Future income is profit gained over time from investing money. In other words, if an amount of money is invested in a savings account today, how much will it be worth in five years, 10 years, or 20 years. You can calculate future income by using the simple Time Value of Money formula.
Things You'll Need
Calculate annual interest earnings. For example, if you are earning 5 percent on $20,000, you could calculate the annual interest rate like this:
$20,000 x 0.05 = $1,000
This means every year $1,000 would be earned from $20,000 with a 5 percent annual interest rate, assuming "simple interest" is given, as opposed to compound interest.
Multiply the interest earned in one year by the total number of years you plan to hold the investment. For example:
$1,000 x 10 = $10,000
In 10 years $20,000 will generate $10,000 from interest.
Add the sum from Step 2 to the total amount of money invested. For example:
$10,000 + $20,000 = $30,000 future income.
Write the investment amount (principle) which can be represented by "P."
Write down the annual interest rate, which can be represented by "r."
Write down the number of years for the duration of the loan, which can be represented by "n."
Write out the formula as show in the following example. In this equation you will be solving for "A" which represents the total amount of money:
A = P (1 + r )n
or, if the investment amount was $1,000 with a 10 percent interest rate over five years, it would be written as:
A = 1,000 (1 + 0.1)5
- Photo Credit calculator image by L. Shat from Fotolia.com
How to Calculate Earnings Growth
Profits are the lifeblood of company operations. Without profits, companies have difficulty staying afloat and have to borrow or raise funds from...
- How to Calculate Loss of Earnings
- How to Calculate Business Income
How to Calculate Loss of Income
An accident, disability or long illness can strike anyone at any time. There may be a waiting period for disability benefits, even...
How to Calculate a Projected Income Statement
To create a project income statement, estimate change in sales volume, adjust revenue and expense items accordingly and put it in an...