If you don't know where you're going, you'll end up somewhere else.
- Yogi Berra
In my last post I ran a scenario of two people who had similar mortgages, $300,000, with the same mortgage rate, 7%, and with 30 years to pay it off - they also had an extra $500 bucks to burn every month - they could either use it help pay down their mortgage every month or use it to invest a tax deffered account - 401k - every month
Then I asked the question"who comes out ahead financially?"
it was the person that invested in a 401k - that person came out almost $300,000 ahead of the person who payed down their mortgage first THEN invested into a 401k
Well, what happens if we change some of the variables - what if the mortgage is only $100,000 and the extra cash to use to either pay down the mortgage or invest is reduced to $100 per month?
check out Len and Harry...
Well, looks similar to our previous result - the person who invests their money instead of prepaying their mortgage comes out ahead financially - in this case, Harry came out almost $50,000 ahead of Len
Probably the very best thing my earnings have given me is absense of worry. I have not forgotten what it feels like to worry whether you'll have enough to pay the bills. Not to have to think about that any more is the biggest luxury in the world.
- J.K. Rowling
Rather go to bed supperless than rise to debt.
- Ben Franklin
From CardWeb.com (a leading online publisher of information pertaining to all types of payment cards):
"An association representing U.S. bankers says it is a "myth" that Americans are "up to their eyeballs" in credit card debt, claiming that American households only carry about $200 billion in balances, despite government figures of more than $900 billion and industry data showing nearly $850 billion. Where is the missing $700 billion? The American Bankers Association referenced a nearly four year old Government Accountability Office study that showed the median credit card balance among families carrying a balance was $2,200 in 2004, meaning that 50% of families with credit card debt owe more than $2,200, while 50% owe less than $2,200. According to an online poll of more than 55,000 consumers, conducted earlier this year by CardTrak.com and released in May, the median amount of credit card debt carried by Americans is about $6,600 while the mean (or average) credit card debt load is nearly $9,900. Based on industry figures, and discounting balances paid-off in full each month and commercial credit card debt, Americans were revolving about $672 billion on all credit cards at the end of last year. Furthermore, the latest revolving credit figures released by the Federal Reserve show Americans owed $920 billion in September, which includes lines of credit attached to checking accounts. The "myth" is that Bankers are "up to their eyeballs" in current facts."
I wanna know who owes that money - is the lower class or middle class that owes the lion's share of this debt and how much does a lower class person owe on average - are they capable of paying their debt instead of just the minimum payments