Found Money

This week was my first time since I started this project that I have found some money.  I have mentioned in previous posts that any “found” money would go towards my investment account.  Fortunately, for my wife and me this found money will be a monthly occurrence for the next 52 months. 

My wife and I financed a car about a year ago.  Like most car purchases, we were car shopping on the weekend and couldn’t contact our bank to see what they could offer us, so we went with the financing provided through the dealer.  Our rate at the time was 6% which isn’t horrible, but also isn’t that great when you consider the bank is paying next to nothing for those funds they just lent us.  When you consider what the interbank interest rate or Libor is and compare that to your rate you can tell how much you are getting ripped off.  Now, since I was an underwriter for a major bank in my previous career I have a good understanding of risk based pricing and the “risk” the bank is taking by making a loan.

 

When you think about an auto loan or even a home mortgage there really isn’t any risk to the bank.  They have the first lien right to the asset and as long as they didn’t write the loan for 100% or more of the assets value they should be fine.  Now, this is not always the case because there could be a large drop in the market for homes or for used cars.  We did recently see a drop like this and now seem to be on the road to recovery.  Don’t worry; I am stopping here since everyone should know where our economy has been in recent years.

Let’s get back to topic at hand, found money.  As I stated earlier our vehicle was financed at 6% and our monthly payment was roughly $320.  This wasn’t bad for a vehicle that was a couple years old and had very low miles.  I can honestly say that I had never considered refinancing an auto loan because there are usually fees and the term usually gets extended to help lower the payment.  In the long run, you are likely to be worse off than when you started.  But, for some reason, I was checking the loan rates with our credit union and saw that they were offering a rate of 2.24% and no fees to refinance.  With that rate and keeping the term the same we were able to lower our monthly payment to $232 a month, saving us $85 a month.  This savings will be added to the $50 per month I have already allocated to be automatically invested into my account.

To reiterate a wide known fact, you should always consider a credit union when looking to finance a vehicle, a home, or any other high value item.

As of right now, no trades have been completed since I am in the process of setting up my account and getting it funded.  I will reflect the automatic investment when the deposit has been completed.

Portfolio Statistics:

Cash: $400

Stock Investments: $0

Bond Investments: $0

Real Estate Investments: $0