Tuesday, November 8, 2011

Moving Up with Age

In Yesterday's post I used numbers to illustrate the point that making lower monthly payments on a loan, without lowering interest rates, means lenghthening the loan, and thereby also increasing the amount of interest paid, and the overall cost of the loan.

That is true. But the example, I should mention, is simplified just to make that point. It is unlikely that a person making $33,000 just out of college will continue to make that throughout his/her career. So I wouldn't expect it to be common (maybe not ever happening) for a school loan to take 38 years to repay because of the 10%-of-income payment cap.

Which brings up another point about wealth. Most people just out of college don't have it. They have debt--too much probably. And their income is better than it was as students, but much lower than it will be with years behind them and time to build up wealth.
Thomas Sowell on Uncommon Knowledge

Thomas Sowell talks about that in his piece today: "Numbers Games." Of course older people are likely to have greater incomes and wealth than younger people, generally. But it's not a problem with distribution; mostly it's a matter of time.

If that's not enough Thomas Sowell to get you through the day, he was this week's guest on one of my favorite shows, Uncommon Knowledge, talking about his latest book, The Thomas Sowell Reader, and about anything else he was asked--including a little baseball and current primary campaigns. We would be so much better off right now if Mr. Sowell had become our first black president.

Speaking of elections, in much of the country, this is an election day, even though it's an off year. In my area it's things like ballot propositions and school board. Inside the city limits there's a mayoral election (that has been generating surprisingly little news) and city council positions. If there's an election being held in your area, don't miss this opportunity to vote. At times when there's low voter turnout, such as in an off year, every vote makes a bigger difference. Go ahead--enjoy the sense of power!

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