What’s Poppin’,

This is the Master Money Newsletter. We’re the Keanu Reeves of Money newsletters; action-packed with a track record of being awesome.

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Here’s what we have on deck today:

📰 Read: Why I Hate the 40-year Mortgage

📺 Watch: The Best Vanguard ETF’s

🎧 Listen: The difference between being broke, rich, and really rich.

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Numbers to Know

💰 Social Security Concerns

A recent CNBC article (link) highlights that 74% of Americans feel they cannot rely on social security benefits for their retirement. The report suggests that individuals should focus on other retirement savings strategies and explore alternative financial options to secure their future.

💻 Uninsured Deposits in U.S. Banks

Visual Capitalist published an article (link) ranking the U.S. banks with the most uninsured deposits. This information can help customers make informed decisions when choosing banks and depositing funds, as uninsured deposits may be at risk in case of a bank failure.

📈 Richest People in the World in 2023

Visual Capitalist also released a list of the richest people in the world in 2023 (link). This article presents an overview of the wealthiest individuals, their net worth, and the industries that contributed to their wealth, offering insights into global wealth trends and the success of various business sectors.

🤔 Inflation's Persistence

Kiplinger published an article (link) discussing the possibility of inflation persisting longer than anticipated. The report explores various factors that could contribute to sustained inflation, including supply chain issues and labor market conditions, and the potential impact on the economy and personal finances.

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The 40-Year Mortgage is Here

Today, we're diving into the world of 40-year mortgages and why they might not be the financial lifeline you think they are.You may have heard that the FHA is expanding it's loan term options, going into effect May 8th. This will include options to modify into a 40-year mortgage! I am not a fan, let me show you why:

Interest Rates: The Long-Term Bite 💰

One of the most significant drawbacks of a 40-year mortgage is the higher interest rate. Although the difference might seem small at first glance, the extra interest you'll pay over the life of the loan can be substantial. A longer loan term means more time for interest to accumulate, which can cost you tens of thousands of dollars in the long run.

Equity: Building Slowly 🐌

Equity is the portion of your home's value that you actually own, and it plays a crucial role in your financial stability. With a 40-year mortgage, your monthly payments are lower because you're paying off the principal at a slower pace. This means it'll take much longer to build equity in your home. And if you need to sell before you've gained enough equity, you might end up owing more on your mortgage than your home is worth—a situation known as being "underwater."

The Opportunity Cost: What You're Missing Out On 🏖️

Taking on a 40-year mortgage means committing to a longer period of debt, which can have a significant impact on your financial goals. For example, you might need to delay retirement or other major life decisions to accommodate this long-term commitment. Additionally, you might miss out on other investment opportunities that could potentially offer higher returns than the interest savings from a 40-year mortgage.

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Here's a table comparing a 30-year mortgage and a 40-year mortgage with a 6% interest rate, assuming a loan amount of $300,000:

In this example, a 30-year mortgage has a monthly payment of $1,798.65, while the 40-year mortgage has a lower monthly payment of $1,618.72. However, the total interest paid over the life of the 40-year mortgage is $476,978.89, which is $129,464.32 more than the interest paid over the life of the 30-year mortgage.

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The Bottom Line: Consider Your Options 🤔

While a 40-year mortgage might seem like a lifeline to homeownership, it's essential to weigh the long-term consequences before taking the plunge. Be sure to explore alternative options, such as waiting to buy a home until you can afford a larger down payment or considering a less expensive property. In the end, the best decision will depend on your unique financial situation and long-term goals.

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📈 Quick Tip Of The Week - Pay off Student Loans Faster

Consider making biweekly payments instead of monthly payments. By splitting your monthly payment in half and paying that amount every two weeks, you'll make one extra payment per year, effectively reducing your principal balance faster and saving on interest over the life of the loan. Just make sure to check with your loan servicer that there are no prepayment penalties or restrictions.

Let's say you've got a $40,000 student loan with a 5% interest rate and a 10-year payback period. With the usual monthly payments, you'd end up shelling out around $10,992.80 in interest by the time the loan is fully paid. But worry not, friends! By making biweekly payments or adding extra payments, you can chip away at that interest total, keeping more cash in your pocket. So, by making biweekly payments in this scenario, you would save approximately $752.60 in interest over the life of the loan.

Every little bit helps when you're tackling the student loan beast! 🎓💸

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High-Performance Book Club 📚

I get a ton of questions from listeners and readers as to what I am reading. So we decided to let you know via the newsletter. The High-Performance Book Club will be a way to share this. If you want to be Elite in your career, business, or with your wealth, then welcome to the club. If you would like to see our previous picks, you can find them here.

​https://kit.co/MasterMoney/high-performance-book-club/tools-of-titans-the​

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The Personal Finance Podcast 🎙️ ​ ​

​The 13 Differences Between Broke, Rich, and Really Rich!​

​How Much House Can You Actually Afford (By Income!)​

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Youtube

The 6 Best Vanguard ETF's to Hold Forever
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