TIME = MONEY Truth #1 About Common Sense Finance

Time is money, it’s an old cliché that most of you have heard many times. It usually refers to payroll and how if you put in a certain amount of time, you will get a certain amount of pay. If your company has lost time, they will lose money also.

But most people do not understand that time is money when it comes to borrowing and investing also. It is typically called “opportunity cost”. Many borrowers will tell me: “I want to pay cash for my home because that will increase my cash flow. Well that really is not true. It likely will decrease your cash flow depending on what you do with that cash. The TIME that your MONEY is kept inside of your house has a cost. Let’s say you had 200,000 in cash. You went out and bought your dream home for $200,000. You have no payments so the house really only costs you money when it comes to taxes and utilities, right? Wrong! Your $200.000 has the potential to earn you lots of money over the next 30 years at about 8% interest in relatively safe, long-term investments. That would bring your investment to a whopping $2,187,146 in 30 years with interest compounded monthly.

Of course you would have to pay interest on that mortgage to the tune of $1000 per month at today’s good rates of around 6%. But if you are earning around 1300 per month (just under 8%) and you get a tax break of 300 per month (30% marginal bracket), your cash flow will increase by $600 per month simply because you did not store that $200,000 in your home and kept it in your investment account earning more money. That will amount to tens of thousands of dollars over your lifetime. There is nothing wrong with paying interest as long as you are earning more interest. You could earn as little as 5% in your investment account at today’s mortgage rates and still come out ahead because of the tax benefit.

Time is equal to Money should be a principle that you always look at whenever you borrow or invest money. Time value of money calculators are all over the internet, and you can ask your mortgage or investment professional for help in making these decisions. It is a bit more confusing and takes more time to think like this, but it can make the difference as to whether or not you hit retirement goals and make you financially secure. The obvious answer is usually not the right one. The crowd follows conventional wisdom and the thinkers take the better, more profitable and less crowded path. You will get paid to think!!

Reverse Mortgage Man
http://www.moneywise123.com/
(866) 800-0280