Ho How im w importan ant is t is th the in e inter eres est r t rate? e? Let’s say you take out a $120k mortgage at the average mortgage rate – 4.38%. How much does that mortgage cost in total, interest included? Principal $120,000.00 Interest $95,816.58 Total $215,818.65
Ho How im w importan ant is t is th the in e inter eres est r t rate? e? Let’s say you take out that same $120k mortgage at the credit card rate – 16.71%. How much does that mortgage cost in total, interest included? Principal $120,000.00
Ho How im w importan ant is t is th the in e inter eres est r t rate? e? Let’s say you take out that same $120k mortgage at the credit card rate – 16.71%. How much does that mortgage cost in total, interest included? Principal $120,000.00 Interest $485,730.42
Ho How im w importan ant is t is th the in e inter eres est r t rate? e? Let’s say you take out that same $120k mortgage at the credit card rate – 16.71%. How much does that mortgage cost in total, interest included? Principal $120,000.00 Interest $485,730.42 Total $605,730.42
Ho How im w importan ant is t is th the in e inter eres est r t rate? e? While this is an unrealistic scenario (you would never buy a house on a credit card), it shows the importance of the interest rate. 4.38% 16.71% Total $215,818.65 $605,730.42 Difference 389,911.77
Is debt good or bad?
Good or bad use se of f debt? Taking out a loan to finance the purchase of a $30,000 Rolex to look cool and impress your friends
Good or bad use se of f debt? Taking out a loan to finance the purchase of a $30,000 Rolex to look cool and impress your friends BAD
Good or bad use se of f debt? Taking out a car loan to purchase a reliable Toyota Camry car so you can make it to and from work
Good or bad use se of f debt? Taking out a car loan to purchase a reliable Toyota Camry car so you can make it to and from work GOOD
Good or bad use se of f debt? Taking out a mortgage to buy a house in a nice neighborhood at a reasonable price
Good or bad use se of f debt? Taking out a mortgage to buy a house in a nice neighborhood at a reasonable price GOOD
Good or bad use se of f debt? Using a credit card to buy a new 60” TV for your man cave to watch Buffalo Bills games
Good or bad use se of f debt? Using a credit card to buy a new 60” TV for your man cave to watch Buffalo Bills games BAD
Ho How d w does es d deb ebt im t impac act n t net w t worth th? Net Assets Liabilities Worth
Ho How d w does es d deb ebt im t impac act n t net w t worth th? Net Assets Liabilities Worth
What m Wh t mak akes es a a go good us use e of deb debt? t? A good use of debt enables a purchase of an asset that retains value or adds to your net worth long after the debt has been paid off. For instance, a home retains value for many years. A college education enables you to earn more money and build your net worth. That pair of shoes you bought on a credit card is going to be worth almost nothing after just a few uses! This is destructive to your net worth.
Financial Literacy CFA Society of Buffalo Investing 130
What is investing?
Wh What is t is in inves esting ting? By definition investing is the purchase of an asset with the idea that the asset will provide income in the future or will later be sold at a higher price for a profit.
Wh What ar t are e in inves estm tmen ents ts? Stocks Bonds Houses Businesses
10% 10% An Annualized Return 1990 - 2014
Ho How m w much d do y you h have t e to in inves est t to to buy buy a ho hous use e in in 10 10 years?
Ho How m w much d do y you h have t e to in inves est to to buy buy a ho hous use in 10 years? s? $150,000 home
Ho How m w much d do y you h have t e to in inves est to to buy buy a ho hous use in 10 years? s? $150,000 home 20% Down Payment = $30,000
Ho How m w much d do y you h have t e to in inves est to to buy buy a ho hous use in 10 years? s? $150,000 home 20% Down Payment = $30,000 Average return on investment = 10%
Ho How m w much d do y you h have t e to in inves est to to buy buy a ho hous use in 10 years? s? $150,000 home 20% Down Payment = $30,000 Average return on investment = 10% $1,882 per year
Ho How m w much d do y you h have t e to in inves est to to buy buy a ho hous use in 10 years? s? $150,000 home 20% Down Payment = $30,000 Average return on investment = 10% $1,882 per year $156 per month
Ho How m w much d do y you h have t e to in inves est to to buy buy a ho hous use in 10 years? s? $150,000 home 20% Down Payment = $30,000 Average return on investment = 10% $1,882 per year $156 per month $36 per week
Ho How m w much d do y you h have t e to in inves est t to to be a mi millionaire?
Ho How m w much d do y you h have t e to in inves est to to be a mi million onaire? $1,400,000 $1,219,630 $1,200,000 Start at 25, save $2,500/year $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 25 30 35 40 45 50 55 60 65
Ho How m w much d do y you h have t e to in inves est to to be a million mi onaire? $1,400,000 $1,219,630 Start at 25, save $2,500/year $1,200,000 Start at 35, save $2,500/year $1,000,000 Start at 40, save $5,000/year $800,000 $600,000 $454,859 $400,000 $272,954 $200,000 $0 25 30 35 40 45 50 55 60 65
Ho How m w much d do y you h have t e to in inves est to to be a million mi onaire? $1,400,000 $1,219,630 Start at 25, save $2,500/year $1,200,000 Start at 35, save $2,500/year $1,000,000 Start at 40, save $5,000/year $800,000 $600,000 $454,859 $400,000 $272,954 $200,000 $0 25 30 35 40 45 50 55 60 65
Ho How m w much d do y you h have t e to in inves est to to be a mi million onaire? Average Annual Personal Income in the United States: $31,099
How m Ho w much d do y you h have t e to in inves est to to be a million mi onaire? Average Annual Personal Income in the United States: $31,099 So to save $2,500/year, that’s just 8% of the average income.
If If you u can n make e the the av aver erage age income, , invest 8% of 8% of you our paycheck, and earn the av aver erage age ra rate of return, YO YOU CAN BE A mi millionaire
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