Radio host Dave Ramsey has a debt elimination framework he calls Baby Steps. It seems to work well from the people I have talked to who have used it. I often think many frameworks can be improved. This is just a quickie article on what ways I would tweak the Baby Steps to “improve” it. (Humbly I don’t know if I could but, that doesn’t mean I shouldn’t try.)
A few articles ago I analyzed the budgets and profits of Mockbuster movies. That got me thinking about what is the profit margin for big studio blockbusters and how does overhead effect the film’s success.
In the past I did a WAVE-B Drive Free project. The starting car was a Ford Windstar Mini-van which was sold for whatever I could get for it. That money plus my small nest egg of $3,500 was used to buy a 1994 Honda Accord. One year and a half from then I sold it for about what I purchased it for and added that to the money that was saved to purchase a 2012 Honda Accord cash. The purchase price for the 2012 was $15,000 + registration, fees and tax ($17,000 total). The miles on the car was 26,000. The question I have is: what was the depreciation of this car to this point?
In part one the example of a 14 year old who invests $5000 one time of the money earned while babysitting showed the power of compounding over a long period of time. Of course as effective as it to invest one time for a long period of time is the most effective way to make use of this is to do the same process multiple times .
Parcheesi with 72 Spaces
Previously I went over briefly the Rule of 72. After going the rule over with a few people in the last couple of weeks it seems the power of the tool is lost until it is applied in a personal finance context. The math behind the rule is simple. The number of 72 is divided by the interest rate of an investment equals the time in years the money will double.
Can you work longer hours for the same money? Would you like to give yourself a pay cut? Can you sign up to become an indentured servant? Would you like to be an investor in inferior products? All these things can be done but, it takes planning and goal setting. This post is not for everyone, not everyone has what it takes to be perpetually poor. If this is your goal keep reading….