Car Loan Amortization

A loan amortization schedule is a very helpful tool when trying to figure out how to make payments on a car you are looking to buy. One of the most important factors is how long you are taking the loan. Many people take loans for a longer period because at first glance it would appear easier to pay, as you are paying less each month. What not everyone takes into account is the interest that you have to pay. The longer the loan, the longer the interest has to build up. For my $4,495 Ford Taurus, if I was to take a loan for 2 years the cumulative interest would only be $189.68. If I was to take the loan for the maximum loan period, about 7 years, the interest would come out to $666.07. If you can, I would recommend buying the car with cash rather than taking a loan because you can save the money spent on loan interest.

Buying a Car

Don't sign on for long loans. When I read the 'Money' article, I was surprised to read that the average car loan is the second highest average term on record. This made sense when it was explained, because a longer loan would mean you are spending less each month. What people look past is the cumulative interest you will continue to pay the lender for those extra months. People buy more expensive cars and stretch their loan so they believe they can afford it. For the average midsize car, the price is about $25,731. Over 48 months, interest paid would reach $2,399.38. When your loan is stretched to 72 months, you will be paying $3,625.77. While you may be paying a lower monthly rate when you take a longer loan, it will not work out in your benefit in the long run.

Want to be a Millionaire?

This article did not take me by surprise, but it did reinforce a fact that I had already known. The article talks about how you do not need to be rich or luck into an inheritance to be rich in your later years. All you need to do is save about 10 percent of what you are earning. It gives the example that if you have a starting salary of $50,000 at the age of 25, investing 10 percent of that salary each year will yield a return of $916,618 at the age of 65. That comes out to be a little less than $100 per week, $96 to be exact. This may seem like a lot of money to a 17 year old, but it will seem increasingly small as you grow, and your salary grows. $50,000 is roughly the average income for Americans, so it is entirely possible that you could get a return of over 1 million dollars if yo only invest a tenth of the money you make. What I always find interesting is the rapid decline in returns if the investor decides to invest later in their life. If someone was to invest the same amount with the same salary, but at age 35, they would only have $483,152 at age 65.

Dave Ramsey Audio Archive- October 9th

This archive starts off with a woman talking to Dave about her 14 year old daughter who is going to make $3,000-5,000 per month for the next six months. as this is clearly more money than a 14 year old knows how to spend and save properly, the mother is concerned with the best way to save the money, and how to save for a car she will want in the future. I liked how he started off by talking about how you can't let the income of the job affect your work ethic. Whether you are 14 and mowing lawns or making $5,000 as a model, you have to keep up your work ethic and continue to learn people skills. Ramsey says he had his kids pay for half their cars, and since this woman's daughter is doing so well, he would have her pay for the whole car. This is good because it teaches responsible spending at a young age. This would also allow the kid to know how to save money to make financial goals for the future and not spend on things you want immediately. This is a very important this family needs to learn because she said that their family is barely making it month to month. Ramsey advises that because they will not be able to afford her college if she doesn't get a full scholarship. I also liked what Dave said about using the kids money to get prepared for the future. The four things you always want to teach kids with money are to work, save, give, and spending.

Most Important Info from Lesson 1

The most important information I took away from the first lesson was the idea of compound interest. When Dave showed us the chart with Ben and Arthur, it opened my eyes to how effective saving money can really be. When most highschoolers think of money, it is spending that comes to mind before saving. This may be because many people think they do not make enough to find saving helpful. This lesson has showed me that no matter how small the savings, the investment is still there. Compound interest is most effective when done early because the interest on that interest will snowball until you no longer need to put money in. It would be a great feeling to know that even as a teenager, the money you are making is going towards your older life when you'll really need it.