Category Archives: Debt – Debt Management

Should you Buy or Lease that Next Car?

Long desired but fearful of repercussions of writing this article, we finally had the courage to jump in. Opinions on this subject are sometimes very strong (maybe even divisive!) on either side of the fence.

In doing research for this we came across a very handy internet site, www.usedfirst.com. While you may only be interested in buying a new car or leasing, one of the most important items is the residual value, especially in leasing. As the following neat graph shows from the site, there are dramatic differences in the decay value of cars. In our opinion, worthy of at least a few minutes research, especially if you are open to different makes and models.

 

Depreciation Comparison Studies

Those that are interested in buying a used car, the handy site will also target an expected BEST year to buy the car, as shown in the next very high end auto, with a steep depreciation schedule.

Benz Depreciation chart

The Case For Leasing

Leasing a car is by far the least expensive from a out of pocket standpoint (minimum monthly payment) way to get into a NEW Car.

In certain cases there is a great desire to drive a vehicle that is no more than two or three years old, in this case leasing is likely your best decision. Continued safety is certainly a big point for the new car ownership.

The Case For New Car

If you are one that must have a new car, but are willing to keep it for an extended period of time,  purchasing a new car is likely your best option.

A favorite place to buy a new car which we have had good experience is a membership program such as Costco or Sam’s or any other type of membership that gives you some sort of unique advantage or barrier for the general public. Always check the prices using your friendly Internet as there is tons of information out there to get the price range of the vehicle you want.

The Case for a Used Car

With a normal depreciation of between 15% and 30% per year (there are exceptions, but on the average these numbers are correct), our favorite “new car to you” purchase recommendation is buying a one or two-year-young automobile with low mileage, and keeping it until it will drive no more. Most cases this will save you a great deal of money-there are exceptions be sure, we recently ran onto a situation where a later year brand new car was within striking distance of a used car because the new models were coming out. In this case it made sense not to opt for a one-year-old car and just buy a late year new car. But on the margin, the statistics above are true.

Have a Great “Lease or Buy Car Informed” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents

Two Neat Charts, History of Interest Rates, and Debt, for a Lighter than Normal Pre-Thanksgiving Week

In a quest for postable animated charts (coming soon – these are REALLY fun) the following two charts grabbed attention on a Pre-Thanksgiving lighter week…. from our friends at Visual Capitalist.

Next week we will bring an animation chart to your inbox – again, they are really neat!

Interest Rates Since 1350

We crow frequently about Interest Rates, as they are very important.

Stepping back to see the forest for the trees…. this chart caught our eyes…

interest-rates-history

Location of Debt

From above, we see the long history of interest rates… below is the location

Pay particular attention to the color and the legend at the bottom of the chart as it is more important than the size of debt as focused on by the chart!

world-debt-2019

We just could not pass these up!

Have a Great “History of Rates and Location” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents

September 2019 Podcast Video, Financial Planning and Capital Market Update – By John Kvale

Hello and Welcome to our September 2019 Financial Planning and Capital Market Update!

If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast format as well as Video!

BREAK IN :

November 14th from 6:30 to 9 PM – Perot Museum – For the Evening

Newbies –

We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets and current events!

September – 2019 Video

Financial Planning Tip (s) –

RMD Season is here – Is your DOB between 7-1-48 to 6-30-49 ?

In this post, we reminded all of those with the unique option of deferring that first RMD an extra year on the perils of the double income from that deferral decision…..

Defer at your own risk and make sure you will not jump a tax bracket by doing so!

Mortgage Rate Update – Time to Refinance?

Mortgage rates (the drop there of – in rates) caught our attention and in this post, we reminded of eleven (just counted them – was surprised so many) items to think of when/if you should refinance – its a big decision and there are many variables,  if you didn’t catch the post and have been in your loan for a few years, be sure to take a look … another reminder will also make its way to you in the Q 4 2019 Newsletter –

30 Year US Avg Mortgage Rate

 

Capital Market Comments –

Inverted Yield Curve Update

In this post, early in the month we reviewed the definitely inverted yield curve…. and spoke to this being one of the slowest recoveries on record…. just after our post, the yield curve did normalize on positive trade talks…. Look for more details in the coming Q 4 2019 Newsletter-

9-3-19 three month less 10 year fred graph

FED Lowers Again, but only by .25%

Jerome Powell Chief of the FOMC (Federal Open Market Committee) lowered rates by .25% to the 1.75 to 2.00% range, which will directly effect our overnight money, such as checking accounts and money markets…

Their fear is the prior mentioned Tariff saber rattling causing an extended slowdown….

We prefer they save that gunpowder for a real fire, but just pouring a small bit of gasoline on the coals is ok for now!

FOMC Rate now

Have a Great Day – Talk to you at the end of October!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
street-cents

Lower Rates MAY Have Created an Opportunity … Refinance that Mortgage? – Here’s Some Tips

As mentioned Friday, with an inverted yield curve, mostly caused by longer term rates being lower than short, an opportunity MAY have been created….

We are going to put this in the Newsletter with more details, so please do not take this as an “ok” to run out and start refinancing, there likely is no hurry AND its a big decision…..

Mortgage Rates are Low Again

This chart is the Average 30 year rate across the US –

30 Year US Avg Mortgage Rate

Here are a few points and rules we like to think about when considering a refinance:

  • Think 18 months cost break even – We like to have the saving from the refinance cover the cost of the refinance within 18 months – i.e. Person with $30k mortgage at 5% probably would not need to refinance to 4%, but a $3 million mortgage may be smart to refinance from 4.25% to 4% or the like, if the numbers work out.
  • Resetting Term – Remember if you reset your term, you are extending the treadmill – You may consider paying extra after the refinance to keep on prior term if desired.
  • Planning on staying – It makes no sense what so ever to refinance if you are planning on moving in the next couple of years – life’s curve balls always happen, but if you are planning to move, likely pass on the refinance.
  • 30 Year Fixed Mortgage is our favorite as you can accelerate your term by paying extra, but a 15 year had its merits too, especially if the rate is greatly different – we are not big fans of Variable rate loans.
  • Closing Costs- keep low as possible- This will make your payback faster, easier and also give you the opportunity to refinance again in the future without angst.
  • Buying down points to lower rates – We are not fans of buying down the rate – Ultimately this increases your closing costs and extends the break even analysis from above – If you did on the last mortgage, review where you are and make sure you are out of your break even period before refinancing again.
  • Ancillary fees – It’s a complicated transaction and there are costs associated with it, deservingly so, but try to keep costs down so as to once again keep your break even period short.
  • PMI – Private Mortgage Insurance – Stay away from this if at all possible. This insurance is a cost to you and does nothing for you as the owner/loan holder.
  • Deductibility of cost – Some costs may be deductible, consider costs that are deductible for taxes over costs that are not – With changing tax laws, expect confusion on this point.
  • Avoid teasers – If you google mortgage rates you will get some outlandish offers, if it sounds too good to be true, it is, there is always a catch. Don’t bite on something that is way different than the others.
  • Careful with Hard Credit Reports – Once you lock in on a decision, avoid running multiple Hard/thorough credit reports (these are needed for mortgages) as duplicate checks will lower your credit score.

Have a Great “Possible Refinance Mortgage” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents

Student Loans, History, Growth, and Interesting Facts….

With College Funding coming in at # 2, just behind retirement planning, as the most important Financial Planning topic … we watch the various statistics, public commentary and rules for trends, advanced planning techniques and rule changes that may be positive or negative in the coming years.

The History of Student Loans

The Federal Government began guaranteeing student loans in 1965. Here is our best found article on the complete history.

As a hot topic for any presidential administration, various laws have been passed since 1965, in most cases enhancing the ability for students/parents to obtain loans. Unfortunately, tuition costs have risen at a dramatic rate as well … a possible topic for another time.

Total Student Loan Statistics

The following chart from our friends at the St Louis Fed (FRED) shows the much spoken about total bulging student debt … often times called a crisis… yes, it is a large number and growing, but before you take a stance, we have more for you…

In our minds, student debt is one of the most acceptable debts from a Financial Planning perspective … yes we would prefer NOT to have any, and planning in advance helps this fact, but there are always situations where it is just not possible. Loans for higher education gives many the best opportunity for longevity of happiness in a career they may not otherwise had access…

Parents we would argue not sacrifice retirement for college funding, but we know there are many strong feelings on this topic…

Total Student Debt

9-10-19 Total Student Loan Debt

Total Burden Per Person By State

This chart from our friends at HowMuch.com started the wheels turning for this article…. and is a per person debt load in each of the 50 states.

9-10-19 america_student_debt_by_state-40fe

An Interesting and Important Statistical Chart

Student Debt is large, and clearly growing, however, much to our surprise, the growth rate of student debt has slowed dramatically in recent years….

9-10-19 Student Loan % change yr over yr

This chart is the percentage change year over year in student loans, note the super high mid teens growth during the great recession … not a surprise given the lack of job opportunities at the time.

Happily the growth rate has steadily declined post great recession.

Have a Great “Student Debt Update” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents