Inflation Impact Calculator Formula

Understand the math behind the inflation impact calculator. Each variable explained with a worked example.

Use the Inflation Impact Calculator

Formulas Used

Future Equivalent Needed

future_value = current_amount * pow(1 + inflation_rate / 100, years)

Purchasing Power of Today's Dollar

purchasing_power = current_amount / pow(1 + inflation_rate / 100, years)

Value Lost to Inflation

total_erosion = current_amount - current_amount / pow(1 + inflation_rate / 100, years)

Variables

VariableDescriptionDefault
current_amountCurrent Dollar Amount(USD)1000
inflation_rateAnnual Inflation Rate(%)3
yearsNumber of Years(years)10

How It Works

How Inflation Erodes Purchasing Power

Inflation increases the cost of goods over time, meaning each dollar buys less in the future.

Formula

Future Equivalent = Amount x (1 + Rate)^Years

Purchasing Power = Amount / (1 + Rate)^Years

The purchasing power formula tells you what your current dollars will be worth in real terms.

Worked Example

$1,000 today with 3% annual inflation over 10 years.

current_amount = 1000inflation_rate = 3years = 10
  1. 01Inflation multiplier = (1 + 0.03)^10 = 1.3439
  2. 02To buy what $1,000 buys today, you will need $1,000 x 1.3439 = $1,343.92
  3. 03Purchasing power = $1,000 / 1.3439 = $744.09
  4. 04Value lost = $1,000 - $744.09 = $255.91

Ready to run the numbers?

Open Inflation Impact Calculator