Money Multiplier & Receipt Reasoning
Q. How do I calculate the interest earned on my money?
A. There are two standard types of interest: simple and compound. The basic formula for simple interest is FV = P × R × Y, where FV = future value of your money, P = principal amount, R = interest rate, and Y = number of years. If $1,000 is deposited at a 3% interest rate for three years, simple interest is calculated like this: $1,000 × .03 × 3 = $90 earned.
Compound interest factors accumulated interest into the calculation. Both the principal and accumulated interest earn interest. The basic formula is FV = P × (1 + R)Y. $1,000 at a 3% interest rate earns $30 in the first year. The next year the accumulated interest is factored in (3% × $1,030), and so on. By year three, the balance equals $1,092.73.
Q. How long should I keep receipts for everyday items?
A. Unfortunately, there is no hard and fast rule, but these guidelines should point you in the right direction.
- Keep purchase receipts as long as the return policy applies.
- Keep debit and credit card receipts to compare to your monthly account statement.
- For anything under warranty, keep the receipt until the warranty expires. Include the warranty redemption information in the same place.
- Keep utility bill statements for about a year in case one of your utility companies makes a mistake. It's also a good idea to keep them to compare costs from year to year.
- The IRS suggests that you keep tax-related receipts for up to seven years.
When a receipt has outlived its usefulness, destroy it (i.e. shred) so no one can get their hands on your info.
Editor's Note: When answering your questions, the editors consult with experienced professionals from a wide spectrum of industries. We utilize their expertise to give you the answers you need, but it's always wise to seek additional opinions from other professionals.
Sources: irs.gov; bankrate.com; lifehack.org; extension.org; bbb.org; moneychimp.com; investopedia.com; webmath.com; dinkytown.net