Profit From Financial Calculators!
Malcolm Wheatley runs the rule over financial calculator programs.
Every tradesman, it's said, has a handful of tools that are 'old favourites' -- worn and battered, maybe, but which in familiar hands turn in a dependable performance. It's a saying I've been reminded of these last few evenings, as I've spent a little time working with some favourite tools of my own.They're financial calculator programs that have been with me since (in some cases) the late 1970s. They're written in a DOS-based version of the BASIC computer language and over the last few nights I've been converting them to a more modern Windows-friendly version of BASIC.Strictly speaking, it probably wasn't necessary to convert them at all. I might have considered junking the lot: these days, the web is full of financial calculators. But these tools are old friends, and I didn't begrudge the small amount of time involved. (And yes, I do know I ought to get out more....)More to the point, these tools have been a regular source of profit over the years, performing compound interest calculations and the like, and helping me to figure out how to make my hard-earned dosh deliver the greatest return.Take compound interest, for example. Here at The Fool, we're well-used to the message that small differences in percentage interest rates add up to a very significant sum indeed when compounded long enough. It's one thing to see the figures printed in a table on a website, though -- and quite another to play around working the numbers on your own finances, when real money (your own) is at stake.It's the role of financial calculator programs to crunch numbers like these. It's possible to do it 'long hand', of course, with an ordinary calculator -- but tedious, error-prone, and slow. Better by far to use a computer. If you're a whiz with spreadsheets, for example, Microsoft Excel has a variety of inbuilt financial calculators in the form of functions. While spreadsheets are a good start, web-based calculators are even better -- not everyone finds Excel functions easy to use, and (for that matter) not everyone has Excel. But we all have the Internet. Here at the Fool, there are calculators to help work out how fast your savings will grow, how much a loan will cost, and how much a mortgage will cost. We have calculators that can help you decide how much insurance you need.Here's another site, written by a Fool, that's also rich in calculators, some of which are quirky and fun. It too is popular with Fools on our Dealing With Debt and Living Below Your Means boards.So why do I persist in running my own little BASIC financial calculators when I could simply use a web-based one? Flexibility. The Fool's compound interest calculator for savings, for example, assumes interest is added and compounded annually. But ING Direct, to name just one bank, adds interest monthly. Again, my ISA compounds on a six-monthly basis. While spreadsheet-based calculators (and specialist ones out there on the web) can deal with this, I've already got just the tool I need sitting on my desktop.I've also got the flexibility to work calculations out backwards, which is occasionally useful. Here's the sum of money I started with, here's the sum of money I finished with -- so what was the compound interest? Ditto mortgages: here's the amount, the term, and the monthly payment -- so what's the interest rate?But at the end of the day, the real requirement for a tool is that it be 'fit for purpose'. And for most practical purposes, and most people, the ordinary calculators on the Fool are more than ample.So: if you managed to save an extra £20 a month, for example, what would it grow to over five years? And if you switched to an account paying an extra 0.75% in interest, how much extra would you earn? Get clicking!