How To Use Financial Calculators

People are always looking for a better way to manage their finances - and in this day and age, financial management has never been more important. A powerful tool for accomplishing that goal is the use of a financial calculator. These are designed to calculate payments, solve for interest rates, and even solve for the projected value of investment and retirement accounts. You simply input values into the program and it will do the rest. It's pretty simple and easy right? Well, not quite. You might want to first understand how it works, and what it can really do for you.

They come in many different forms, since each is designed for a specific set of calculations. However, they all have a common set of functions that are used to perform those specific functions. There are five keys that represent the most often used variables on a financial calculation. They are "N" for number of defined periods, "I" for interest rate, "PV" for present value, "PMT" for applied payments, and "FV" for future value  A financial calculator, if well-designed, will solve for all of these values.

To begin using your financial calculator, you must first establish the starting, or present value, of the loan, annuity, or whatever it is you are working with. For instance, if you are taking out a loan with a timeframe for which it is to be repaid such as a home, and would like to calculate what the payments (PMT) would be, you need to know the start value (PV), interest rate and its type (I), and the defined period (N).  If this tool is being used for the sake of doing a projection of the future value for an investment or retirement account, you would need to know the start value, interest rate, defined period, and applied payments (PMT).  This calculates what the future value (FV) would be after that defined period (N) of time.

It's important to know when and where you need to insert a zero. If you are calculating a home loan, you finish your FV with a zero at the end of N. If it's an investment account, your zero is the value at which your account begins, as well as entering a zero for PMT.  Also, remember that the values entered into the calculator need to be accurate. In summary, know the variable numbers and what key value you are solving for. It can be a snap if you follow the steps correctly.


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