Monday, May 7, 2007

Dropout Pays Cash for Home

So many people imitate the most popular but unhealthy ways of finance that it is important to know the full range of possibilities in order to make an informed decision. Here is a parable of a hypothetical Jack and Jill.

How to drop out of high school and pay cash for a house at 21 years old (legally and honestly)

Jack drops out of school at 16 and gets a GED by taking the test. He gets entry-level jobs totaling a modest 60 hours per week (still time to take a community-college course) and $25k per year. Living at his parents' home with free room and board (as a normal teenager would do anyway), it is possible to save $15k per year and still keep some pocket money. An after-tax 5% interest rate compounds to about $100k while age 21, mostly before he is old enough to legally drink his paycheck at bars.

Jack can buy a $100k home in cash, or marry Jill who did the same plan so they can buy a $200k home with no mortgage, or the interest alone will pay for most of a studio rental while about $10-15k per person per year continues to go into the bank.

Jack and Jill might have risen to assistant manager by 21 years old and, with no home mortgage, it is affordable to finish the college degree in cash.

There are many ways to reach your goals, as long as you have a good plan.

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