Tuesday, June 21, 2016

Cost Benefit Analysis (CBA), Debt Service Obligations (DSO) and Income/Investment Opportunities (IIO) ... KISS and MOM Rules Apply

CBA (cost benefit analysis) leads to increased IIO (income/investment opportunities) due to fewer DSO (debt service obligations).

Employing the KISS (keep it simple, stupid) and MOM (my own money) method of behavior and thinking will work wonders with respect to creating expanded individual opportunities and a better quality of life and happier adulthood.

For example, how much do we spend by borrowing, aka student loans, for education, both in terms of time and money? Can't we get that same or better education by spending or borrowing less money? Of course we can.

More knowledge leads to higher future income and investment opportunities, and more debt leads to higher future debt service obligations. More knowledge for less debt is the basic idea.

Think about it in KISS terms --- debt not owed is future income not dedicated to interest and principal payments and greater income and investment opportunities.

Now consider the following KISS related questions, please.

Why not attend and graduate quickly from a low cost school? And why not work part time while getting that degree?

And why make unnecessary credit card purchases resulting in required monthly payments forever of the minimum amount? Why not avoid taking on these sure to be super high debt obligations in the form of both interest and principal payments?

And why not defer buying that house and rent instead until the down payment is sufficient to make the investment a credible one instead of speculation about whether foreclosure is down the road?

And when buying that first house eventually, why not buy a lower priced nice home instead of the highest monthly payment home that we really can't afford? It won't make us happy campers.

And when it comes to buying and financing that car, the same KISS based 'why do it to ourselves' rule applies. Why resign ourselves to making 'low affordable' monthly car payments forever? Why not really own a car or cars someday?

And the same KISS thinking applies for other purchases as the more we borrow now, the more costly the purchases will prove to be in the real world of the future.

CBA is about spending as little as possible to get as much as possible. It applies to both time and money. It also applies to knowledge.

So take some time to reflect on CBA and how it can make your life better, easier, happier and more fulfilling. KISS really works.

When buying, caveat emptor behavior is essential. The seller has his own goals in mind, and they aren't the same as yours.

MOM (my own money) rules apply.

That's my take.

Thanks. Bob.

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