Definition: Back-Of-The Envelope Calculation

back of the envelope calculation

Defined: An informal mathematical computation, often performed on a scrap of paper such as an envelope. A back-of-the-envelope calculation uses estimated and/or rounded numbers to quickly develop a ballpark figure. The result should be more accurate than a guess, but will be less accurate than a formal calculation performed using precise numbers and a spreadsheet or calculator.

MB Comment: I’ve done hundreds of financial and retirement plans/analysis for clients, and after about 23 years, I usually know the rough outcome even before inputting the data into the computer.


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