NPER: Excel Formulas Explained
Hey guys, it's your friendly neighborhood marketer here, and today I am going to be sharing my love for Excel and all the amazing things it can do for us in our daily work lives. More specifically, I will be talking about NPER formulas – an incredibly handy tool that I've used time and time again to make my life easier.
Now, I know what some of you might be thinking – "Ugh, math? No thanks." But hear me out – NPER formulas can be used in a variety of practical ways that can save you time and help you better understand your finances. And if you're the kind of person who likes to get their work done efficiently, well, you're in luck because this article is going to change your life.
So let's start with the basics. NPER stands for "number of periods" and is a function used to calculate the number of payment periods required to pay off a loan or investment. Essentially, it helps you determine how long it will take to pay off a debt or reach a savings goal, given a fixed monthly payment and an interest rate.
Let's say you want to take out a loan for $10,000 at a 5% interest rate, and you can afford to make monthly payments of $200. How long will it take to pay off the loan? That's where the NPER formula comes in – we can plug in the relevant variables into the formula and get an answer.
The basic NPER formula is as follows: =NPER(rate, payment, present value)
- Rate: The interest rate for the loan or investment, expressed as a percentage.
- Payment: The fixed monthly payment amount. Note: the payment must remain constant throughout the life of the loan or investment.
- Present Value: The present value, or principle amount, of the loan or investment.
So for our example, we would write the formula like this: =NPER(5%/12, -$200, $10,000)
Note that we divided the annual interest rate by 12 to get the monthly rate and entered the payment amount as a negative number to indicate that it is a payment and not a deposit.
When we hit enter, the formula will return a value of 63.67 – meaning it will take 64 months, or a little over 5 years, to pay off the loan.
But that's just the tip of the iceberg when it comes to NPER formulas. You can use them to calculate all sorts of financial scenarios, such as compound interest, retirement savings, and even college savings plans.
For example, let's say you want to save $50,000 for your child's college fund in 18 years. You estimate that college tuition will cost around $30,000 a year, and you want to earn a 6% annual return on your investment. How much do you need to save each month to reach your goal?
Using the NPER formula, we can calculate the required monthly savings amount like this: =NPER(6%/12, -$30,000/12, -$50,000)
In this case, we entered the monthly tuition cost as a negative number, since it is a payment and not a deposit. The formula returns a value of 212.20 – meaning you need to save $212.20 each month for 18 years in order to reach your goal.
See, isn't that easy? And the best part is, you don't have to be a math whiz to use these formulas – Excel does all the heavy lifting for you. All you need to do is understand the variables and plug them in.
So whether you're trying to pay off debt, save for a big purchase, or plan for your retirement, NPER formulas are a powerful tool to have in your arsenal. And if you're still feeling intimidated, don't worry – there are plenty of online resources available to help you learn more. So go forth and Excel, my friends – your financial future just got a lot brighter.