How Long Will My Money Last Calculator Bankrate Based on

This calculator helps you estimate how long your savings will last based on your current balance, monthly expenses, and expected interest rate. The method is based on Bankrate's approach to calculating savings duration.

How This Calculator Works

The calculator estimates how long your money will last by considering both your spending and the interest your savings earn. It uses a compound interest formula to project your savings balance over time.

This is an estimate only. Actual results may vary based on market conditions, changes in your expenses, and other factors.

Key Inputs

You'll need to provide three main inputs:

Current savings balance - Your starting amount
Monthly expenses - How much you spend each month
Expected annual interest rate - The percentage your savings earn annually

Calculation Process

The calculator uses the following steps:

Convert the annual interest rate to a monthly rate
Calculate how much interest your savings earn each month
Determine how much of your monthly expenses come from your savings
Project the balance month by month until it reaches zero

The Formula

The calculator uses the following formula to estimate how long your money will last:

Months = log(Monthly Expenses / (Monthly Expenses - (Current Balance × Monthly Interest Rate))) / log(1 + Monthly Interest Rate)

Where:

Monthly Interest Rate = Annual Interest Rate / 12
Monthly Expenses must be less than Current Balance × Monthly Interest Rate

This formula accounts for the fact that your savings earn interest while you're spending from them.

Worked Example

Let's say you have $10,000 in savings, spend $1,000 per month, and expect a 2% annual interest rate. Here's how the calculation works:

Monthly Interest Rate = 2% / 12 = 0.1667% Months = log(1000 / (1000 - (10000 × 0.001667))) / log(1 + 0.001667) Months ≈ 120.5 months (10.04 years)

This means your $10,000 savings would last about 10 years if you spend $1,000 per month and earn 2% annual interest.

Interpreting Results

The calculator provides an estimate of how long your money will last. Here's what the results mean:

Short Duration (Under 1 Year)

If your money lasts less than a year, you may need to:

Reduce your monthly expenses
Find ways to earn more income
Consider borrowing money for essential expenses

Medium Duration (1-5 Years)

This is a reasonable timeframe for most people. You should:

Continue saving and investing
Monitor your expenses to avoid overspending
Plan for emergencies within this timeframe

Long Duration (Over 5 Years)

This suggests your savings are sufficient for your current lifestyle. You can:

Consider reducing expenses to save more
Invest the extra savings for growth
Plan for future goals within this timeframe

Remember, these are estimates. Unforeseen expenses, market changes, and other factors can affect your actual savings duration.

Frequently Asked Questions

How accurate is this calculator?: The calculator provides an estimate based on the inputs you provide. Actual results may vary due to market conditions, changes in expenses, and other factors.
What if my expenses change over time?: This calculator assumes your monthly expenses remain constant. If your expenses change, you should recalculate with the new figures.
Does this calculator account for taxes?: No, this calculator does not account for taxes on interest income. The interest rate you enter should be your after-tax rate.
What if I want to withdraw money before it runs out?: If you withdraw money before your savings run out, the calculator will provide a new estimate based on your remaining balance.
Can I use this calculator for retirement planning?: While this calculator can provide a rough estimate, it's not designed for comprehensive retirement planning. Consider consulting a financial advisor for retirement-specific advice.