3. Disclaimer
I am not a financial advisor so the information I will provide will not cover
issues such as:
Shares
Using home equity
Negative gearing
The “common sense” advice that I will state on topics that I don’t know
enough about is “ do your own research, if you only understand 99% of the
information, do not get involved”.
4. What is Interest ?
There is 2 types of interest, Simple and Compound interest.
Simple interest will use the amount that is the PRINCIPLE amount. To
workout how much interest you need to pay or receive.
Compound interest will use the amount that is in the account to workout
how much interest you need to pay or receive.
5. The difference between Simple and Compound Interest
Simple Compound
Principle $1,000.00 $1,000.00
1 year $1,030.00 $1,033.04
2 years $1,060.00 $1,064.64
3 years $1,090.00 $1,096.84
4 years $1,120.00 $1,130.20
5 years $1,150.00 $1,164.58
6 years $1,180.00 $1,200.00
7 years $1,210.00 $1,236.50
8 years $1,240.00 $1,274.11
9 years $1,270.00 $1,312.86
10 years $1,300.00 $1,352.79
3% Interest Rate
Compounded Monthly
The winner is ….
Compound Interest
6. Practical Compound Interest Example
Simple Compound
$1,000.00 $1,000.00
1 year $1,630.00 $1,641.43
2 years $2,260.00 $2,299.74
3 years $2,890.00 $2,978.08
4 years $3,520.00 $3,677.05
5 years $4,150.00 $4,397.28
6 years $4,780.00 $5,139.41
7 years $5,410.00 $5,904.12
8 years $6,040.00 $6,692.09
9 years $6,670.00 $7,504.02
10 years $7,300.00 $8,340.65
$50 Monthly Deposit
3% Interest Rate
Compounded
Monthly
The Winner is …. Compound Interest
8. The repayments that a financial institution states to pay off the
loan is a minimum figure.
If you can afford to make a higher repayments and more
frequent payments on the loan the quicker the loan will paid
off.
11. In the 1897 and 1924 VFL seasons the finals series were in a round robin
format.
In 1897 both Essendon and Melbourne won they their first two round robin
games. They played against each other in the “ Grand Final” with
Essendon winning 1 – 7 – 13 to 0 – 6 -6.
In 1924 Essendon won its first 2 games, but as no other team had won 2
games in the round robin format so Essendon was declared the winner.
Essendon lost their 3rd game of the round robin.
Essendon played an exibition game against VFA champions Footscray /
Western Bulldogs.
Essendon lost this game also.
For the 1925 season Footscary, Hawthorn and North Melbourne joined the
VFL from the VFA to expand the league from 9 teams to 12.
I wasn’t sure what topic I should do this presentation on, should I talk about the Essendon Football Club and explain what was different about the 1897 and 1924 VFL seasons? Do I talk about the Canadian inventor of Basketball? With a 10 minute presentation required I knew I couldn’t explain why 3 to the power of 6, 9 cubed and 27 squared all equal 729 because it would only take about 1 minute. So I decided on a topic that some people may learn something from.
The information that I am providing today is on a more basic level of finance. But I do guarantee that the information I do provide will be better than and more useful than if you went to a financial lecture that telemarketers ring you about over the phone.
I am not a financial advisor so the information I will provide will not cover issues such as:
Shares: I did an accounting assignment on the company Rio Tinto, I thought their share price of $135 was a good buy, many years later Rio Tinto’s share price is below $50.
Using the equity of the home to buy more property.
Using property to reduce the amount of tax that you pay each year is what negative gearing is.
The “common sense” advice that I will state on topics that I don’t know enough about is “ do your own research, if you only understand 99% of the information, do not get involved”.
There is 2 types of interest, Simple and Compound interest.
These types of interest apply for when you have a loan or a savings account.
Simple interest will use the amount that is the PRINCIPLE amount. To workout how much interest you need to pay or receive.
Compound interest will use the amount that is in the account to workout how much interest you need to pay or receive.
For this example I am using a realistic interest rate of 3%, compounded monthly the same way the bank does it. The principle amount is $1000 and the balance is shown yearly for 10 years. In the comparison, the simple interest increases by $30 each year, the compound interest increases in difference year on year. By the 10th year Compound has won by 52 79.
For this example I am again using the realistic interest rate of 3%, compounded monthly the same way the bank does it. I have now added a $50 monthly deposit as most financial institutions require that each month. The principle amount is $1000 and the balance is shown yearly for 10 years. In the comparison, the simple interest increases by $630 each year, the compound interest increases in difference year on year. By the 10th year Compound has won by $1040.65.
The financial institution wants you to take as long as possible to pay off the loan. They want you to pay as much interest as possible. In some cases, they’re not going to be unhappy if the Viridian Line of Credit from the Commonwealth Bank is not paid off.
When using a loan calculator, with the above variables, the repayments came to be 2445 per month, with 380231 interest paid, 1128 per fortnight with 379818 interest paid or 564 per week and 379640 interest paid. When I added just $6 to the weekly requirements, I saved 1 year on the time of the loan and over $8000 in interest
When I was doing the research on this I thought that paying weekly would provide more benefit then $600 over a 30 year loan
Shane ad libs this slide as he is very good at math's.
