Welcome back. Hopefully, you have looked at this problem, thought about it. I want to just emphasize one more time the importance of timeline. So what I've done is actually have drawn one ahead of time. And I'm going to go to that now. So I'm starting saving at the year 30. And for convenience to be consistent with the formula, we're going to assume that saving starts at the end of the year. So I'm turning 30. I'll start saving at 31. And I'll quit saving at 50. And whenever I say 31 or 50 by definition means the end of the year, right? That's the way we talk. I'm going to retire at 60. So what's going to happen between 50 and 60? If you look at the graph, nothing. So what I'm going to do is I'm going to now annotate and start writing on this. So this is the time period, but I'm saving here nothing. In other words, by magic I'm approximately even. I'm not saving and I'm not dissaving. I know you may not have heard of that word, but I have. You're basically not spending more than you're earning every year. It's a matter of convenience, right? And now in this period, what am I doing? I'm consuming, but not earning, right? Again, that's in a simplification. But it'll give you a sense. I think this world problem is just awesome. You can modify it in various ways. Now the question is, I'm dying at it. Of course, you don't want to die. I haven't met anybody who said, I'm really looking forward to die. But it's one of the most predictable things based on statistics expected. So let's assume 80. And let's assume for convenience that even in the last year end of the last year, I'm going to spend some money, me on my behalf or whatever or given to somebody else or whatever. We can change the problem in many ways. So let's see. What does the question asked me? Is the question asking me how much am I saving for a year? Is it a PMT question? No one says yes. But the problem is the question I'm trying to answer, and this is why finances awesome, and you need to try and travel the answer to it. If you just say PMT to the calculator or Excel in weight, Excel is going to look at you and smack you around and writing saying are you expect me to answer questions even I don't know the answer to, right? You Google PMT, the Google is going to laugh back at you. So the question is you got know something in the future. So yes, turns out we do. We know from 61 to 80. What do I want? I want PMT of how much every year? That's why I said we have everything set up. We want a payment of what? We want if you go back to the problem, let's go back the problem for a second so that we are all on the same page, right? I don't want to confuse numbers. I want to consume $100,000 every year. So once I know that, I know that starting in I know that starting year 61 I need 100,000. And how many of these? 20 of these. So this is a very simple problem to do. It's called a PMT present value problem. So I do the PV at this point, let's do it very quickly. Because if I know the PV At this point, I will know the PV at this point. If I know the PV at this point, I know the future value of my savings. So the thing I'm trying to solve for is 20 PMT is here. Which is money I'm going to invest. And the answer is hidden in 20 PMT is in the future. The only difference between these two is a difference in time. And obviously, in one case, I'm giving away money to the bank or a fund or retirement account. In other case, I'm withdrawing. Right. Okay, everybody. So let's do if I can somehow figured this out, I'll be much better off than I am right now. So let's try to get to it. Okay? Excel. So this is not a PMT problem. I know the PMT. So what am I going to do? Please recognize you have time travelled to year 60. Why have I time travelled to year 60? Because I know how to figure out the present value of something starting one year from now and at 60. I know at 61, I need 100,000. Okay, so the interest rate and we're doing this annual so we don't want to do the monthly thing is 0.08, I believe, right? And how many periods? I have 20 periods. And what is PMT? Turns out it's exactly the same number from the previous problem. So 124,990 and they must be in that error. Let me just try to make sure we got it. Yep. I could tell there was a mistake then I did it quickly. A press 0.8 and 0.8 is 80% interest rate. You don't want that right? Okay, this makes a lot more sense. So I have 981,814.74 I'm going to go back now. I'm going to go back now and say that what I need is 980 to confirm the number 981,815. Write it one more time. So that's legible. At what point? This is the PV at 0.60. Another way in English to say this is for the following remember we did the loan problem and we talked about repaying the loan. It's the same problem except slightly different. I need to have 981,000 dollars about 982 if you may, in the bank in which year, in year 60 to be able to finance what $100,000 worth of consumption every year, withdrawal. And at the end of your 80 how much will I be left with zero. Exactly the same problem, right? So that's what I want you to understand. In the end, there's only one problem. And if you know how to do it, you can apply that thinking to anything, however, I have a problem here. There's a gap of 10 years that I don't like. Why? Because I know how to use annuities. But I do not know how to use annuities that end in the year 50. But actually, the valuation I know is in year 60. So what do I need to do? Step two. And by the way, you can do this many ways. I'm taking the easy way out. So what do I have to do, remember in finance time? Value of money is everything and the interest rate is, what, 8%? So now what do I have to do? I have to bring it back, PV. In the year 50. What will that do that will become the future value of the saving annuity I'm trying to solve. So let's do that. And that will help us. As I said, this is a very, very cool problem. And I'm going to walk you through it simply because I'm going to make another cell notice. I have left. Sorry. Okay. Notice. I've left the first cell still open, and I'm going to write zero. I mean, sorry, I'm going to write equal. And now I'm going to do a PV function. Right? You'll see in a second. Why I have left that cell in its own place. Because I can write 0.08. The interest rate is 0.08. Remember? I screwed up last time. I put 0.8. Don't do that. Number of periods. 10. Why? Because I'm bringing a value. I know in year 60 back to year 50 right. And there is no PMT. Remember, this is a one shot thing. So we're combining our learnings from the past week. There's no PMT. It's a one shot bank account that will finance the future PMT Right. So zero, don't forget that. And then I know the future value of this. Where is it? Residing in cell. A1. So, what is the value of 981 year, 60 and year 50. Well, the value is about $454,770. So I'm going to I apologize. There's a little bit of going of this. Let me just write out the numbers. So it's about 981,815 have now brought it back to about 454. And to get the numbers right, 717. I'm just confirming that the numbers are right. Okay, so to see what has happened. The magnitude it's almost become half right, actually, less than half. And the reason is I'm discounting heavily at 8% now. I'm almost done. Why? Because this PV is in year 50. This PV is in year 60. But I know if I know this PV in year 50 it can become the future value of this problem. So I know the value that I'm saving towards is about $455,000, 454,770. But now I need to ask the following question. How much every year will I put in the bank so that I am sure 454,770. There, everybody got that right. One more step. Okay, so now notice. I'll keep that 454 exactly where it is. One. It'll give me a sense of what? I've got the right numbers. But now I want to do what? Remember, I'm trying to save every year in amount that becomes 454 after 20 years. So I'm going to do a PMT problem. Why because I don't know the amount. Okay. What is the interest rate 0.08. How many times am I saving and period is 20. And what is the present value of it? I don't know the present value because the present value would be in year 30 right. So what do I do know? Luckily, I know the future value. And where is it? Sitting in cell A2 right. Bingo. 46,319 And let me just convert. Confirm that this is okay. And turns out this seems to be too much. So what did I do wrong here? I a one a two be empty. You see what I did wrong and that I wasn't paying attention. I pressed eight to SPB. It's good to make mistakes, which I know you will, but it's a minor mistaking the sense that I'm making a calculation error. But I could guess my answer was wrong because it was too high. So I have 9937 So the answer now is right. Remember, if you look up and you do the PMT function, the first number you press is interest rate second number of Peter. 23rd is PV. And I said I didn't have any PV but I didn't put zero and final this v f d. So if I knew the PV, I would replace zero by that and make a 20 Is that okay? So we are cool now and we know and I'll confirm that we need 9938. Can we almost done so here comes the final. I'm sure you're relieved by now, but how much would I save every year for the next 20 years is 993 eight. Look at the awesomeness of this. Look at the awesomeness, in this case, the awesomeness of finances. Helping used. It's actually really not, because it's time, value of money. But I am saving only $10,000. How many times? 20 times. But I'm going to use that money to consume. How much? 20 times. $100,000? 20 times. How the heck is this possible? It's possible, because the time value of money is 8%. If the time value of money was zero the world in going to make me do this easily, right? So I saved 9938 I get nine and three it back, one for one. If the interest rate is zero. I hope you like today because I love talking to you today. I'm not kidding you. Which, by the way, kidding in the US. Means making fun off. You are joking with you, you know, because I've traveled and I've lived in different countries and different words mean different things. But I've tried to tell you the essence and the beauty off finance which has made it a little bit challenging for you, I'm sure. But I think that's the value of this class. If anything, I have to bring to the table just a quick minute. I think I feel I wanted you to know that. I feel very fortunate that I'm able toe teach you anything at all, and many times I want to be like to work. I hope you watched our Star Trek and so on and do the mind meld and do this very quickly. But that's not feasible. Right on. Duh. That's also probably not the right thing to do, because if you try toe gain knowledge very quickly like that, it tends not to stick. So I've tried to make the problems rail world. I've tried to go slow video, and therefore the videos will be long when the build the videos B shot when the content is very crisp. But maybe you need to go to a textbook toe, reinforce or maybe you need to go back later toe accounting to reinforce our status. See you next time.