Financial Matters

We've all heard the old joke, "he who dies with the most toys - wins!". Well, there is one toy out there that we can all benefit from. Go out and buy a financial calculator, and then take the time to learn how to use it. The results could amaze you.

For example - have you heard the following on the radio: "It's truck month in the Bayou City - come on in, and we'll put you in a brand new truck -- NO MONEY DOWN." It's certainly convenient. But does it make sense? Let's break out the calculator, and work the numbers and decide if this is a good deal or not.

Let's say you decide on the "blue" one. $20,000.00 cost - 10% interest, no money down and 48 months to pay (We're obviously ignoring tax, title and license). The trusty calc says that your payments will be $507.25 per month for a total expenditure of $24,348.00 ($507.25 X 48).

But what happens if you put that $507.25 in a savings account for six months and save up for a down payment. Six months from now you buy "big blue" - same terms, except you make a down payment of $3,037.50 ($507.25 x 6). Again, utilizing the calculator, your new payments would be $430.21 per month and a total expenditure of $23,687.58 ($430.21 x48 + $3,037.50) for a savings of $660.42 in total out of pocket expenditures.

Finally, go one step further assuming that your lender lets you prepay your loan, what happens when you save six months and then pay the $507.25 per month to prepay the note quicker. The loan is retired in 39.36 months and you save $1,345.14. Planning helps with major purchases.