I hear this all the time. People making large cash deposits on low interest loans. Regardless of it being a home, car, credit card, etc. In the long run you lose money even more money.
Due to a lack of a proper financial education, most of us actually get financial advice from the people closest to us. Our parents. Now like most people, your parents aren't wealthy millionaires. Chances are they've worked most of their lives, lived frugally and have scrapped by to have the little that they have.
Do you ever wonder if there is a better way? I have. So I did some research and learned some things on my own, rather than take advice blindly. Would you take restaurant advice from someone who's never opened or ran one? Do you take advice on how to beat a ticket from someone who's never beat one? You get the idea.
It's always a debate, so I've put it down in a spreadsheet below. Click on the link to see the full view. It should be self explanatory, but inc ase you do have questions I'll sum it up after the link.
Last 10 years Saving vs Debt
In the spreadsheet there are 2 separate sections. The top is someone who invested their money and below is someone who paid off debt first before saving.
As you can see I've use a real mutual fund in the example with 10 years worth of returns.
In the mad dash to save $3,700 in interest they sacrificed $16,000 in gains.
So, the big questions is do you want to save $3,700 or make $16,000? I'd rather have the $16,000 in cash. Wouldn't you?
Monday, August 29, 2011
Friday, June 24, 2011
Not all debt is created equal...
What does this mean? Not all debt is the same. Some debt is good. Believe it or not, paying off debt can cost you more money than you imagine.
What do I mean? Here's an example:
Low interest debt, which is anything in single digits, can actually work to your benefit. The best example is my previous post: The Power of Saving Early You can apply that to this. So you have low interest debt (Student loans, car loans, mortgage) and want to pay it off first before saving. BAD! Why you ask? If you look at the break down in the spreadsheet. You avoid saving and paying off debt of $30,000. You lose $48,000 in trying to catch up for retirement vs saving early and it costing you $12,000. Not only that, you also lose in the financial gains you may missed out on, which is highlighted in the spreadsheet below:
https://docs.google.com/spreadsheets/d/e/2PACX-1vSQTiorIeNCt4YQTXZ6RYHPfy2GB68xpCYJZYD4BmzQ7nSRuVyjbADg0RmVDdfAm7PbMT_T_GBVkviK/pubhtml
Now, in the example above.
Person B paid of debt early and was debt phobic. They started saving later and managed to save a nice $1.5 million.
Person A started saving early and paid off their debt slowly. They have $3 million dollars saved for retirement.
Who would you rather be? Person A I hope.
What do I mean? Here's an example:
Low interest debt, which is anything in single digits, can actually work to your benefit. The best example is my previous post: The Power of Saving Early You can apply that to this. So you have low interest debt (Student loans, car loans, mortgage) and want to pay it off first before saving. BAD! Why you ask? If you look at the break down in the spreadsheet. You avoid saving and paying off debt of $30,000. You lose $48,000 in trying to catch up for retirement vs saving early and it costing you $12,000. Not only that, you also lose in the financial gains you may missed out on, which is highlighted in the spreadsheet below:
https://docs.google.com/spreadsheets/d/e/2PACX-1vSQTiorIeNCt4YQTXZ6RYHPfy2GB68xpCYJZYD4BmzQ7nSRuVyjbADg0RmVDdfAm7PbMT_T_GBVkviK/pubhtml
Now, in the example above.
Person B paid of debt early and was debt phobic. They started saving later and managed to save a nice $1.5 million.
Person A started saving early and paid off their debt slowly. They have $3 million dollars saved for retirement.
Who would you rather be? Person A I hope.
Thursday, April 14, 2011
The Power of Saving Early
So, here's a graph I saw in my previous life as Financial Advisor and recreated. (The link is below.) We demonstrated the power of saving early, to convince people to start saving early. Initially I always thought of it as marketing, until I actually put it together in a spreadsheet.
Here's the SHOCKING part. If you look...
Person A saved $2000 a year starting at 21 and saved until 26 ($12,000). To get $1,510,252.43 for retirement.
Person B started late at 27 and had to save until 65 ($78,000). To get $1,532,182.84 for retirement.
It costs $66,000 more, because they started late, to get ONLY $21,930.41 more in savings for retirement.
If you truly think about it, it's only $77 per check every 2 weeks or $167 month or $5.48 a day to save the $2000 a year.
It's AMAZING how college graduates or even high school students aren't taught this in school.
Check out the link: https://goo.gl/3DpvFH
* Based on a rate of return of 12% per year. I'll show you how in another post! Stay tuned!
Here's the SHOCKING part. If you look...
Person A saved $2000 a year starting at 21 and saved until 26 ($12,000). To get $1,510,252.43 for retirement.
Person B started late at 27 and had to save until 65 ($78,000). To get $1,532,182.84 for retirement.
It costs $66,000 more, because they started late, to get ONLY $21,930.41 more in savings for retirement.
If you truly think about it, it's only $77 per check every 2 weeks or $167 month or $5.48 a day to save the $2000 a year.
It's AMAZING how college graduates or even high school students aren't taught this in school.
Check out the link: https://goo.gl/3DpvFH
* Based on a rate of return of 12% per year. I'll show you how in another post! Stay tuned!
Thursday, January 27, 2011
Happy New Year! New online identity!
For those of you who run your own business, work in marketing or want an online presence this year (or anytime), you'll need to establish your own identity/persona.
I've done this with atchan. If you need help, reach out to me. So here are some basic steps:
1. Decide what your goal is.
2. Pick an identity that isn't online. Create something and google it. If it comes up, chances are it's taken. If not, great!
3. Check to see if the domain is taken. Click this link and check on Godaddy.com to see if your name as a domain is available. If so, buy the .com for around $8. Don't buy the additional services, you don't need them.
4. Establish email for your domain. It's free. You may need some technical help with this.
http://www.google.com/apps/intl/en/group/index.html
5. Go to, and register yourself and your new identity (This is only a few, depends on what you are looking to do.):
http://www.youtube.com/
http://www.blogger.com/
http://www.facebook.com/
http://www.twitter.com/
6. Content is up to you.
Mind you this is only a start.
I've done this with atchan. If you need help, reach out to me. So here are some basic steps:
1. Decide what your goal is.
2. Pick an identity that isn't online. Create something and google it. If it comes up, chances are it's taken. If not, great!
3. Check to see if the domain is taken. Click this link and check on Godaddy.com to see if your name as a domain is available. If so, buy the .com for around $8. Don't buy the additional services, you don't need them.
4. Establish email for your domain. It's free. You may need some technical help with this.
http://www.google.com/apps/intl/en/group/index.html
5. Go to, and register yourself and your new identity (This is only a few, depends on what you are looking to do.):
http://www.youtube.com/
http://www.blogger.com/
http://www.facebook.com/
http://www.twitter.com/
6. Content is up to you.
Mind you this is only a start.
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