The Time Value of Money: Mortgage Notes

Understanding the time value of money is a concept that you must wrap your head around in order to become a successful investor of mortgage notes. There are two reasons why your dollar will buy less tomorrow than it can buy today. The first is inflation.  Inflation is the culprit of the rise in prices of goods and services. Think of it this way, how much did you pay for a candy bar when you were six years old and how much do you have to pay for that same candy bar today? The second reason why your dollar is worth less tomorrow than it is today is due to the inherent interest earning power of every dollar. If you invest $100 today at a 10% interest rate annually, you would have $110 after one year. If you had to wait a year before you invested your $100 you would have lost the interest earning power of that $100 and lost your $10. If you choose not to invest your $100, you may even actually be losing money in the long run due to inflation. The moral of the story is to be certain you have your money secured in an investment that is making you money rather than having your money become stale and slowly seep out of your bank account due to the high rates of inflation. The concept is one that the “wealthy” have mastered.  Every day that you let your money sit in bank account that is earning a sad 3%, then you are losing the interest earning power of every dollar. It is in your best interest to take control of your money and begin investing today.

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