Financial Clinic 101

hey I have $80,000 in cash, should I pay off all my debt or invest it?

rule of 72 will tell you to invest it for 15 years...earning to $320,000 !!!!

pay your debt off with your earnings....slowly over time

let your investments grow by the rule of 72

The rule of 72....the rule of 72 states that your money will double every 7.2 years if it is in an investment earning 10% year.

Blah Blah Blah...what does that mean?

If you had $100,000 invested at 10%; it would be worth $200,000 in 7.2 years.....wow.....it would double again to $400,000 in the next 7.2 years.

this is any easy calculation for growing a lump sum of money

wow money grows fast

Wealth Wednesday
Your Rich uncle leave you $50,000 and a note.

the note says; nephew/niece here is $50,000,
please buy a large cap mutual fund and
let the money sit for 15 years (10% return)
at that time the money would be worth $200,000

You want to pay debt now of $50,000

what is better for you?
to be debt free now or be loaded in 15 years?

screw that debt ….YOU want the money

Your Rich Uncle would agree

Tax Tuesday!!
Does all income have the same tax rate??
no...some income is taxed differently
example: qualified dividends are taxed at 15%
therefore if you made 500,000 in dividends your tax bill would be $ 75,000 vs. $130,000 for regular income.

I want dividend income!!!!

Saving for a rainy day and being prepared for a hurricane are not the same.

Bless those folks in the Bahamas who are suffering.

What is a good investment?

A good investment pays you earnings annually
and you can always recover your initial investment.
money market and mutual funds can fill this need

your brother-in-laws idea to "start a bar" may NOT give you annual earnings and you may never see your initial investment ever again....that would make that a BAD investment

Extra Taxes??? Yes there are a couple of taxes for those making greater than $250,000.

On your wages you will pay another .9% on income your W-2 greater than $250,000.

If you make more than $250,000 there will be a 3.8% tax on all investment earnings.

If you had $100,000 in cash would you use it to buy a beach condo or use it to rent a $10,000/week beach condo for the next 10 years?

Same $100,000

buy a condo
or rent a very very nice unit

buy the condo and you will have to pay a mortgage, tax bill and real estate tax...untll you sell it

or try to find a beach rental that goes for $10,000 rental for 1-2 weeks...how nice of a unit can you get for $10,000???

very nice!!! and no ongoing expenses unlike the condo purchase

Tax Talk..
do we have personal exemptions any more?

no, there are no more personal exemptions on your federal tax return

so the tax strategy to have a lot of children to write off on your tax return....probably no longer a benefit

Wealthy Wednesday
How do we make money with a Stock?

Stocks make money two ways.

The company pays out the profit of the company issuing a dividend to the share holders annually.

We sell the stock for more than we paid and that is called Capital Gains.