272
votes
Why do people save so much?
When people over 60 reflect back on their life, they generally do not say:
I wish I took out more student loans.
I wish I bought more expensive cars.
I wish I bought fancier clothes.
I wish I didn't ...
- 47.2k
217
votes
Why do people save so much?
Why do they need so much money as old people?
The future is unexpected.
My country has universal healthcare, so medical expenses are not a worry.
Will it have UHC in 50 years? Probably... but ...
- 50.6k
110
votes
Why do people save so much?
The reason some people save so much so young is that they understand the growth potential of COMPOUND INTEREST.
Every dollar that I put away for my daughter at 2 years old can be worth $1,000 when she ...
- 32.7k
90
votes
Accepted
What are the alternatives to compound interest for a Muslim?
There are many Shariah compliant investments, so that could direct your resulting searches. Shariah compliance is a very strict interpretation of Islam and for investing offers strict guidelines in ...
- 20.2k
69
votes
Accepted
Would compound interest work better if all my accounts were combined into one?
No. The compounding is a multiplier, and multiplication is distributive over addition. So
1.1 * (x + y) = (1.1 * x) + (1.1 * y).
That is assuming that the accounts are large enough that no ...
- 7,566
60
votes
Why do people save so much?
For myself, I saved because having accumulated a nice pile of money - enough to live modestly on the income (what I call being "independently poor") is both security and freedom.
Take security. What ...
- 11.2k
50
votes
Why do people save so much?
I'll be living in my own house that is already paid off at that
point, so no rent or mortgage payments.
This very much depends on where you live. In the major cities of the costal USA many folks ...
- 12.6k
42
votes
Accepted
Which mortgage should I pay off first? Same interest rate and mortgage length
You haven't accounted for what happens when the small loan is completely paid off.
Seven years into the aggressive payoff schedule you need to shift all original principal and interest payment and the ...
- 136k
41
votes
Why do people save so much?
My country has universal healthcare, so medical expenses are not a worry.
People in their 20s (and 30s) thinking about the future may choose not to gamble that the government in 50 years will look ...
- 6,788
30
votes
What are the alternatives to compound interest for a Muslim?
My understanding of Muslim finance is that you may not lend money at interest, including investing in in things that pay interest. However you may still make investments: it just has to be in places ...
- 33.1k
25
votes
Accepted
Does the growth of home value benefit from compound interest?
Compound interest is only relevant when you get paid interest and you reinvest it.
In cases where you buy, hold and sell, with no income generated during the holding period, there isn’t any income ...
- 9,332
24
votes
How do I calculate monthly compound interest in Google Sheets?
You just use the compound interest formula:
Principle * (1 + Rate / Time) ^ Time
For Cell C2 you want this formula:
=B2*(((1+(D$1/360))^(C$1-$A2))-1)
Column A is deposit date
Column B is deposit ...
- 49k
22
votes
Why do people save so much?
Everyone has different retirement goals. Some people want to retire before they are 70, the earlier they want to retire the more they need to save now. Other people want to travel in retirement and ...
- 69.1k
18
votes
Accepted
Is there any instance where less leverage will get you a better return on a rental property?
There are two obvious cases in which your return is lower with a heavily leveraged investment.
When the interest payments on the loan outweigh the return.
If a $100,000 investment of your own cash ...
- 33.1k
17
votes
Accepted
Do pension pots get interest?
There are two main types of pensions to consider in answering your question:
(1) Defined Benefit pension plan. This type is the 'traditional' pension plan. It means that when you retire, you get a ...
- 42k
16
votes
Accepted
Inflation and the current value of my dollar
Your $100 at t=0 will be worth $55.2 thirty years hence.
Something that costs $100 today will cost 100*(1.02)^30 = $181 30 years later. So your original $100 can purchase only 100/181 worth of goods ...
- 1,064
15
votes
What are the alternatives to compound interest for a Muslim?
I cannot tell you what is or is not allowed under Islamic law. What I can tell you is that when most investors talk about the "power of compound interest," they are not actually necessarily talking ...
- 115k
15
votes
Why do people save so much?
What makes you so sure that you know what you'll want when you're 70?
Seriously. When you where a child, if you ever even had the thought, did you predict your current life well? How about when you ...
- 1,857
15
votes
Do I make more money if I combine 2 VTI investments (me and my spouse) into one investment?
Mathematically is just does not matter as compounding is a percentage increase. x*1.05 is the same as (y+z)*1.05 with x = y+z
In real life there might be some caveats to this however
are there any ...
- 7,422
14
votes
Why "N-year" loans (and other complications)? Why does a loan need so many parameters?
This model would work fine under a couple of assumptions: that market interest rates never change, and that the borrower will surely make all the payments as agreed. But neither of those assumptions ...
- 6,971
14
votes
Why do people save so much?
Let's say I live like you describe, spending very little money beyond essentials like food. I spend much less than a typical person.
Let's also say I have a typical, full-time job.
Since I have ...
- 3,131
13
votes
How do I calculate monthly compound interest in Google Sheets?
The "Future Value" function does this.
=FV(rate, number_of_periods, payment_amount, present_value, [end_or_beginning])
For example:
=FV(2%, 12, -100, -400, 0)
Note that the payment_amount and ...
- 131
13
votes
How does compound interest work with stocks?
Well, to clear up terminology, stocks do not pay interest. Many pay dividends, which you can sometimes choose to either take as cash or to reinvest (meaning either take the dividend in stock or buy ...
- 131k
12
votes
Would compound interest work better if all my accounts were combined into one?
Rupert's got the formal answer. I'd like to chip in with a everyday sort of example.
Imagine you had $200 dollars, and you had the choice between investing it in a single account that earned 10% in ...
- 2,630
12
votes
Why do people save so much?
When I am old and retired (70 years +), I don't plan to spend a lot of money:
You are implying that saving is for when you are retired, and retiring is when you are above 70, which is wrong.
Being ...
- 225
11
votes
Which mortgage should I pay off first? Same interest rate and mortgage length
However, I just started thinking, and because of the nature of
amortized loans, I'm obviously paying quite a lot of interest in the
beginning....
This is a common point of confusion, the portion of ...
- 69.1k
10
votes
Is there any instance where less leverage will get you a better return on a rental property?
Leverage means you can make more investments with the same amount of money. In the case of rental properties, it means you can own more properties and generate more rents. You exchange a higher cost ...
- 35.7k
10
votes
Am I paying too much in mortgage interest?
Yes, you are paying extra in interest, but additionally, you are decreasing your payment each year, taking 21% longer to pay off the loan, which further increases the total interest you will pay. The ...
- 32.7k
10
votes
How to profit from compound interest when investing in single stocks?
Stocks don't pay interest. Some do pay dividends. You can use the dividends to purchase more shares of that stock, or you can use it to buy shares of a different company.
When people talk about ...
- 136k
10
votes
How are compound interest factor tables calculated?
It's actually really simple, despite how they make it appear!
Compound interest means nothing more than the fact that the interest of each month is calculated based on the outstanding balance at that ...
- 1,009
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