It is estimated that two thirds of all Americans do not pay their Visa or Mastercard bills in full when they receive them. Many simply make the minimum payment and let the annual interest charges of 18% plus escalate.
Interest rate charges for consumer debt are no longer tax deductible. This means that people in the 28% tax bracket must earn 25% before taxes to be able to afford to pay 18% in interest charges after taxes for their credit card debt. Where can you find an investment guaranteed to pay you a 25% annual return? By eliminating your credit card debt you will have avoided a minus 25% annual drain on your assets.
Many investors feel that the greatest risk to their portfolios is economic and financial volatility. It is not. Inflation is the greatest risk.
If inflation averages 4% annually, how much will your purchasing power shrink?
After 5 years of 4% inflation, the value of $1 is just 82 cents
10 years, the value of $ l.66 cents
15 years, the value of $1.54 cents
20 years, the value of $1.44 cents
25 years, the value of $1.36 cents
This means that a 4% annual inflation rate will reduce the purchasing power of $100,000 as follows:
Number of years Purchasing power
5 years $82,000
10 years $66,000
15 years $54,000
20 years $44,000
25 years $36,000
30 years $30,000
As we examine these figures (assuming that inflation will only average 4% annually), today’s retiree will need to double his or her income every 18 years to maintain the same standard of living they currently enjoy. (Question 36 to 54)
Interest rate charges for consumer debt are no longer tax deductible. This means that people in the 28% tax bracket must earn 25% before taxes to be able to afford to pay 18% in interest charges after taxes for their credit card debt. Where can you find an investment guaranteed to pay you a 25% annual return? By eliminating your credit card debt you will have avoided a minus 25% annual drain on your assets.
Many investors feel that the greatest risk to their portfolios is economic and financial volatility. It is not. Inflation is the greatest risk.
If inflation averages 4% annually, how much will your purchasing power shrink?
After 5 years of 4% inflation, the value of $1 is just 82 cents
10 years, the value of $ l.66 cents
15 years, the value of $1.54 cents
20 years, the value of $1.44 cents
25 years, the value of $1.36 cents
This means that a 4% annual inflation rate will reduce the purchasing power of $100,000 as follows:
Number of years Purchasing power
5 years $82,000
10 years $66,000
15 years $54,000
20 years $44,000
25 years $36,000
30 years $30,000
As we examine these figures (assuming that inflation will only average 4% annually), today’s retiree will need to double his or her income every 18 years to maintain the same standard of living they currently enjoy. (Question 36 to 54)
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