Most people will not need to know the depth of information that I dive into here, but I figured this would be a great place to post this information for those that are like me and need to know. There are a few key factors that drive HOW the Financial GPS works and I learned about them, because…
I’m ‘That Guy’
There’s a great line from the movie “Tommy Boy” , “You can get a good look at a T-bone by sticking your head up a bull’s ass, but wouldn’t you rather take the butcher’s word for it?” Nope. Not me. *smirking* I’d rather take a look myself! I need to see, I need to know, how everything works. It reminds me of when I was really young, I completely took apart our huge black and white console TV in our basement… simply because I HAD to see how it worked! I guess that’s how I am wired, I always ask too many questions and I am always thinking about things. I know that I can drive some people crazy.
Focused On The Financial GPS
So after I finished populating all of our financial information into our new program, it showed that in 9.5 years we would be completely debt free. On top of that, we would be saving 10.5 years of time and $115,260.50 in interest that we would not have to pay! The pin-point accuracy in which our new Financial GPS program calculated our financial future was mind-blowing, just to say the least. It also shows us every payment, payment amount, payment transfer and payment date that we needed to make.
How Does It Do That?
Hmmmmmm, so how does it do that??? I mean I already knew that in this Financial GPS there were mathematical engines driven by complex banking algorithms and systems that were at the core of this program, but HOW exactly does it save us the amount of money that it is calculating it will save???
Dirty Secrets
Most people do not know that loans, especially mortgages are front-end loaded. That means that you will pay the bulk of the interest on the beginning or front-end of the loan. They are also structured to target the seven year mark… why the seven year mark? Because most people refinance or move to a new mortgage at the seven-year time frame. Pretty sneaky, eh?
Leveraging This Information
So now, understanding how the payment structure is designed, and by looking at the amortization schedule, we could use this information to formulate our strategy. The problem is that there are way too many variables to ever manually calculate everything!
That is why a mathematical program, a Financial GPS, is the absolute best weapon for being able to reduce the amount of interest I was going to have to pay. I know in my case, I was going to pay ALL of that interest simply because I did not know.
I struggled trying to figure out how I could explain this in words, so that anyone could understand it, but I couldn’t… so I made this quick video. It will show a portion of an amortization schedule and how strategic payments to the principal save an incredible amount of money.
This is one of the driving strategies of HOW the Financial GPS saves us so much money!
Amortization Schedule/Interest Cancellation:
Interest Cancellation on Mortgages and Loans
Infuriating Fact Revealed
Did that upset you even half as much as it did me??? WOW! First time I was shown exactly how my mortgage was structured, I was FUMING MAD! I remember going into my bank to make a mortgage payment after analyzing my mortgage…. as I handed my payment to one of the tellers, I said, “it’s pretty angering that 72% of this payment is pure interest.” She replied “We don’t make THAT much money.”
I’m Ready To Fight
I became a sponge for more financial information at this point. Our Financial GPS was suggesting to borrow money from our HELOC to make a strategic payment on our mortgage, BUT the interest rate was higher on our HELOC than our mortgage. Why would we borrow higher interest rate money to pay down lower interest rate money???
Closed-End and Open-End Loans/Lines
I never knew what a close-end loan or an open-end loan or lines were nor had I ever even heard of these terms before, but it was mind-blowing… again, to say the least, when I learned this!
A close-end loan characteristics:
- Requires at minimum a full scheduled payment
- Allows payments in but no withdrawals
- Is driven by an amortization schedule
- Any money applied does not affect interest charges until the following month
- Calculates interest charges from month-end principal balance
An open-end loan or line characteristics:
- You have the ability to make multiple payments and withdrawals – Money In and Out
- Uses an interest factor to calculate interest
- No amortization schedule
- Views daily balance to assess interest charges
Why Is This So Important?
I would have never considered borrowing money at a higher interest rate to pay down or off money (debt) that is at a lower interest rate. I sure as heck would’ve never… until I learned the difference between open-end lines and close-end loans and HOW the interest is calculated so differently in each of them!
The Shot Lesson
A mentor explained interest to me in a great lesson… going to the doctor’s to get a shot. The lesson was about rates and volumes: Does it matter how fast (rate) the doctor pushes the liquid into your arm? Of course not. Does it matter how much (volume) the doctor puts into your arm/body? Yes, of course! So let’s look at interest like we look at getting a shot. Do we care what the interest rate is?
Wow… I couldn’t even type that without my blood pressure jumping, lol. We have all been programed to focus on the rate!!! 6%… yeah, that’s pretty good rate. Did you not watch the video above??? I don’t care about the rate, I care about the volume!!!
How do you boil a frog? Ever heard that one? Just raise the temperature one degree and he will sit in the water until he dies. I feel like the frog! I don’t care about what the banks or society says about the rates, I care about the volume of my hard earned money that the banks are taking from me, without me really even knowing about it… until I learned, until I became aware.
The Lesson
What I learned:
- The Financial GPS program not only guided me to the fastest route of paying off all of our debt, but it is also a financial eduction program – as I inquired and wanted to know ‘why’ it is recommending what it is recommending, I learned some really valuable lessons!
- Mortgages and loans are almost all front end loaded.
- I can payoff/pay down lower interest rate mortgages and loans with higher interest rate money.
- I don’t care so much about the rate of interest that my loans are at as much as I care about the total volume of interest that I am paying.
What’s The Point
Sometimes when you find something that’s ‘too good to be true’ you gotta check it out, instead of simply dismissing it. I found this incredible Financial GPS that has completely changed my financial past, future and hopefully all the people that I have shared it with. It’s capabilities are simply amazing, to say the least… 20/20 financial FORESIGHT! It is so powerful that I believe all of our government, school and nations financial offices should be using it! Anywhere there is a ‘budget’ can benefit from it.
For Your Best,
Dad
