This does not even seem possible - $73.23. How were they going to pay that bill every single month for the next 30 years?
A conversation I had with my father over mortgages made me realize there was a number he could never get out of his head, and it was $73.23. When they first purchased their home in 1959, they went to the bank for a 30-year mortgage at 5.5% fixed rate, but the payment was going to be $73.23 because their mortgage amount was whopping $10,000. It was difficult for them to even wrap their brains around.
Now, fast forward. It’s 1984. My wife and I had a number that we could not wrap our brain around.
Granted, the house at that point in time, as modest as it was — and oh, it was modest - 672 square feet. In fact, there were some home loans we couldn’t even qualify for because the bank said the house wasn’t big enough to actually ‘qualify’ as a house, but it was. There were two bedrooms, teeny tiny as they were, and our mortgage was about $38,000.
But the figure that I worried about every single month was $365. Realizing that every single month, potentially for the next 30 years, I would have to pay $365.
My parents' was $73.23. My number was $365. He lost sleep. I lost sleep. The reason I bring this up is that this is a telling conversation about inflation.
First, if you are young, in your 20s and 30s, it may seem like you are never, ever going to get ahead. Inflation automatically will make your payment over time seem less because you should, if you are improving in your skills and your career, and just with inflation, you should be making more and more money, and that fixed payment will seem less and less. That is story number one.
But here is story number two for those individuals who are in the retirement years of their life: What you think is a reasonable price today, you may need to remind yourself that the prices for those things will continue to go up.
When a person says, “I live on a fixed income,” guess what? It is a variable life that you are living. Your income, if it is fixed, then the worry that you should have in life is that everything else keeps on accelerating.
It might seem like a ridiculous story to say, “Oh my gosh, that must have been so easy to have a mortgage payment of just $73.23,” or “that must have been so wonderful to only have a mortgage payment of $365.”
Know that things keep moving throughout your life. So, whether you are at the beginning of your journey, where you know time and income and inflation will make these payments seem less over time, or if you are at the back end of your journey, you need to have the realization that prices and expenses keep on going up. And are you in a position with your fixed income that you are arranging for in your retirement to take care of those future expenses? If not, why not? And why not schedule for your Financialoscopy®.
