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Time Value of Money: How to Determine the Value of Money with Respect to Time

Money received today is more valuable than the same amount of money a year from now. It is essential to understand the relation between mone...

Philippine Inflation Rate (1957-2014)



Note:
1. Price Increase Per Administration - How much has the prices of goods change within a specific administration. We use a  base price of Php 100 at the beginning of each administration. We then compute how much the prices of  goods has increased at the end of each administration.
2.Purchasing Power - This determines how much the purchasing power of money has reduced each administration. If the purchasing power of money has  reduced to 50% after 10 years, then Php 100 worth of goods purchased 10 years earlier can only purchase Php 50 worth of goods today.

Source: http://data.worldbank.org/


Three Stage Retirement Plan

Achieving financial freedom begins with establishing a specific GOAL with a deadline. After reading The Millionaire Next Door (TMND) By Thomas J. Stanley, I decided to incorporate the formula provided in the book in my Retirement Plan. Instead of having one goal with a very long duration, I decided to divide it into three short stages. Smaller goals will make it easier for me to achieve and will motivate me each time I complete it.


Goal Setting

The FIRST STAGE of my retirement plan is to become an Average Accumulator of Wealth before I turn 40. The book states that a person needs to have a net worth his/her age multiplied by his/her annual household income then divide it by ten to be considered an Average Accumulator of Wealth.

Age x Annual Income / 10

This formula provides an exact figure serves as my first goal. Although it is prone to changes, since future income is unpredictable, I used the inflation rate to establish a conservative estimate of my future income.