Tags |
|
|
Links |
|
|
Add You - Wealth Creation and Mortgage Planning - Two Great Tastes that Taste Great Together
Are you making hand crafted products and wondering why you're working hard but not making enough money? I might have the answer for you.A Common MistakeA common mistake entrepreneurs and handcrafters make is thinking that if you’re selling your product at double your cost, you’re making 100% profit.Surprise - there is no such thing as 100% profit.Profit is always figured as a percentage of your selling price, not by comparing it to your costs. Here's a handy formula for you.Profit % = ((Selling Price – Costs) divided by Selling Price) x 100For example, if your product costs are $20.00 and you sell your product for $40.00, here’s how the formula would work:$40 (selling price) - $20 (total costs) = $20 (profit dollars) divided by $40 (selling price) = 0.5 x 100 = 50% profitSo when you double your costs, you're making 50% profit. But what if you’re selling that same product for $27?$27 (selling price) - $20 (total costs) = $7 (profit dollars) divided by $27 (selling price) = 0.26 x 100 = 26% profitThe only businesses that can succeed on 26% profit margins are businesses that rely on extremely high volume turnover. Is that you? Could you work fast enough to handle high volume turnover and not burn out?Of course, those profit margins only apply if you have actually added up all your cost
First we must explain the difference between return of investment and return on investment. Return OF investment is simply getting back the money that you put in. Return ON investment is difference between the end value of your investment and the amount you invested.
Whether you pay cash for your home or pay nothing down, your home mortgage will be worth the exact same in 1 year, 5 years, 10 years or 30 years. It is true that if values keep going up you will make a positive return ON investment but that is independent of the return OF your investment. Even that fact has some doubt clouding it, but that's another article.
PAGING CHI
A lot of celebrities, non-profit and non-governmental organizations work in different fund raising events every year. This could be to get more money for AIDS research, food for impoverished nations and victims of national calamities.This type of fundraiser doesn't go from house to house in the event that the homeowner will give a fat check. It takes a gimmick and a bit of marketing to get people to participate and have some fun. Here are some tips that will be help make the project successful.1. There are a lot of causes to work for and the individual must first figure out which one to join. These organizations need people to work in the field and in the office. If the person likes talking to big time bosses, then it will be great to work in the marketing department.2. The organizers must come up with an idea that will attract a lot of people to attend. In 1984, the song “ Do They Know Its Christmas Time” was released and raised millions for those starving in Africa. To make the 20th anniversary of this event, Bono and some celebrities did a rendition to continue these efforts.3. Manpower is the biggest challenge in any fundraiser. If the number of people needed exceeds the budget, the individual must find an organizer to tie up with.The World Health Organization or the United Nations Development Program will be great if the proje
Most of you right now are looking at the byline a couple of times to see if this article is REALLY being written by a mortgage person. Some of you have taken this as final, unequivocal proof that all mortgage people really do sit around a big table of tea cups wearing hats with fractions on them! No you are not in Wonderland but if you keep reading you might find many of you have been for a long time now.
One of the buzzwords or catch phrases floating around the financial circles is "wealth creation." This has gained prominence due to the ability of the planner or agent to broaden their focus on overall wealth with their clients instead of just return on a particular investment. While a holistic approach is a very good one, what wealth creation strategies often lack are a defined strategy for accomplishing well, wealth creation! These plans often fail or vastly under perform because they don't properly account for one of the biggest parts of the wealth picture and that's the home!
WHAT DID HE SAY?
Now that's not a typo and I didn't contradict myself from the first paragraph. You see, most people believe their home is something completely separate from the rest of their financial planning. It's this sacred cow that's over in the green grass munching away while everything else in their financial life is trying to figure out how to grow without the food it needs. The sooner people realize that EVERYTHING they do is an investment decision , the better off they will be. The implication of your decision is not simply what you obtain by your action but what opportunity you give up.
So, back to wealth creation and mortgage planning. In borrowing some thoughts from a great financial partner of mine, Brent Gilmore, we can summarize what we typically look for as far as characteristics of a good investment as:
- something that earns us a good return based on our risk
- is liquid if we need it
- is not subject to additional restriction to access it once we have it
- is not at risk of loss.
The reality is your home is absolutely not the definition of a good investment. The reasons are fairly clear if we break them down. What if I told you the MAXIMUM return you could make on the purchase of your home was 0%?
Here's where we hit the rabbit hole.
First we must explain the difference between return of investment and return on investment. Return OF investment is simply getting back the money that you put in. Return ON investment is difference between the end value of your investment and the amount you invested.
Whether you pay cash for your home or pay nothing down, your home mortgage will be worth the exact same in 1 year, 5 years, 10 years or 30 years. It is true that if values keep going up you will make a positive return ON investment but that is independent of the return OF your investment. Even that fact has some doubt clouding it, but that's another article.
PAGING CHI
In recent years, credit cards have become a major component of everybody’s life. It started as a convenient spending tool but now it has become a reasonable way to gain access to much needed credit in the form of cash and loans. Keeping a balance on a credit card account is today a very common thing and interest rates are a dominant factor in peoples’ daily finance.As newer credit cards are issued every year, a balance transfer between credit cards is a common way for many to reduce their monthly payments and fees to lending organizations. If the credit history is kept in good standing, a balance transfer can be much easier and rewarding as most credit cards will be willing to grant a new loan to obtain future customers. Most credit cards offer introductory rates that are as low as zero percent and very often this low interest is kept up to twelve months.Clearly, if someone has a very high interest rate on a credit card, he or she will save a lot of money if he/she can transfer its’ entire balance into a different credit card. But a balance transfer between credit cards can actually be used effectively for years by switching from one card to another while paying down the overall balance. But that is a dangerous game to play.Let’s take for example, Mr. X who opens a credit card account at a given rate, say 7.99%. As he uses his card, he decides
One of the buzzwords or catch phrases floating around the financial circles is "wealth creation." This has gained prominence due to the ability of the planner or agent to broaden their focus on overall wealth with their clients instead of just return on a particular investment. While a holistic approach is a very good one, what wealth creation strategies often lack are a defined strategy for accomplishing well, wealth creation! These plans often fail or vastly under perform because they don't properly account for one of the biggest parts of the wealth picture and that's the home!
WHAT DID HE SAY?
Now that's not a typo and I didn't contradict myself from the first paragraph. You see, most people believe their home is something completely separate from the rest of their financial planning. It's this sacred cow that's over in the green grass munching away while everything else in their financial life is trying to figure out how to grow without the food it needs. The sooner people realize that EVERYTHING they do is an investment decision , the better off they will be. The implication of your decision is not simply what you obtain by your action but what opportunity you give up.
So, back to wealth creation and mortgage planning. In borrowing some thoughts from a great financial partner of mine, Brent Gilmore, we can summarize what we typically look for as far as characteristics of a good investment as:
- something that earns us a good return based on our risk
- is liquid if we need it
- is not subject to additional restriction to access it once we have it
- is not at risk of loss.
The reality is your home is absolutely not the definition of a good investment. The reasons are fairly clear if we break them down. What if I told you the MAXIMUM return you could make on the purchase of your home was 0%?
Here's where we hit the rabbit hole.
First we must explain the difference between return of investment and return on investment. Return OF investment is simply getting back the money that you put in. Return ON investment is difference between the end value of your investment and the amount you invested.
Whether you pay cash for your home or pay nothing down, your home mortgage will be worth the exact same in 1 year, 5 years, 10 years or 30 years. It is true that if values keep going up you will make a positive return ON investment but that is independent of the return OF your investment. Even that fact has some doubt clouding it, but that's another article.
PAGING CHI
This is the second report in the sequence entitled "Building a Professional Web site with just a little coin". The initial report had you acquiring your domain name. What do we do next? Probably not what you think.I know you want to get right into it, setting up your internet site, adding graphics, signing up for AdSense and making some money. Don't be in such a rush, learning a little up front will save you a ton of wasted time and money.Your first task is to consider the lookup phrases that you want people to type into google to arrive at your home page. Your main page is your introduction to the internet.You've got your keywords (lookup phrases), what do you do next?The next thing to do is to have a seat in front of your favourite text editor and compose a five hundred to seven hundred word introduction to your internet site. Make sure you make use of your lookup phrases and keywords liberally in the prologue. This is going to be key to driving traffic to your web site, the earlier you do it, the better the results.Page done, keywords in place...now what?Did you take your time? Solicit some opinions, is it appealing? Sometimes using keywords taints your writing. It takes some practice to have good writing which is still seo friendly. I still don't have the hang of it and I have fourteen full fledged web sites with a t
WHAT DID HE SAY?
Now that's not a typo and I didn't contradict myself from the first paragraph. You see, most people believe their home is something completely separate from the rest of their financial planning. It's this sacred cow that's over in the green grass munching away while everything else in their financial life is trying to figure out how to grow without the food it needs. The sooner people realize that EVERYTHING they do is an investment decision , the better off they will be. The implication of your decision is not simply what you obtain by your action but what opportunity you give up.
So, back to wealth creation and mortgage planning. In borrowing some thoughts from a great financial partner of mine, Brent Gilmore, we can summarize what we typically look for as far as characteristics of a good investment as:
- something that earns us a good return based on our risk
- is liquid if we need it
- is not subject to additional restriction to access it once we have it
- is not at risk of loss.
The reality is your home is absolutely not the definition of a good investment. The reasons are fairly clear if we break them down. What if I told you the MAXIMUM return you could make on the purchase of your home was 0%?
Here's where we hit the rabbit hole.
First we must explain the difference between return of investment and return on investment. Return OF investment is simply getting back the money that you put in. Return ON investment is difference between the end value of your investment and the amount you invested.
Whether you pay cash for your home or pay nothing down, your home mortgage will be worth the exact same in 1 year, 5 years, 10 years or 30 years. It is true that if values keep going up you will make a positive return ON investment but that is independent of the return OF your investment. Even that fact has some doubt clouding it, but that's another article.
PAGING CHI
In a world full of complications sometimes we overlook the simple things in life. We are so busy trying to work out our twisted problems that we miss out on the simple secrets to success. The same can be said of our businesses. We get caught up in endless problems when all we really need to do is to step back and see the simple alternatives, that will lead us to success. Sometimes we need to think with the simplicity of a child.Not so long ago, Summer holidays (vacation) in the USA meant the rebirth of the Lemonade Empire. Enterprising children of about 10 years and up set up their lemonade stands and earned themselves some holiday money. A note to all who do not live in the USA, school children in USA have a 3 month vacation in the summer, allowing them a great deal of free time. This was before the year round schools that have tried to cut down the long summer vacation. The Lemonade era was in full swing in these “good old days.”The Lemonade King/Queen, who would earn the most money by the end of the vacation, depended on individual factors. Being children they did not have any complicated “think tanks" or secret board meetings, they relied on simple business skills and techniques. Let me explain with these few points.There was a need/market: Hot thirsty people, (most of the USA has hot Summers) A proven hot selling product: Cold Lemonade is th
- something that earns us a good return based on our risk
- is liquid if we need it
- is not subject to additional restriction to access it once we have it
- is not at risk of loss.
The reality is your home is absolutely not the definition of a good investment. The reasons are fairly clear if we break them down. What if I told you the MAXIMUM return you could make on the purchase of your home was 0%?
Here's where we hit the rabbit hole.
First we must explain the difference between return of investment and return on investment. Return OF investment is simply getting back the money that you put in. Return ON investment is difference between the end value of your investment and the amount you invested.
Whether you pay cash for your home or pay nothing down, your home mortgage will be worth the exact same in 1 year, 5 years, 10 years or 30 years. It is true that if values keep going up you will make a positive return ON investment but that is independent of the return OF your investment. Even that fact has some doubt clouding it, but that's another article.
PAGING CHI
Seventy seven million (77,000,000) middle class aging baby boomers are going to rely on Medicare as their default long-term health care policy. The Cato Institute estimates that $60 trillions of Medicare is an unfunded, unaccounted for obligation.*The Medicare / Medicaid programs are dual eligibilities government programs for the aged, the blind, and disabled, and heavy long term care users for the poor of the poorest. Medicaid is the largest liability in state budgets having topped elementary and secondary education. For 2003, total Medicaid expenditures in most states were $267 billion. Of this, Medicaid financed nursing home care accounted for approximately $51 billion and home care $9.9billion.*The new Tax Reduction Act of 2005 mandated that seniors spend-down all of their combined assets before the sick spouse can qualify into a nursing home. The act requires a 5-year look back for any transfers by seniors designed to deprive the state of those available resources to pay for the nursing home.WHAT IS THE NURSING HOME SPEND-DOWN?The spend-down provision is that “you must self pay” for your nursing home care with the sale of all your personal and real assets to the point of financial devastation of your life’s savings driving you into financial destitution. Nursing home eligibility will be determined by your lack of any available resourc
First we must explain the difference between return of investment and return on investment. Return OF investment is simply getting back the money that you put in. Return ON investment is difference between the end value of your investment and the amount you invested.
Whether you pay cash for your home or pay nothing down, your home mortgage will be worth the exact same in 1 year, 5 years, 10 years or 30 years. It is true that if values keep going up you will make a positive return ON investment but that is independent of the return OF your investment. Even that fact has some doubt clouding it, but that's another article.
PAGING CHICKEN LITTLE
Now let's step back from all of the sky is falling stuff and clear some things up. Your house may well continue to appreciate in value, especially in a strong local economy like Columbus . But appreciation as I showed you above has absolutely nothing to do with return OF capital . Remember that if you bought a $300,000 house today, paid cash for it and turned around in 1 year and sold it for $350,000 you would have experienced the same appreciation as if you had put $0 down to buy the house. Your $300,000 was invested in an asset that yielded 0% during its use.
The key to this is that when you pay your mortgage you "choose" to invest the money in your home instead of in other options that could return you more . Lets Consider the consequences of not being able to pay that mortgage one day:
- Will the bank give you back the money you paid on the mortgage and all of the appreciation when they sell your house in foreclosure?
- Will they lend you more to help you get back on your feet at terms as good or better then you have now?
- And will they do it without asking you to prove your ability to repay the new loan when you couldn't pay the old one?
Sounds silly, but this is what happens all the time.
Now wait, you say, I have a paper that shows me that if I pay twice per month I will pay off my mortgage 8 years sooner and save $84,000 in interest! You are right, you will. BUT is it a good choice if that money that you borrowed at 4% (After factoring in tax savings on the interest) could be returning you more, guaranteed , elsewhere? Consider other factors as well:
- Are you making those payments and carrying "bad" debt like credit cards at 15%?
- Are you finding it hard to put in enough in your 401k to even get the match your employer offers?
- Are you funding the Roth IRA or the kids 529 college savings plan?
We aren't even touching on the implications of eliminating or reducing your tax deduction and increasing your overall tax burden.
TO PAY OFF OR NOT TO PAY OFF , THAT IS THE QUESTION
Let's look at the positive outcomes of paying off your mortgage versus keeping it.
You no longer have to make a mortgage payment to the bank every month.
You might have less to pay at retirement.
And that's about it. Now, notice I didn't say anything about the myth that you finally "own" your home. In truth you never do, you always have to pay taxes on it and it is always at risk of loss through various means including but not limited to:
- Taxes
- Creditors
- Casualty Lo
HTTP = HTML link (for blogs, profiles,phorums):
<a href="http://www.addyou.info/article/120498/addyou-Wealth-Creation-and-Mortgage-Planning--Two-Great-Tastes-that-Taste-Great-Together.html">Wealth Creation and Mortgage Planning - Two Great Tastes that Taste Great Together</a>
BB link (for phorums):
[url=http://www.addyou.info/article/120498/addyou-Wealth-Creation-and-Mortgage-Planning--Two-Great-Tastes-that-Taste-Great-Together.html]Wealth Creation and Mortgage Planning - Two Great Tastes that Taste Great Together[/url]
Related Articles:
5 Ways to Earn More Money with Adsense
Bookmark it:
|