# Dream Come True Calculator

Created by Bogna Szyk and Marcin Manias
Last updated: Dec 19, 2023

It's a universal truth: we want things that are hard to get. We don't want to spend our holidays at our parents' place, we want to sip drinks on a Bali beach instead. We never settle for an old Nokia phone (unless it's the indestructible Nokia 3310) if the newest iPhone model is just around the corner. Our wishes and dreams tend to get more expensive as our earnings improve.

While some of our dreams might be completely unrealistic (how many of us will actually fly to the Moon in the next five years?), most of them simply require us to save a certain amount of money. Our dream come true calculator answers this vital question:

How long do I have to save to afford my dream?

You might ask why are we talking about this subject now. The answer is simple - there's no better time to talk about goal-setting, plans, and dreams than the beginning of a new year! It gives you a "clean slate" and feels like a fresh start towards a better future.

## Step 1: Get in the right mindset

We all have dreams, but if we don't start translating these dreams into plans, they will never come true. Instead of sitting at home wishing for that Lamborghini miraculously appear, you can build a plan that moves you towards this goal every single day! We prepared some tips on how to create a good plan that will actually work.

• Set a realistic goal. Of course, you can say that you will save 70 percent of your income, but unless you're a maharaja, this plan is extremely likely to fail. Make sure to analyze your finances and set a goal that you can actually achieve.

• Define the goal well. The more details you include in your plan, the more likely it is to work! For example, "I will save excess money" is a non-specific goal that invites excuses. "I will put aside $50 a week" is a concrete, measurable goal. • Think about the quick wins. Work smarter, not harder! Let's say you're working towards a goal: holidays in Hawaii. You assumed you need$3000 to make that happen, and you'll be putting aside $50 a week. But what if you find a flight that is$200 cheaper than expected? That's four weeks less of saving, granted by one smart choice!

• Anticipate problems. Think about obstacles you are likely to encounter, and plan what you will do to overcome them. You can form "if-then scenarios". For example, you might spend a lot of money on drinks when you go out with friends. You can develop this scenario: "If I go out with friends, I only take a limited sum of money with me to make sure I don't overspend."

• Be ready to tweak your plan. Each plan will fail if you won't leave any room for modifications. Make sure to revisit it often - for example, once a month - and adjust it to your current financial situation.

## Step 2: Build your saving strategy

Before you assess how much time you need, you need to establish your strategy. You have to answer three questions:

• How much will my dream cost me? - Or, in other words, what is the price tag on that item you'd like to have? The price might be anywhere between a few hundred (for example, if you're saving for a new phone), a few thousand (a new TV or holidays, anyone?), or even reach a quarter of a million if you're saving for your dream home.

• How much do I already have? - How much did you save towards that goal, or what part of your current savings can be dedicated towards it? If you haven't saved anything yet, don't worry. You can begin today! Our savings calculator can help you with that.

• How much can I save every month? - This value will most likely be lower than your monthly income - after all, you need to allocate some of your earnings towards everyday expenses. Still, try to make this number as high as possible. The more you can save each month, the faster you will be able to afford your dream!

## Step 3: Put your savings to work

So, how do you go about getting money for your dream? You don't have to rob a bank - there are smarter ways to go about it. An excellent first step is to start recording your monthly expenses - it will help you eliminate unnecessary costs. Eating out and a bunch of monthly subscriptions can add up to a substantial sum! Selling your old stuff instead of throwing it out can also earn you extra cash with the added benefit of being eco-friendly.

What about the money you already have? Our #1 recommendation is not to keep it under the mattress π Here are some options to consider:

• A savings account is one of the easiest options to set up. Putting aside a sum of money each month is a pretty good start, as regularity is the key to success. The catch here is the interest you get will be pretty small.

• A better option is to put the money you already have to work. This way, while you are saving, your money is growing, helping you achieve your goals faster. When investing, the rule of thumb is the riskier the project, the higher the yields. Purchasing stocks can lead to high earnings, but the stock market is volatile, and there is a chance of losing your investment. You can check our investment calculator if you want to learn about investing.

• Luckily, you have other options. Investing in bonds is a long-term commitment that is more profitable than a savings account. Bonds can be either government one's or private company's. Buying bonds is one of the safest options to earn money while saving it. The trade-off here is that you do not have immediate access to your funds.

• Mutual funds are another option. Instead of investing directly in the stock market, you buy into a "basket" of shares managed by a fund. Check our stock calculator for some more information about investing in stocks. Typically this means less work for you - you don't have to micromanage your shares, and the risk is reduced. The main drawbacks here are: the fund will take a commission fee, so your profit will be smaller, and the risk is never completely gone.

• Contrary to common belief, you do not need a stash of cash to enter the real estate market. There are online platforms that allow you to participate in real-estate crowd-funding. A couple of hundred dollars is all you need to start and buy a small share.

Remember, when it comes to investing, there is always risk involved. You should do your research to see if the potential reward is worth the trade-offs. Investing shouldn't be a gamble but a cough calculated cough decision. Pick the type that best suits your needs!

## Step 4: Find out how long you need to save

Do you already have a plan? A good plan, which sets realistic, concrete goals and anticipates problems. Do you also know where to keep your savings? Great! Our dream come true calculator will now automatically find out how long you have to save to buy yourself that new smartphone, a shiny new car, or afford a two-week vacation for the whole family.

The time you need will be calculated according to the formula below:

$T = \frac{\log{\left(\frac{P+\frac{M}{R}}{\frac{M}{R}+I}\right)}}{\log{(1+R)}}$

where:

• $P$ β Price tag on your dream;
• $M$ β Amount of money you save monthly;
• $I$ β Initial balance of your account;
• $R$ β Monthly interest rate; and
• $T$ β Time, expressed in months.

## Example: saving for a new car

Let's make an example calculation together to understand how this dream come true calculator works. We can assume that you are saving for a new car at the price of $33,000. 1. Check the initial balance of your savings account. Let's say it's$5,000.

2. Analyze your expenses (you can use our budget calculator) to decide how much you can allocate monthly towards your car. Let's say you don't spend much and can save 1,500 a month. 3. Check your bank's interest rates. We can assume you found a decent savings account with a yearly 5% interest, which translates into 5% / 12 = 0.42% monthly interest. 4. Plug all of these values into the formula above: \begin{align*} T &= \frac{\log{\left(\frac{P+\frac{M}{R}}{\frac{M}{R}+I}\right)}}{\log{(1+R)}}\\[1.2em] &= \frac{\log{\left(\frac{33000+\frac{1500}{0.0042}}{\frac{1500}{0.0042}+5000}\right)}}{\log{(1+0.0042)}}\\[1.2em] &= \frac{\log{\left(\frac{33000+357143}{357143+5000}\right)}}{\log{(1.0042)}}\\[1.2em] &= \frac{\log{\left(\frac{390143}{362143}\right)}}{\log{(1.0042)}}\\[1.2em] &= \frac{\log{(1.077)}}{\log{(1.0042)}}\\[1.2em] &= \frac{0.032}{0.0018}\\[1.2em] &= 17.78\ \text{months} \end{align*} 1. You will be able to afford a new car after approximately 18 months, or 1.5 years. π If, on the other hand, you want to reach your first million particularly, you can use our millionaire calculator to help you plan out your savings and investments. ## I saved for my dream! What now? First of all - congratulations! You deserve a pat on the back π Withdraw your savings from the bank, go ahead and buy the thing (or the experience) you were saving for! It's also a great moment to share your happiness with others. With your determination and ability to save, why not make someone else's dream come true? Donating to your favorite charity is a sure-fire way to fulfill the wishes and dreams of others, however small they may be. We guarantee that you will feel as good - if not better - as when you saw that savings account getting filled up! Bogna Szyk and Marcin Manias Price tag on your dream
Initial savings
$Monthly savings$
Interest rate (per year)
%/yr
Time you need
yrs
mos
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