If you paid $16,000 for an investment that gerenated $400 a month for 5 years, what would be your yield?
(The answer will be posted with the new calculator problem in 2 weeks. Or if you can’t wait that long, you can go to http://www.facebook.com/pages/Gary-Johnston-Seminars/111368472221424 for the answer.)
The answer to the 2010-08-02 calculator problem is FV=$349,748.12
(N=180, I=12, PV= -50,000, PMT= -100)
Below is a link to a great article on Will Smith and his family that is worth taking the time to read. There are so many great thoughts and lessons in this article.
http://www.oprah.com/oprahshow/Will-Smith-and-Jada-Pinkett-Smith-Talk-Family
If you start with $50,000.00 and add $100 every month for 15 years in an investment at 12%, how much money would you have at the end of 15 years?
(The answer will be posted with the new calculator problem in 2 weeks. Or if you can’t wait that long, you can go to http://www.facebook.com/pages/Gary-Johnston-Seminars/111368472221424 for the answer.)
The answer to the 2010-07-18 calculator problem is FV = $1,034,344.05 (N=480, I=10, PV= -19,261.29, PMT=0)
In the last extension of unemployment benefits (H.R.4213) there was a significant change to they way S corporations are going to be taxed. If you have an S corporation, this might impact you.
(Sec. 413) Requires the recognition of all self-employment income, for purposes of the tax on such income, earned from an S corporation which is a partner in a partnership engaged in professional services or for which the principal assets are the reputation and skill or three or fewer employees.
http://thomas.loc.gov/cgi-bin/bdquery/z?d111:HR04213:@@@D&summ2=m&
As a part of the health care reform bill, there will be a new requirement starting in 2012 for self-employed workers, businesses, and charities to issue a 1099 to every vendor that they purchase more than $600 from during the year. This is going to be a big change and you will want to start thinking about how you will implement this.
If you invest $19,261.29 at 10%, how much would you have in 40 years?
(The answer will be posted with the new calculator problem in 2 weeks. Or if you can’t wait that long, you can go to http://www.facebook.com/pages/Gary-Johnston-Seminars/111368472221424 for the answer.)
Yesterday, one of my jobs was to shake the hands and congratulate high school graduates as they received their diplomas. They were ready to tackle the world and full of smiles. One of the many thoughts that ran across my mind as they walked across the stage was the lesson they probably didn’t learn while they were in school. Oh how I wish that they understood the power of compounding and the big influence that time has on the equation. My friend, Danny Williams, calls them compounding periods. The vast majority of these young kids have a significant number of compounding periods.
If they can earn 12% on their money, it will double every 6 years. In 48 years (18 to 66), invested money would double 8 times (48 / 6). If they started out with $1000 from graduation and a summer job, it would grow-up to be $256,000 over those 48 years. If they would add $100 a month over that same 48 years to the initial $1000, they would have $3.38M! (They would contribute $58,600.) Time is a great ally in their financial future. It can be powerfully harnessed or let slip by.
No matter how old we are, we have compounding periods in front of us that can be harnessed. Are you taking advantage of them? Would you do a favor for me today? Please find a graduate or young person in your life and share the power of compounding and the big influence time has with them? It is one of the most critical lessons they will ever learn.
After the SEC filed the recent civil fraud charges against Goldman Sachs, I heard a lot of folks commenting on how greedy Goldman was and how they were finally being held accountable. My view is that people are not being held accountable – especially the investors. The assets they were buying were fully disclosed. The job of every investor is to do good due diligence on any investment they are making. (This is especially true when you are talking about the level of sophistication of these investors.) The investors may not have known who selected the assets but a careful evaluation of the assets would have shown they were a dog. They simply took a bet and they lost. As investors, we have to make our own decisions and live with the consequences. It is our money. If we make a bad investment, it is our fault.
It seems like we have evolved as a society where if anything goes wrong, it is someone else’s fault. The past couple of years seem to be the worst. Lawsuits and bailouts reign supreme. “It is Wall Street’s fault.” (Not mine because I paid too much for a house and took out an even stupider loan.) “It was the perfect storm that caused our business to fail.” (Not the stupid decisions the board and executives made over the last 20 years including overpaying people for the job they were doing – or not doing.) It is not my fault and someone else should pay!
I made some bad investments over the past couple of years that would be easy to justify that were someone else’s fault; however, at the end of the day, it is my fault because I made the final decision. The problem is that until we take full responsibility for our lives, they don’t get better. We don’t control everything that happens to us, but we do have 100% control over the thoughts, decisions and actions we take. Where are you not taking full accountability for the decisions you have made?
A friend of mine recently introduced me to a fascinating man. My friend knew I would enjoy his company. He was an old cowboy that had been around a long time and had run cattle in several states. He was a very smart business man and a really nice guy. As part of the conversation, we were sharing some of the regulatory changes we are seeing in the real estate and investing arena with him. Some are sweeping changes. After expressing dismay about a few of the changes, he took a drink of coffee to collect his thoughts. Then he said, “Now, I guess the real question is, ‘How can we profit from it?’”
What a great question! It is not about how we can make money out of every situation but stepping back from the muck and looking for the opportunity in every situation. It is so critical that we keep that positive, opportunistic, can do attitude in investing and life. Give us lemons and we will make lemonade. It can get discouraging (if you need a little, study the current financial “reform” bill being debated in congress right now), but we need to always step back when we start to get stuck in the muck and look for the opportunities. They are always there; we just have to look for them.
How about you? Are there changes in your environment that are getting you stuck in the muck? Remember, the real question is…
Calculator Problem – 2010-08-30
You invest $30k at 20% for 20 years. What is the future value using monthly compounding? If you then borrowed another $30k to invest in the same 20% investment and agreed to pay the lender 10%, interest only, on a monthly basis for the same 20 years and invest the increased cash flow from the borrowed money back into the same investment, how much would you have at the end of 20 years? What would be the return on your initial $30k?
(The answer will be posted with the new calculator problem in 2 weeks. Or if you can’t wait that long, you can go to http://www.facebook.com/pages/Gary-Johnston-Seminars/111368472221424 for the answer.)
The answer to the 2010-08-16 calculator problem is I=17.27% (N=60, PV= -16,000, PMT= 400, FV=0)