Accounting formulas?

LukeZ · Feb 16, 2017

This is very off topic. In my defense, the 'General Discussion' tab reads "Talk about, well, just about anything.... Keep it clean and respectful! NO POLITICS".
This is not car related. Anyone here good at managing money?

What is the formula for an annuity that that I add to each month, and simultaneously grows at a set interest rate annually?

For example, if I have an annuity that I add $500 to each month, and at the same time grows by 7% every year for 40 years. It is not as simple as compound interest.

Second, what is the formula for a fund that I take a set amount away from every month, yet simultaneously grows by a set interest rate every year?

For example, if I have an account with $100,000 in it that I take $5,000 from each month, yet grows by 2% annually.

Sorry again its so random. I cant find much on the internet. Perhaps we have a member who is an accountant? Thanks!

ssn696 · Feb 16, 2017

Oh, my. Engineering Economics. Them was the days. I think this is the one that fits your first question, choose first column, annual compounding:

http://www2.latech.edu/~sajones/Senior Design Web Pages/Homework 7 on Engineering Economics.htm

Your second question is an annual decrement. I am less confident, but I think it uses the same formula, with a negative number for A (?).

This one may also be helpful:

http://www.webpages.uidaho.edu/~mlo...ering_Economics_Excerpt_from_FE_Reference.pdf

Did you win the lottery and are trying to decide how to take payment?

ssn696 · Feb 16, 2017

I think your second question is depreciation. See if page 4-7a gets you where you need to go:
http://www.valpo.edu/student/asme/FE Slides/EngEconSlides.pdf

LukeZ · Feb 16, 2017

ssn696 said:
Oh, my. Engineering Economics. Them was the days. I think this is the one that fits your first question, choose first column, annual compounding:

View attachment 60889

http://www2.latech.edu/~sajones/Senior Design Web Pages/Homework 7 on Engineering Economics.htm

Your second question is an annual decrement. I am less confident, but I think it uses the same formula, with a negative number for A (?).

This one may also be helpful:

http://www.webpages.uidaho.edu/~mlo...ering_Economics_Excerpt_from_FE_Reference.pdf

Did you win the lottery and are trying to decide how to take payment?

No winning tickets for me haha. But seriously, thank you for your help. Ill read over the links you posted and hopefully it takes me to my answer.

My task is to design a program in Java that will take certain inputs from the user regarding how many years they plan to work and how many years they expect to be in retirement. Among other things, based on how much they think they can live on each month and how much the government pays every month (assuming social security isn't going anywhere), it tells you approximately how much money you need saved up by the first day of your retirement to live comfortably.

Good old computer science. Thanks again, ssn696.

pontiacgp · Feb 16, 2017

LukeZ said:
No winning tickets for me haha. But seriously, thank you for your help. Ill read over the links you posted and hopefully it takes me to my answer.

My task is to design a program in Java that will take certain inputs from the user regarding how many years they plan to work and how many years they expect to be in retirement. Among other things, based on how much they think they can live on each month and how much the government pays every month (assuming social security isn't going anywhere), it tells you approximately how much money you need saved up by the first day or your retirement to live comfortably.

Good old computer science. Thanks again, ssn696.

is this a project you need to do for a course you are taking?

LukeZ · Feb 16, 2017

pontiacgp said:
is this a project you need to do for a course you are taking?

Yessir, sure is. The thing I at least like about some of the projects we are given is that they could have real-world applications, such as this project dealing with personal finance and economic planning. Its not just designing stuff that asks for your favorite color and spits out your horoscope haha.

pontiacgp · Feb 16, 2017

LukeZ said:
Yessir, sure is. The thing I at least like about some of the projects we are given is that they could have real-world applications, such as this project dealing with personal finance and economic planning. Its not just designing stuff that asks for your favorite color and spits out your horoscope haha.

wouldn't it be better to do your own research and learn how to do than to ask others for the answer....

LukeZ · Feb 16, 2017

pontiacgp said:
wouldn't it be better to do your own research and learn how to do than to ask others for the answer....

Wouldn't it be better to aimlessly wander the internet for accounting formulas that I know nothing about? I mean if that's your way of doing things then more power to you. I believe I am using my resources in an honest fashion. Its not like I am learning any less or taking away from my own education.

FYI, I am writing the program myself. Its not like I am copy/pasting it right from the internet. I was just wondering about some equations. Ever hear of The Beatles? "I get by with a little help from my friends"

LukeZ · Feb 16, 2017

Alright so the first formula regarding an annuity that is simultaneously added to regularly and grows on interest annually checks out.

The second one is still a mystery. An account that has regular, equivalent amounts deducted from it each month (or each year, no difference), yet simultaneously grows by a set interest rate once per year? Still, the initial help is much appreciated. Those engineering economic links are very helpful, ssn696

UNGN · Feb 16, 2017

Real annuities are insurance products and not really investments. Deposited money doesn't buy an appreciating asset but is an IOU and the balance goes to pay others' current insurance claims.

When you die, the annuity money usually disappears unless you have a lower payout and actuarial tables play as much a part of annuities as compounding interest does. You can get a result using ordinary math, but it would be hard to justify actual annuity rates using ordinary math, as much of their money is made "on the catch" and not on the "money in, money out".

With insurance companies, there is pretty much always "a catch".

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