Which financial principle involves evaluating how much money you need today to achieve a future goal?

The principle that involves evaluating how much money you need today to achieve a future goal is known as present value calculation. This concept focuses on determining the current worth of a sum of money that you wish to receive in the future, taking into account a specific interest rate over a set period of time.

By discounting future cash flows back to their present value, individuals and businesses can make informed decisions about how much money they need to invest today to reach a desired financial target in the future. This allows for effective budgeting and investment planning, as it incorporates the time value of money, which recognizes that a dollar today is worth more than a dollar tomorrow due to its potential earning capacity.

Present value calculations are crucial for assessing financial goals such as saving for retirement, buying a house, or funding a child's education, as they provide a clear picture of how much needs to be saved or invested today to meet those future objectives efficiently.