Saturday, February 18, 2006

The Power of Leverage: Find a Class 1 Lever

Financial Leverage can be truly awesome when used correctly in the proper balance between growth and safety. Too much of one is likely to impede current cash flow (growth costs money), while too much of the other (safety) won't produce an adequate financial return for the risk taken.

Let's say that you're a 50 year old couple, who is realizing with some alarm that you haven't put away enough for retirement. You've got a nice home, but that's about it. You're starting to think that things will be very bleak once you hit 65. Your pension will be minimal and your savings aren't currently much. It certainly doesn't look like you'll be able to go south for the winter, and you fear having to sell your home to finance current living expenses as you age. Not pretty.

But with a little bit of the right financial leverage, and just a bit of scrimping for five years, you can let leverage take care of those nasty retirement fears. Using current some current examples, we'll see how it's very possible to have a positive cash flow of almost $1,300 per month at age 65, and if you live to 80 - $7,614 per month (wow, what a bonanza!).

Next time


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