So generally forecasting is either a management terminology or a weather term to determine upcoming weather changes.
But if taken in layman terms, it’s all about what you have today and on the basis of the same, we tend to make a prediction.
Loads of people are confused about deciding on what should be their retirement fund or child Investment and find it hard to comprehend future needs.
A few pointers which can be used for forecasting future financial needs-
✅ Keep your income constant and your expenses as constant, you know what would be your expense needs for the future.
✅ Now for every year add five percent inflation to it. ( or you can data analysis of inflation rate for every year). Now, why 5%, it’s just basic calculation, to helo you make your work easy rather than going into in-depth analysis.
✅ Now future value can be calculated using the formula below⤵️
You don’t need rocket science to calculate your needs, all you need is to understand your basic expenses which can help you forecast any future expenses.
What wrong things we do while forecasting?
* We don’t analyze our expenses. We have some unnecessary expenses which could have been avoided and we didn’t look into it.
* We don’t take education needs, health needs into account while forecasting
* We tend to forget about inflation.
* With pandemic teaching us loads we tend to forget the emergency fund concept.
Though these are basics for forecasting, you can always use an online calculator or take the help of a financial advisor to determine your future needs.
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