Financial Choices and the True cost of Debt? Unbelievable, but true!
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This document discusses life choices and the costs of debt. It notes that at age 40, there are approximately 10,971 days left in a person's life. It then provides two examples of the high costs of financing purchases like a home or car over long periods at interest rates of 9.5-10%, with the total costs being over double the purchase prices due to accumulated interest. It emphasizes that financing decisions have opportunity costs and that destiny is a matter of choice, not chance.
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Financial Choices and the True cost of Debt? Unbelievable, but true!
- 4. If 40 years old = 10’971 days left? Life and Choices
- 5. Dependent learn to earn earn, live below your income and save live on whatever you saved Inter-dependent In/dependent Life and choices
- 9. The cost of DEBT list price: R800,000 deposit: R120,000 bond: R680,000 finance: 240 months annual rate: 9.5% payment: R6,338 total: R1,521,238 + R120,000 (deposit) = R1,641,238 interest: R841’238 (lost opportunity) CUMULATIVE INTEREST: 123.7%
- 10. purchase price R300’000 finance 60 months rate 10% payment R6,374 per month The cost of DEBT total R382,446 interest R82,446 (lost opportunity) CUMULATIVE INTEREST : 27.5%
- 11. R82,446 R132,780 R893,278 R344,397 R2,316,933 5yrs 10yrs 20yrs 30yrs 40yrs 10%pa OPPORTUNITY COST But I have to have a car (And a house) The True cost of DEBT
- 12. “Destiny is no matter of chance. It is a matter of choice: It is not a thing to be waited for, it is a thing to be achieved.” - William Jennings Bryan
Editor's Notes
- If you had to plot your investment assets on a graph it would look something like thisYou save up and then you draw down – hopefully the money lasts longer than youHowever a more accurate picture would probably look something like….
- Most people’s graphs would start below the line because most people will have debt at some point in their lives.Getting out of debt is called DEBT-onation and the sooner you can do that the Better!!The next phase is Wealth accumulation and finally you have wealth preservation.So why should we get rid of our Debt and what is the True cost of Debt?
- The majority of people have no idea about the cost of Debt, so let’s investigate?
- Over 5 years you will have paid R54,964 in interest!Assuming growth at 10% pa, this interest cost of R82,446becomes R132,780by theend of year 10. (Note: No further payments taken into account!)At 20 years, it is R344,397, 30 years it is R893,278 and in 40 years the true cost of the interest on that First Vehicle is an astonishing R2,3 Million!!!And that is just the Interest from one car and is the impact of Deferring Gratification by 5 short years!