What’s Your Money Multiple?

What’s Your Money Multiple?


You’ve earned this. You deserve it.

There are few thoughts more dangerous than this one in the world of personal finance (or anything else, for that matter). I’ve fallen victim to it myself many times in my younger years, and each time I regretted not saving the money instead.

I created this post to short-circuit your brain next time you have this self-destructive thought. When you get the urge to splurge, you’re going to picture your Money Multiple and then weigh that against the thing you’re trying to buy.

What is the Money Multiple? Simply stated, it is the value of $1 dollar today from this moment until you retire and eventually die. As morbid as that is, framing your finances with the Money Multiple in mind is powerful.

Let’s say this thing you deserve is a nice purse or the parts to custom build your own PC. This item, this trinket you adore, this object of your affection that will make your life that much better and validate your hard work costs $2000 today. Using my personal Money Multiple of 7.8x, these PC parts are taking a total of $15,611 out of my pocket!

I designed a spreadsheet to calculate your Money Multiple. You don’t need to download anything or input any information.

The assumptions for this example are below. The calculation is driven by the future value formula:

FV= PV*(1+r)^n.

Future Value = Present Value x (1+rate of return)^number of periods (years)




The table below adjusts the Money Multiple. Are you retiring in 10 years, not 30? You’re covered. Think you can get an inflation-adjusted return of 10% per annum because you’re just that good? I got you too. The vertical figures on the left margin indicate the number of years between now and retirement. The horizontal axis represents the real (inflation-adjusted) growth rate of your money had you invested it instead of spent it.

I made you live to 100 because, for the younger readers here, that isn’t too far fetched. I’ve adjusted for inflation because I don’t want you to give yourself the excuse that “a bazillion dollars when I’m old is like $5 today”. Inflation is very low now but upping it to 3% is a safer bet, given that it’s hard to trust the monkey math on inflation today.

So, what’s your Money Multiple? 

Many times when I see similar material online, it calculates how much your cash would have grown up to the point of retirement. This, however, only tells half the story. Your investments grew in value and now provide you with the cash flow you need to live on until you pass away. Buying that Gucci purse not only screws with the size of your retirement “nut”, but it also steals income that additional nut would have provided.

When I run the calculation, I get a Money Multiple of 7.8x. Those sweet PC parts cost me a total of $15,610!

Frame everything into this context: your daily Red Bull addiction, blowing your tax refund on a huge TV or vacation…you get the point.

The Money Multiple is both a serious downer and awe-inspiring. All the dumb purchases you have made will haunt you. However, it will also inspire you to sock away every last dollar you possibly can because, at least in my case, it’s not $1 but $8!


27 Replies to “What’s Your Money Multiple?”

  1. This is great!
    I like that you take into account not only the lump sum, but the possible future returns of said sum.
    Mine is 9.9 so basically everything I buy now needs to be multiplied by 10! I wonder how much difference that will make to my spending habits.
    Thanks for putting this together 🙂

    1. Glad you like it, Miss Balance! It certainly changed my perspective when I first calculated my Money Multiple.

  2. So well written! This gives such a refreshing perspective to all those ‘necessary’ purchases. I will definitely be integrating this mentality into my spending. Looking forward to many more MS tips!

    1. Thank you, Lara! Fresh post is up now. It covers real estate and whether or not it’s a good inflation hedge (generally no).

  3. This is a great table that I will want to reference for helping others I know. Thanks for a really great way to visualize compounding.

    1. Thanks, Susan! I laid it out this way so that you can see how changing your retirement age or expected return does to your retirement stash. This exercise is what inspired me to start blogging in the first place. Please feel free to reference it whenever you want!

  4. Great articulation of the power of compounding! I hadn’t come across this on your site yet. Thanks for this helpful framework. Even if the numbers may change a bit at the margins, it’s really useful to think about the present value vs. future value of a dollar.

    1. It’s this conceptualization of compounding that really put my butt into gear with regard to saving and investing. Thanks for stopping by and for the kind comments, Sarah!

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