Net Worth Principle Blog
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| Pay Debt or Save for Retirement Just a few days ago this question came to me again. The wife really wanted to start saving for retirement because her company had a matching 401k plan, but her husband was determined to pay on their home equity loan. He was in a Crown Financial class that emphasized paying off debt. I must admit that paying down debt is great. It increases your networth with every principle payment. However, this was not the best choice when using the Net Worth Principle. They had an extra $100 to pay or save each month, and she was not saving at all to her retirement plan that matched up to 6% (which is an awesome plan). We sat down and calculated how much their net worth was increasing each month paying the extra $100 on the home equity loan. Then, we calculated putting the money towards her retirement where it was automatically doubled. Clearly, her net worth increased by $100 more per month than by paying down the home equity loan. This kind of action can easily add up to thousands over time. Paying debt is great, but blindly paying debt without understanding the bigger picture can cost you over time. I have rarely seen anyone make up the amount in saving for their retirement if they paid debts at the expense of putting some aside for this cause. You will pay the loans because they send you a reminder and nasty letters if you don't. Take a balanced approach and get some money put away for the future as well as getting rid of liabilities. Come back for future posts or email me if you have a financial topic or question that you would like me to address Paul Ebisch Last Updated: 12/3/06 4:02 am EST Created on: 12/3/06 4:02 am EST |
| How It All Began This concept all began while teaching a small group at my local church (North Point Church). I decided I needed to come up with something that I could leave with the group that was significant. Nobody would take the time to do their budget, and once it was done it was quickly left behind. God opened my eyes to see the one factor that was affected by every financial choice we make: net worth. Immediately, I switched from the negative aspect of finance to the positive. My idea was that by focusing on the positive end result a person could naturally make the "right" financial choices. It started as an idea that I shared with the group. Quickly I put it into an article that I was writing for the Enrichment Journal, and then it quickly expanded into an entire book. Come back for future posts or email me if you have a financial topic or question that you would like me to address. Paul Ebisch Last Updated: 12/3/06 4:01 am EST Created on: 12/3/06 4:01 am EST |
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