Help Needed for Formula Looking at Impact of Inflation

Help Needed for Formula Looking at Impact of Inflation

Postby Guest » Mon Nov 21, 2022 1:06 pm

Hello (ps sorry I couldn’t format formulas correctly):

I’ll start saying I am no maths expert at all (that’s why I’m here), just in my spare time I am interested in learning about and designing financial algorithms and formulas and recently came across one I could reconfigure to calculate how much compound inflation one’s wages could take in the space of ‘n’ years before being eclipsed.

i = Income e = Expenditure n = Years

(((i/e)^1/n )-1)x100

Eg: (((25,000/20,000)^1/5 )-1)x100 = can sustain an inflation rate, year on year of 4.564% for 5 years

Then I changed it slightly to include the savings of the individual.

s = savings

((((i+(s/n))/e)^1/n )-1)x100

But I realised that this wouldn’t work, as each year one’s savings would be a little more as you would add the result of the leftover of i - e, but even this figure would change each year as inflation ate into what would be left over.

As I said, I’m no expert, just someone who enjoys basic financial calculations, so I cannot work out a neat (or a messy one!) formula that could be used to encapsulate all of this - all the changes in savings year on year and therefore produce a correct answer.

Any help would be most welcome!

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