I'm currently listening to the Dave Ramsey Show and there was this one caller who called wanting to argue how idiodic payments on an amortized mortgage. Here is her arguement that made me so angry at how inept some real estate "experts" can be.
She tried to make the arguement that in the first payment on a 30 year mortgage one is paying 500% interest!!!!! How idiodic, Dave tried to set her strait but she did her best to stop him.
For those of you who also, don't know how an amortization schelude works here is a great description I was able to find online, http://www.ruralfinance.org/servlet/BinaryDownloaderServlet?filename=1133308852080_Lesson_4_interest_rates.pdf
If you read it, you will see that the interest rate is calculated at the beginning and interest payments do fluctuate as the payments are made, but this is not the major issue here. The reason mortgage payments are on an amortization schedule is most home owners would like the convenience of fixed payments so making a budget is easy. In the first payment, typically most of the payment goes to interest. This, however, (lets say $825 of a $1000 payment) is not the interest rate!! This, as a percentage to the principal, is 471% of the payment. the interest rate is calculated as shown in that link provided, thats how the interest rate and monthly payments are kept constant. If you're given a 5% mortgage, even if the first payment is 500% interest, your last payment will be less than .1% interest and over the course of your loan if you don't make any payments early or late, your total interest payments as a percentage of your total loan amount will be 5%. Your rate will be less of course if you pay early each month and your rate will be vastly more if you pay late because of late fees and back-interest.
Please comment if you want to learn more about this
Monday, July 7, 2008
Tuesday, July 1, 2008
I'm making a change to my baby steps
Here's a list of the baby steps and my current progress through them:
1. $1,000 baby emergency fund - Done
2. Debt Snowball - Done
3. 3 - 6 months expenses in emergancy fund - Done
4. Saving 15% of pre-tax income towardretirement - Not done
5. College funding for children - Close
6. Pay off home early - I don't own a home
7. Build/Enjoy wealth, give - Not done
Those are the baby steps as prescribed by Dave Ramsey, below is how i've ammended them for my personal jouney. I've added a step in bettween 4 and 5 to increase my emergancy fund to a whole year of living expenses because I had the sub-prime collapse hit really close to home when Shanna's (my girlfriend's) father was laid off and was out of work for almost a year because the job market was so bad. Also, baby step #5 is really meant for saving for kids college, but since I don't have any kids and am currently still in college myself, I've adjusted the meaning of that step to apply to me. Also, since I am a college student and not working for 6 months of the year, funding college is a bit more important as a near-term goal.
My new list of baby steps:
1. $1,000 baby emergancy fund - Done
2. Debt Snowball - Done
3. 3 - 6 months expenses in emergancy fund - Done
4. College funding for me - Close
4.5 12 months expenses in emergancy fund - Not done
5. Saving 15% of pre-tax income toward retirement - When I'm making a better salary
6. Pay off home early - When I own a home, I'll work on this
7. Build/Enjoy wealth, give - Not done
1. $1,000 baby emergency fund - Done
2. Debt Snowball - Done
3. 3 - 6 months expenses in emergancy fund - Done
4. Saving 15% of pre-tax income towardretirement - Not done
5. College funding for children - Close
6. Pay off home early - I don't own a home
7. Build/Enjoy wealth, give - Not done
Those are the baby steps as prescribed by Dave Ramsey, below is how i've ammended them for my personal jouney. I've added a step in bettween 4 and 5 to increase my emergancy fund to a whole year of living expenses because I had the sub-prime collapse hit really close to home when Shanna's (my girlfriend's) father was laid off and was out of work for almost a year because the job market was so bad. Also, baby step #5 is really meant for saving for kids college, but since I don't have any kids and am currently still in college myself, I've adjusted the meaning of that step to apply to me. Also, since I am a college student and not working for 6 months of the year, funding college is a bit more important as a near-term goal.
My new list of baby steps:
1. $1,000 baby emergancy fund - Done
2. Debt Snowball - Done
3. 3 - 6 months expenses in emergancy fund - Done
4. College funding for me - Close
4.5 12 months expenses in emergancy fund - Not done
5. Saving 15% of pre-tax income toward retirement - When I'm making a better salary
6. Pay off home early - When I own a home, I'll work on this
7. Build/Enjoy wealth, give - Not done
Monday, June 30, 2008
Bank of America ?s
Ok, I have some questions about the Bank of America. I just opened a checking account at the local branch here in Massachusetts because I wanted to have a local bank while I'm living up here. For those of you that don't know, I'm a student at the University of Cincinnati for 6 months of the year and an employee of Intel Corp. for the other 6 months and after three years of doing all my banking online, I've finally decided to get a local bank in Massachusetts (I already have one in Ohio). I wanted to pick a bank that has locations in Massachusetts as well as in Ohio and I was amazed at how many banks there are in one place but not the other... Like all of them!! So I settled on Bank of America even though I've heard so many bad things about them.
I was just wondering what others felt about BoA whether they liked them or not and why since I really don't have any experience with them at all.
I was just wondering what others felt about BoA whether they liked them or not and why since I really don't have any experience with them at all.
I am a triathlete!!
One of the goals I set for myself this year was to compete in and finish a triathlon, and today I am happy to say that I have. Yesterday I competed in the 2nd anual Cohasset Triathlon.
Now, half-way through 2008, I have goals 1 and 2 for the year crossed off:
1. Become Debt-Free -- Done June 5th
2. Complete First Triathlon -- Done June 29th
3. Finish 2nd co-op with Intel with Excellent marks -- In Progress until Sept. 19th
4. Drop below 200 lbs. -- In Progress, current weight: 222 lbs.
This triathlon was one pretty expensive thing that I was saving for while I paid off my debt, which I know Dave Ramsey doesn't really believe in doing when you are paying off debt. But I have to say that the feeling of accomplishment is great, so if you feel passionate and want to do something that you know will give you a great moral boost, I say go for it if it can fit in your budget and not delay your getting out of debt by too much. But just know that it will keep you in debt for a bit longer.
Now, half-way through 2008, I have goals 1 and 2 for the year crossed off:
1. Become Debt-Free -- Done June 5th
2. Complete First Triathlon -- Done June 29th
3. Finish 2nd co-op with Intel with Excellent marks -- In Progress until Sept. 19th
4. Drop below 200 lbs. -- In Progress, current weight: 222 lbs.
This triathlon was one pretty expensive thing that I was saving for while I paid off my debt, which I know Dave Ramsey doesn't really believe in doing when you are paying off debt. But I have to say that the feeling of accomplishment is great, so if you feel passionate and want to do something that you know will give you a great moral boost, I say go for it if it can fit in your budget and not delay your getting out of debt by too much. But just know that it will keep you in debt for a bit longer.
Thursday, June 19, 2008
First Post
Ow!! I just banged my knee on the desk and it really hurts...
Well at least this is just superficial pain. I know that financial problems often cause real pain, personally and socially. I am vowing to try to live with as little of this pain as possible. I have a good start, I am debt-free and an engineering student enrolled in the University of Cincinnati. When I started moving toward this goal, I was 20 years old and had over $10,000 in debt. I am happy to say that now I am 22 years old and have an astounding $0 in debt and a personal net worth of well over anything I'm going to publish to the internet.
You are probably asking how I managed to pull this off, well thats a bit of a story... A huge misfortune in my life in many ways, but on the other hand, God has a way of making sure there is always a silver lining to any situation.
When I was 18 years old, I was involved in a life-threatening car accident that saddly took the lives of two of my best friends and left me in the hospital for a month and a half with many broken bones, two collapsed lungs, a lacerated spleen, ruptured bladder, and cheifly among them, a closed head injury that had me placed in a coma for a couple weeks. This accident was life altering in many, many ways. First of all and most importantly, it stole from me two of my best freinds who can never be replaced, less importantly, it also changed my life situation on a few fronts, It caused me to place college education on the back burner for a while I recovered from my physical injuries, which I'm happy to say took less than a year. The accident also changed a lot about the way I choose to look at my life and the path I am leading and provided me with a great opportunity to make significant changes (for the better) in my future possibilities in the form of a substantial pain and suffering settlement from my friend's (the driver of the car, and one of the two who parished) insurance company.
While this has left me in a better position than most students in college, if given the chance I would, in a second, give everything back just to have both of my friends back. Sittuation being what it is though, I have made a pledge to use this gift in the best way i know how to honor their memories.
Thats not to say that I diddn't make my mistakes with the money at first. One of the first things I did when I recieved the settlement was, buy a $30,000 car on a loan thinking that it wouldn't matter because I'd have the money to pay it off at any point. This logic worked for a while until I realized that with the rest of the money I still needed to pay for college and have an emergency fund of 6-months expenses. After I got smart and set asside this money, I realized that I diddn't have as much as I would have liked left over to invest for the future (which was the orriginal goal for the money).
Since then I've committed to living debt free and have discovered some tools to help me do this that I think are great and would urge anyone reading this to use. First of all, Dave Ramsey, yes the biggest name in personal debt reduction, Dave has provided a wonderful and very common-sense method to eliminating debt and living debt-free. Most of what I discuss in this blog will reference his methods and ideas. For those who are familiar with Dave Ramsey and his baby steps, I am now successfully completed with baby step #3 and working on investing 15% of my pay (wait a sec., I'm a student how does this work?... I'll explain in a little bit) into an IRA and building up my emergency fund.
So after that explanation, here is my current life sittuation and goals, I'm a debt-free student currently in my third of five years in engineering college vowing to live debt-free except for a mortgage when the time comes. I'm also currently an intern at Intel (which is that income I reffered to above) for 6 months out of the year; this is why my program is a five-year one. I'm also attempting to put my thoughts and actions through this journey on here. Lets see if it helps...
Well at least this is just superficial pain. I know that financial problems often cause real pain, personally and socially. I am vowing to try to live with as little of this pain as possible. I have a good start, I am debt-free and an engineering student enrolled in the University of Cincinnati. When I started moving toward this goal, I was 20 years old and had over $10,000 in debt. I am happy to say that now I am 22 years old and have an astounding $0 in debt and a personal net worth of well over anything I'm going to publish to the internet.
You are probably asking how I managed to pull this off, well thats a bit of a story... A huge misfortune in my life in many ways, but on the other hand, God has a way of making sure there is always a silver lining to any situation.
When I was 18 years old, I was involved in a life-threatening car accident that saddly took the lives of two of my best friends and left me in the hospital for a month and a half with many broken bones, two collapsed lungs, a lacerated spleen, ruptured bladder, and cheifly among them, a closed head injury that had me placed in a coma for a couple weeks. This accident was life altering in many, many ways. First of all and most importantly, it stole from me two of my best freinds who can never be replaced, less importantly, it also changed my life situation on a few fronts, It caused me to place college education on the back burner for a while I recovered from my physical injuries, which I'm happy to say took less than a year. The accident also changed a lot about the way I choose to look at my life and the path I am leading and provided me with a great opportunity to make significant changes (for the better) in my future possibilities in the form of a substantial pain and suffering settlement from my friend's (the driver of the car, and one of the two who parished) insurance company.
While this has left me in a better position than most students in college, if given the chance I would, in a second, give everything back just to have both of my friends back. Sittuation being what it is though, I have made a pledge to use this gift in the best way i know how to honor their memories.
Thats not to say that I diddn't make my mistakes with the money at first. One of the first things I did when I recieved the settlement was, buy a $30,000 car on a loan thinking that it wouldn't matter because I'd have the money to pay it off at any point. This logic worked for a while until I realized that with the rest of the money I still needed to pay for college and have an emergency fund of 6-months expenses. After I got smart and set asside this money, I realized that I diddn't have as much as I would have liked left over to invest for the future (which was the orriginal goal for the money).
Since then I've committed to living debt free and have discovered some tools to help me do this that I think are great and would urge anyone reading this to use. First of all, Dave Ramsey, yes the biggest name in personal debt reduction, Dave has provided a wonderful and very common-sense method to eliminating debt and living debt-free. Most of what I discuss in this blog will reference his methods and ideas. For those who are familiar with Dave Ramsey and his baby steps, I am now successfully completed with baby step #3 and working on investing 15% of my pay (wait a sec., I'm a student how does this work?... I'll explain in a little bit) into an IRA and building up my emergency fund.
So after that explanation, here is my current life sittuation and goals, I'm a debt-free student currently in my third of five years in engineering college vowing to live debt-free except for a mortgage when the time comes. I'm also currently an intern at Intel (which is that income I reffered to above) for 6 months out of the year; this is why my program is a five-year one. I'm also attempting to put my thoughts and actions through this journey on here. Lets see if it helps...
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