How to calculate Inflation adjusted future expense ?
To plan and invest accordingly to the future requirements, one needs to calculate the inflation adjusted future expense compared to present expense.
Suppose your monthly expense is 5000 and the inflation rate is 7%, you want to know what will be the monthly expense after 15 years ? It can be done by using below formula.
Future Amount =Present expense amount * (1+inflation%)^number of years
= 5000 * (1+7%)^15 = 13,795
13,795 is the amount you require per month after 15 years instead of present 5,000, with an inflation rate of 7%. If the inflation rate is more, the amount also increased accordingly
http://www.bemoneyaware.com/blog/understanding-inflation/
