Prosper Newsletter: June 2006 > Financial
You understand that the following information is educational in nature and is not intended to be legal, accounting, or tax advice. You are responsible for your own financial decisions and should consult your own legal, accounting, and tax advisors before making your financial decisions.
Debt Student Pays Off Over $12k In Debt Since May, Finds What He Is Looking For!
I have paid off roughly $12,230.00 since beginning the sessions in May, which represents the complete elimination of 9 debts and a reduction through payments on others.
Debt Free - Using the accelerated Debt-Free Plan, I will be financially free within 5 years and 8 months. This is 17 years sooner than if I had tried to pay my debts off the way that most people do. I will have save a total of $147,739.00.
If I invest the money I'm now wasting on debt payments ($5,427 per month, for 17 years and 5 months. With a modest 10% annual interest rate, I will build a retirement fund worth $3,038.562, which would pay me a monthly income of $25,321 for the rest of my life.
This is what I was looking for.
- Mike B.
Covington, TN
Your discretionary spending is costing you a lot more than you think. As part of your training in Cash Flow Management and Expense Tracking, you should have a pretty good idea of how much of your hard earned income is being spent on non-necessity items. Items like fast food and dining out, entertainment, vices, etc. are often responsible for a large percentage of our expenditures.
For example, if you spend $35 /week on fast food you might think that over a year you're wasting $1820.00 /year (35X52) or $18,200.00 over 10 years (1820X10). If your total westward expenditures totaled $300.00 a month, you'd think that means you're spending $3,600.00 over the course of a year and $36,000.00 over 10 years.
If this is the case you're not considering the opportunity cost, the potential future value of that money if you had used it in another way. For example, that $35.00 that you spend weekly on fast food, if you had taken that $35.00 every week and invested it and earned 10% compounded annually, at the end of 1 year you would have $1,912.18, and at the end of 10 years you would have $31,415.52. Your $300.00 /month would be worth $3,760.67 after one year and $61,453.49 after 10 years. That's a lot more than the $3,600.00 you would have spent over that period. Whenever you are faced with the spending decision, consider the opportunity cost and ask yourself if you could put that money to better use. To run your own numbers, use the calculator found at http://www.tcalc.com/tvwww.dll?Save.
