An enormous number of Americans didn’t understand how a house mortgage works and this has brought...

An enormous number of Americans didn’t understand how a house mortgage works and this has brought tragedy to many lives. Is personal finance an educational gap for you? can you provide an example please (300 word counts )

Expert Solution

Personal finance is definitely an educational requirement for myself. For example being able to understand that a house mortgage requires a continual outflow from my monthly pay check towards servicing the mortgage and how much that amount would be is essential to understand which house to buy and whether the mortgage is sustainable based on my income.

Also an example would be to understand the amount of money needed to save to service my requirement in retirement. For example if I am retiring in 30 years time and expect to live another 30 years in retirement. With an expected inflation of around 2% and current living expense of $30,000 per annum and current savings of about $30,000, it is important to find out how much I have to save and invest in various funds to service my retirement.

This information is then needed to be correlated with the amount of mortgage that I can afford given that the savings and mortgage servicing has to be done from my pay check. An understanding of these concepts with the interplay between interest rates, compounding and returns is important to have a sound and secured financial life.

jeff jeffy answered 2 years ago

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