

Starting from scratch, it’ll take 35 years of roughly $2,500-a-year payments to reach $1,000,000.00. (All those zeros look rather nice, don’t they?) Note that this calculation assumes a 10 percent annual yield.

The Investment Savings Calculator assumes that you will add to your portfolio at the end of the period — what financial planners call an ordinary annuity.