Tuesday, March 05, 2013

Math Was Never My Strong Suit

And today, on chat... 

Bone: With your MBA, you had to do a lot of financial stuff, right?

Blake: Yeah, I had to take finance classes and accounting. I'm not great at it but I had to do it for classes.

Bone: I have a random question for you. Once you get a car paid off, should you just keep driving it because now you have no monthly payment, or should you sell it to get more value out of it now? Is the money you save from making a car payment more or less than the money you lose by waiting longer to sell you car. I have no idea how to even BEGIN to figure out that true cost/savings, so I thought I'd ask you!

Blake: Well a lot of it would have to do with the value of the car today and the cost of the new car you'd want to buy, and what kind of interest rate would be associated with those payments etc.

Bone: Right, right.

Blake: It would a present value vs. future value problem.

Bone: Sure, sure.
Blink, blink.

Blake: Basically you can plug in numbers to see what today's value of making a bunch of payments would be.

Bone: Is the value different from the actual cost?

Blake: Yeah because money will be valued differently in the future.

Bone: Right, obviously.

Blink, blink. 

Blake: And you have to consider interest.

Blink, blink. 

Bone: So what you're saying is, first and foremost I need to get a DeLorean and go back to the future.

Blake: Yesssssssssss... precisely.

And that's why Blake has two master's degrees, and I don't.