Much is said about the low interest rate environment we are in today.
The rate is important but the "volume of interest paid" is also important and possibly more important than the rate. It is like looking at your monthly spending and calculating that if an expense fits into the monthly plan then it is OK to purchase rather than looking at total costs.
On a $300,000 mortgage at 5% interest for 30 years, you will pay $280,000 in interest alone - almost the cost of the original mortgage. Yes, you most likely will not be able to buy a house with cash but you don't have to keep obtaining 30-year mortgages every time you move/upgrade.
On a $25,000 car at 6% interest for 6 years, you will pay almost $5,000 in interest alone - almost 20% more than the original cost of the car. Buy cars with cash and within your means.
Over a lifetime, it has been studied that 1/3rd of your income is spent on interest only. Interest paid for borrowing may be just as devasting to building wealth as taxes.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.