What's Your Future Worth?: Using Present Value to Make Better Decisions

by Peter Neuwirth

We weigh every significant decision based on how it will affect our future. But when it comes to figuring that out, we mostly make the process up as we go along. While financial professional Peter Neuwirth can’t help you actually predict the future, he can offer a simple, systematic way to make much better guesses about it—and so make better decisions.

Neuwirth offers an accessible, step-by-step guide to using the powerful concept of Present Value—which allows you to determine the value today of something that might happen in the future—to evaluate all of the outcomes that might arise from choosing one path as opposed to another. Using examples that anyone can relate to, Neuwirth walks you through the process. Your old refrigerator doesn’t work as well as it used to—should you buy a new one right away or muddle through for a while? You’re offered a great discount on a service you don’t need at the moment but eventually will—buy the service now or wait?

With just a little math and some common sense, you can compare future costs and benefits with present costs and benefits and make “apples to apples” comparisons. This book will be indispensable for anyone who has ever had to figure out whether to stick with an awful job or follow his or her bliss, fix that old car or buy a new one, increase 401(k) contributions or keep the same take-home pay, and a thousand other decisions.

Genres: Nonfiction, Business, Finance, Audiobook, Psychology, Personal Development

192 pages, Paperback

First published March 2, 2015

Reviews

[Jay French · Rating 2 out of 5]

Throughout my career I used net present value for various projects when analyzing project economics and while creating sales cases as a technical seller of software. I also have used present value calculations in reviewing my personal finances. I am familiar with the concept through use. I naturally think that way. I’d say this is a good book for those who are not familiar with the concept of present value and the time-value of money. The author introduces the concept, but mostly steers clear of the difficult math aspects. Much of the use here is describing some aspects of two alternatives and talking through which seems on a casual analysis to have the best value for a person. From my experience, this way to look at alternatives isn’t obvious to many people, so I do applaud the attempt this book makes in opening up this logical world to others. But for those familiar with the usage of such tools and ways of thinking, the book is not as interesting. Mainly, as the author described some examples of using present value analysis, I kept finding aspects the author ignored to simplify the story but that really gnawed on me as I read. If you already approach life with the tools of financial evaluation in mind and have that kind of latent obsessiveness that I sometimes exhibit, you could avoid this book. But if this is a new concept, this book is an interesting introduction, with the bonus of learning what an actuary does. There are plenty of anecdotes and personal reflections along the way, so it reads easy. But I didn’t find all the examples to best illustrate the points the author was trying to make.

[Moran · Rating 2 out of 5]

In this book, Peter Neuwirth, an actuary, tries to teach us, the readers, the secrets of using the tool of present value to make either everyday or life-changing decisions.
However, instead of giving more and more practical tips and advice on how to use it and actually make it into something I can use, or even give insights about decision making in life, he goes on to talk about how not-for-profit organizations should plan their investments and how employers should ask actuaries for help in designing employee pension plans. It is both general and super specific to certain geographies and interests (I personally have no idea or interest in the downsides of American pension plans, I don't have one and I don't even live in that country - I just want to know about present value).This book assumes a certain knowledge and interests that I don't have, and instead of only targeting an individual's decision making, it ends up just describing the idea of present value and suggesting that the reader could use it. Well then, in that case, this book could have been at least 50%.
However, if after reading (or listening) to the entire book, I am still not sure how to apply this tool to my future decision making process, the author has clearly failed.

[Roy · Rating 2 out of 5]

The book is basically a layman guide to the formula for calculating present value, i.e. the "discounted cash flow" (DCF) method commonly taught in business schools.

Although the book does provide a couple of personal stories to make the formula more intuitive and understandable, applying the formula correctly and consistently to many, if not most, decisions in everyday life is anything but easy. In fact, I would even argue that except for a few major life decisions, it's probably not worth the effort. More often than not, there are a number of shifting, external factors to consider in order to properly calculate the present value of any choice, not to mention we humans are notoriously bad at evaluating previously unknown factors. In sum, knowing the DCF formula is fine, but applying it to derive trustworthy results is where the real challenge is (otherwise Wall Street analysts should always be able to correctly predict stock price movements before corporate earning reports come out.)

[John (JP) · Rating 2 out of 5]

At its core "What's your future worth" looks at concept of present value. Present value means calculating the value today of something you will buy at sometime in the future . I wish this book had stuck to that question and explored its applications in various situations. The introduction and the first thirty five pages of the book does that to a minor extent. The rest of the book Neuwirth waxes about his past as an actuary. Where this book might have value to the non math person is in the author's system of making decisions with present value in mind. 1.) Define the decision 2.) Imagine as many as you can the possible futures that might arise from each possible choice and when it could happen. 3.) Evaluate to the extent possible the relative likelihood of each possible future. 4.) Consider how much more value should be placed on things things that will happen in the NEAR future as opposed nothings that may happen in the DISTANT future and 5.)Sum up the values of the consequences of each choice. This is what the author calls the present value.

Neuwirth's decision making process is the key idea behind this book. He then gives two solid cogently written personal stories where he applies the process. I wish he had written similar stories that had applied the process to other situations. The chapter headings give the reader the hope of a practical application of each step in the decision making process but fail to delivery. What is given instead are anecdotes that fail to add value, clarity, or concrete application to the lay reader. The remainder of the book attempts to look at medical decisions, non profits and and wills. I was unimpressed with these chapters. To the authors credit the book includes a decent set of footnotes and better than average index A better book to read in this vein of rules to make better value choices would be Simple Rules: How to Thrive in a Complex World by Donald Sull.

[Read Ng · Rating 2 out of 5]

I am attempting to apply a Future Value analysis to the Social Security benefit calculation, so when I saw this title I was intrigued. I also had to wonder how much could one write about a simple formula. Nor was it all that long of a read.

The author’s attempt to use the immediate versus delayed purchase of a new refrigerator bothered me. He boiled it down to two choices, keep or replace. For a book example I can understand the limited discussion of only two options, by I could not get around the fact that an older refrigerator that was “hot” on the outside, probably really just needed to have the coils vacuumed. There was a third option. So I wondered just how thought out his approach in the rest of the book would be.

This turned out to be more of a philosophical discussion than how to apply the formula in different real life comparisons. I was a little disappointed, but then again, how much can you write about applying a formula without turning it into a text book, and few of us want to read text books.

I would recommend this to the novice as a mindset approach to problems. But it only lightly helps one make meaningful decisions regarding lump sum versus annuity, or early versus delayed payments, or other comparisons. It was too philosophical for my needs and hence my low rating of its effectiveness.

Have a GoodReads.

[Ginni · Rating 2 out of 5]

A previous review noted that this book is careful not to stray into textbook territory. Unfortunately, it also doesn't work well as a layman's guide. There is a lot of interesting theory, but very little practical application. The author shares lots of real-life anecdotes, but it seemed to me that in almost all of them, his analysis had been incorrect. The formula works, he insists--I just didn't consider all the possibilities. Of course you can't ever consider ALL the possibilities, but really--the formula works.

Again, it was interesting and probably a good introduction into a field I've never explored. But the only parts that were valuable to me seemed like common sense anyway.

(From a Goodreads giveaway.)

[Howard Hewitt · Rating 4 out of 5]

Written in a way that even somebody without any practical experience as an actuary would be able to make better decisions for both present and near future. The book was written in a plan and simple way and if studied in depth take their time, they could really benefit from the book and could possibly save tens of thousands of dollars during a lifetime just applying some of the knowledge. I see where I could have saved thousands myself. I will be able to use this info in the future to invest the money I save apply the 5 steps to many decisions major purchases, stocks and or options.