| Topic Name: |
Law School Debt |
| Message Name: |
Fool |
| Date Posted: |
04/23/2002 |
| In Reply To: |
1. Funny Math?? What did you get a degree in english??
Take a lesson in time value of money. Calculate the payment of a current debt. Assume 9% interest, $160,000, 15 years. The payment is approximately $1622 per month. This payment for 180 months (that's 15 X 12 months/yr)is equal to $291,960. With the change I left out, the total is over $292,000.
C = (P x r)/[1-1/(1+r)N]
C - Payment
P - Principal
r - Interest Rate
N - Periods
2. Can't be english. You would know what discretionary means.
Food and utilities are necessities along with clothing and shelter. Since most people have sufficient clothing to get them by, I generally consider clothing as discretionary.
After that, discretionary is renting a video, going out to dinner, drinking beers out with friends, vacation, etc. Things you don't need to survive.
3. Can't be an ecomomics major either. You don't know time value of money and you think savings is bad for the economy.
The economy thrives on investment. Investment comes from savings. As a single consumer, you are not going to make a dent in the economy but you will mortgage your own future. Savings is always second to paying debt but debt is generally a choice. In this case, a $160K choice that doesn't have to be made. Law school can increase your earnings potential but it is no guarrantee. There are a lot of poorly paid lawyers. Just read this board and listen to some of the practicing lawyers. If you want to really increase your earnings potential. Learn how to sell something. You can sell real estate for example without a college degree and your earnings potential are limitless. An there are more people making more money in real estate than in law.
You better know why you are going to law school. Taking a $160,000 risk seems excessive. If law school is in your plans, move home. Keep your job. Pay off your school loans and go to a good regional law school. They will teach you how to practice law and you won't mortgage your future. |
| Message: |
ChrisBax, you got a big mouth so let me give you a lesson in the time value of money, a la Wharton style. But allow me to first address your foolish and arrogant post. I'm a finance major from Wharton, I don't know where the heck you learned the time value of money but it was either a bad teacher, or the lesson didn't take. Finally, don't ever be so arrogant, it's kind of like shooting yourself in the foot.
On to the numbers: I never said your monthly payments are incorrect. What I questioned is your $292,000 figure. $1600 a month for 180 months is NOT $292,000. You seem to have missed that your paying a loan back needs to be Present Valued using an annuity factor. What your figure claims is that paying a $1 a year for a million years is equal to $1,000,000. Even your puny math brain can see the absurdity of that statement.
As far as discretionary income goes --that's not exactly an econ term (which I have a Bachelor of Science in.) While you may consider a beer every once in a while with a friend, discretionary, I do NOT. It's a matter of lifestyle and preference, so don't scare the kid.
Finally, what I find most abhorrent about your post is that you took advantage of this poor OP, using your little knowledge of finance to scare the crap out of him with an outlandish and untrue figure like ~$300,000.
I hope you'll learn to watch your mouth on this board.
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