If you need dollar value and you already have amount, reference year and target year, this calculator does the substitution for you. It suits a quick check, a homework answer you want to confirm, or any figure you need to sanity test.
What Is the Buying Power Calculator?
The buying power calculator takes amount, reference year and target year and turns them into dollar value.
It is the kind of calculation you would otherwise do on the back of an envelope: mechanical, repeatable and easy to get subtly wrong without noticing.
How the Buying Power Figure Is Built
Each result is calculated from the ones before it, so the working is fully visible. That matters when the answer is going to be quoted to somebody else and you need to be able to explain where it came from.
The figures are exactly as good as the assumptions underneath them. Check the rates, the periods and the tax treatment before you rely on the result.
Reading the Result Sensibly
A small change in an input can move the result by much more than you would expect, particularly where the calculation divides by one of the figures you supplied. That is worth understanding before you rely on a figure.
For anything that will be committed to, write the inputs down beside the result. A number you can reproduce is worth far more than one you cannot explain.
A Worked Example
Working through an example, with amount set to 10, reference year set to 1913,9.9, target year set to 1913,9.9, the calculator returns dollar value of add the values above. Substitute your own figures and the same steps produce the same kind of answer.
Frequently Asked Questions
What do I need to work out dollar value?
Enter amount, reference year and target year. The calculator then works through the relationship and reports dollar value.
What does the buying power actually calculate?
It takes amount, reference year and target year and converts them into dollar value using the standard relationship for this problem. Each step is applied in turn, so every output is traceable back to the numbers you typed in.
How should I enter amount?
Use the value you actually have, in the unit shown next to the field. Enter every value in the same unit system. The calculator assumes the figures you supply are consistent, so it cannot correct a mistake that happens before the calculation starts.
Is the answer exact?
It is as exact as the formula and the inputs allow. The method itself is the standard one for this problem, so the only sources of error are the figures you enter and the precision you ask for.
Can I use this for a quick estimate as well as a precise answer?
Yes. The calculator is built for quick checks, so round your inputs to a sensible number of significant figures and the result will be just as useful. If you need more precision, keep the same method and add digits to the inputs rather than adjusting the method itself.