Ever wonder where your money goes?

[plural]

I'm the first to admit that most of what I post here
while entertaining, amusing and perhaps even insightful
isn't really all the important to your daily lives

but, ernunnos posted this video and you really need to watch it

Comments

[budhaboy]

I'll never forget what you said when you toured our new house back in '05 (note the lack of quotes

[plural]

Indeed, although I was confident that if anyone could make it work it would be yall.

I think the important point is not the extra 6 years but rather that the entirety of that burden has been shifted to the families. Where in the 70s society carried the cost of preparing you for the workforce, now most people have to borrow thousands of dollars.

So a new family starting out, not only has about 100 grand worth of student loans to pay off, but the obscene costs of daycare/preschool (which I'll credit you for making me aware of) before they can even start saving for their child(ren)'s college education.

It pretty much assures that except for the most fortunate, the next generation will also have to take significant debt, and the situation will propigate itself.

The idea of people essentially being born into debt and most likely never been able to get out of debt, seems a whole lot like slavery to me.

Of course, you know how debt averse I am, so my perspective on the issue may be quite skewed.

[budhaboy]

It pretty much assures that except for the most fortunate, the next generation will also have to take significant debt, and the situation will propigate itself.I think that's just about right. If you consider H and I's background it's decidedly upper middleclass, granted we took about 10 years off from actively pursuing money, but we also have no debt for our educations... We make pretty good money today, but H is only making slightly less than 1/2 time money, so we've got a leg up in that regard toward saving money as we are slightly above water with her working 1/2 time. We have no debt other than auto/home loans. We live more frugally than anyone we know, and if we are lucky our boys may be able to 1) get through college with very little debt, 2) not have to support us in our dotage... hardly keeping our kids in our station... they are clearly slipping to a decidedly 'middle' class existence (although I tend to think of it more as a subset titled the American intelligentsia

[plural]

Indeed, of course, they'll be in good company as I suspect the next 5-10 years are going to be pretty tough ones for a lot of people

[budhaboy]

DOH! Doing a refi and applying the money to principle... I'm ashamed to say that hadn't occured to me until you mentioned it, actually. We are currently overpaying our motgage to just shy of an extra payment a year. I'd noticed that the principle was going down, but honestly hadn't thought about doing the calculations to see how much sooner it'd actually be paid off. It's funny too that it wouldn't have occured to me because the mortgage company reassess every year and lowers our payment accordingly to ensure it'll take a total of 30 years to pay it off...

Are you sure it whacks 13 years off the mortgage? That seems a bit steep...

[plural]

No need to be ashamed, I am jewish after all, the laws of compound interest are encoded into our DNA *grin*

Yup I'm sure.

I remember it quite well because it was such a huge difference both in terms of time and money not paid in interest.

It was one of those "Holy shit, really" moments.

Of course, if your company adjusts your payment down, then you would have to keep making 13 of your previous payment amounts to adhere to the 17 year schedule. Making 13 of your new payment amount will reduce the overall cost but each time they adjust it will reduce the amount you save.

You can find a nice javascript calculator that will let you play with numerous options for accelerated loan repayment here. I remodelled the original terms when I ran the question before and all in all, it cut 13 years and 120 grand from the schedule term of the loan in exchange (in my case) for an additional $250 per month

[budhaboy]

the other problem with previous analyses was not taking into acount the decreased principle at the refi... In my case dropping from a 5.25% to 4.75% rate whacks almost 30 months off the schedule for just shy of 53K savings...

Nicely done, bubba... nicely done.

[plural]

Glad I could help, you can send my 10% commission check to the usual address ;p

[plural]

Oh btw.

Whats your life looking like the latter half of May?

I'm thinking I might take a road trip out your way, spend a week or so visiting and pick up the boxes I have in your basement?

[budhaboy]

As of now, it's pretty clear... we're off to NC starting 6/12 though.

[plural]

I'm thinking something like May 23rd through 29th +/- 2 days on either end as I haven't decided if I'm going to fly out or do a road trip.

[budhaboy]

Sounds like a plan, brother...

Those boxes are mostly exactly where you left them... I've moved a couple around and noticed that they are starting to get a little aged. It has been like three years, no?

[plural]

/facedesk

yup three years in august

I may have to repack them.

sounds good then, I'll update you as I get things fixed into place.

[budhaboy]

Heh

[budhaboy]

Definately a slack-jawed moron...

I just noticed the 'nper' function in excel... If I'm applying it correctly, 13/12 a 'normal' payment grinds out to 310.7826 (about 25.8 years)... saving you just over four years... I'm not sure why my formula isn't correct, and I've tragically lost interest as it's way closer to my conventional wisdom would say...

Again, there's no guarantee I'm doing any of this right as I've just proven, I'm a slack-jawed moron.

[plural]

Nope, you are doing it correctly, I just didn't give you the correct set of parameters as it had been three years since I did the calculations myself.

Once I had the calculator in front of me and started actually modelling the terms of my original loan, I realized that I was overpaying by more than just an extra payment and that the contrast between my interest rate (high) and loan amount (low) put my particular situation into the outlier realm, particularly when you add in how much I was overpaying.