Long Term Financial Planning Requires Careful Consideration



Long Term Financial Planning Requires Careful Consideration
The old adage says Haste makes Waste, and caution is​ your only friend .​
How true such a​ proverb is​ when it​ comes to​ the world of​ personal financial planning .​
Caution means that you stop and look at​ all options before making any decisions in​ order to​ ensure that more often than not the result is​ a​ sound decision with a​ positive outcome .​
This step is​ almost mandatory when dealing with issues of​ financial planning, 401(k)s, and future money needs like retirement funds, etc .​
Poor financial decisions can result in​ catastrophic consequences like late payment, a​ deteriorating credit rating and even bankruptcy .​
When investing in​ real estate for short term purchases, one of​ the options you may be considering is​ an​ interest only mortgage .​
These can be a​ tricky investment and so you may want to​ consult with your financial advisor, before entering into a​ mortgage of​ this type .​
And, since it​ really can’t be considered a​ piece of​ your investment portfolio, a​ will more than likely be part of​ a​ business venture or​ investment .​
This is​ where the looking at​ all the options really comes into play .​
An interest only mortgage is​ not a​ good financing option when you are looking at​ purchasing a​ piece of​ property for a​ long-term investment purpose or​ are going to​ claim capital gains on the property .​
Interest-only mortgages are for quick profit transactions .​
You get in, and you get out .​
No hanging around in​ the middle .​
In .​
Out .​
Fast .​
Easy .​
Why do I​ say that? Because interest only mortgages do not allow for an​ increase in​ value to​ you, there isn’t an​ equity growing measure included so you can’t get more out of​ the transaction, really; and, your investment debt never decreases .​

Short-term implications and considerations of​ interest only mortgages have one main point .​
The payments are pretty low during the term of​ the payment, but that is​ simply because the overall liability is​ never going down .​
Other than that, this mortgage product really shouldn’t be a​ regular item of​ consideration in​ your financial planning portfolio .​

The interest only mortgage offers little in​ the way of​ tax deferred savings when compared to​ the bigger products like IRAs, MSAs, and even 401(k)s .​
Sure the interest is​ tax deductible, but not at​ a​ one-to-one ratio .​
Even SEPs for the self-employed individual can have a​ one-to-one ratio of​ tax savings .​

Over the long-term financial planning picture, if​ you were to​ consider an​ interest only mortgage in​ comparison to​ a​ regularly amortized mortgage you would see that when the regularly amortized loan is​ paid out, there is​ still a​ long line of​ payments to​ be made on the interest only loan .​
The amount of​ savings could be quite substantial if​ you consider the time value of​ money .​
Time value is​ easy to​ understand once you learn it .​
The basic concept is​ that the dollar is​ worth more today than it​ will be worth tomorrow (history seems to​ confirm this) .​
So money put in​ savings today, will ultimately be worth more than money you start saving in​ ten or​ fifteen years .​
This is​ why financial planners urge folks to​ plan for retirement at​ such an​ early age instead of​ waiting until age 35 or​ 40 to​ start saving for the future .​
While an​ interest only mortgage may seem like a​ viable option to​ you, be wary and consider all the other possibilities .​
Chances are a​ reputable financial planner will have other options that benefit you more in​ the long run.





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