It’s well explained and an interesting concept. Looking at subscriptions I usually calculate what they would cost me in the next 5 or 10 years to get a better feeling for the real costs
merci :) Personal recommendations at relevant times work wonders, so keeping this video in mind in case the topic comes up in conversation is probably the best thing someone can (easily) do
I think the x20 comes from how much money you would need to invest in order so 5% of it can make you the subscription. Basically it's how much do you need to save so your return equals the price of the subscription. As he said, if you had a 5 dollar subscription, you would need to invest 100 dollars so the 5% return rate can afford you the subscription
Basically, anything that returns 5/year is worth 100 in value right now. Meaning if I give you a contract that says "I will pay the owner of this contract 5/year" it would be worth about 100 to sell to anyone (this is basically what a government bond is). It depends heavily on your assumptions, what the multiple factor is! If you think that 5% a year is a bad deal because you know a surefire way to get 10% a year, then you would only value the contract at 50, because then it would still give you that same 5/year but now it's 10% return also. It all depends on what else you can do with the money. This is what is called "opportunity cost". You give up the opportunity to do something else with the money you pay for anything. Say you buy a picture with a return policy of 10 years no questions asked. You might think "great, a free picture!" But it still costs you the opportunity to do something productive with your money like invest in an etf with 5% return
I really don't get it. If something costs $5 a year, why does $100 get cancelled? Is that per year too? Where did that x20 come from? And why do you keep saying investments, do salaries or other sources of income not count?
If you wanted to pay for the subscription (5$ per year) with savings (that give out 5% per year). 100$ in savings x 5% = 5$ per year. So, assuming you have some money saved away, your subscription will cancel out the income from 100$ of those savings. For as long as you subscribe. Hope that helped have a good day! :)
@@herr_crustovsky No savings in a bank no longer give out any kind of interest, and in fact most banks now charge a fee to keep money in them. A better way of doing this would be to become your own bank, by investing your $100 into a business that will generate your 5% income. In fact, any good business should generate at least 50% income if you are the business owner. That means that for every $1 you invest into your own business you should be making $1.50 in raw sales, which means you generated $0.50 income. No bank in the world can do this for you. For example, selling things online such as cheap jewelry, candles, cool clothing, or collectible items. Edit, It is important to remember that you have to have a job, and on top of that you need to have your own business. So that way you can use the money you make from working at your job to invest into your business.
@@herr_crustovsky Most simple savings accounts to do NOT give 5% net interest. If they give any, it is usually a small fraction of one percent. In this context "savings" really means "a diverse investment portfolio with moderate risk tolerance." The 5% annual growth is just a rough approximation of what a reasonably diverse investment portfolio can expect LONG TERM over many years, not per year. Some years will be very good some will be very bad, but on average, based on previous data (which is no necessarily a perfect predictor of future behavior), the average annual net return is around 5%. This video assumes you are paying for your subscription with the earnings from current investments. In this form, you are "using up" some of the earning power equal to the amount necessary to earn, on average, the cost of the subscription. Another way to think of this is as money you spend now instead of investing it for your own future. This is true no matter what you buy, whether it's subscriptions or clothes or a movie or anything. If you are 20 years old and expect to retire when you turn 60, at which time you will spend that money, then the $10 you spend on a fast food lunch instead of investing costs you over $70, long term. And that's actual value after taking 40 years of inflation into account. This is all assuming you live another 40 years, that the global economy will continue on more or less the same path for the rest of your life , and that there isn't some disaster that happens close to the time you hope to spend those investments. While it's a pretty good bet, it's still a gamble.
There is neither psychology nor complex logic being explained in this video. A number multiplied by 12 is a bigger number, yeah thx for the math, my subscription isn't cheap, mind = blown.
I might have misunderstood your comment, but the point is not to multiply by 12. It is comparing the amount of money you need in stocks to pay for the subscription. 12$/year would become 240$ in stocks. This allows us to compare purchased goods and subscriptions. You can sell purchased goods to get money back. If you ”sell” (cancel) your subscription you get 240$ back in the form of stocks
Only a fool would pay monthly for aservice they could've paid a single fee for, yearly. Amazon Prime may cost $120/yr, but at least I'm not paying, like, $14.99/mo, which equals up to nearly $180 fora year!
![Quando Rondo - Life Goes On [Official Music Video]](http://i.ytimg.com/vi/eIf3fhMXAow/mqdefault.jpg)
It’s well explained and an interesting concept.
Looking at subscriptions I usually calculate what they would cost me in the next 5 or 10 years to get a better feeling for the real costs
This is super informative and needs more views!
merci :) Personal recommendations at relevant times work wonders, so keeping this video in mind in case the topic comes up in conversation is probably the best thing someone can (easily) do
Great breakdown! I had never thought of it exactly like this, but it makes a lot of sense
I love your delivery style
thanks you are very wise man, with good self control impulse ugrges.
Ugrges has no self control.
Ugrges is an ogre... He has layers
I'm still not understanding why multiplying by 20. Where did that x20 come from, is that because it is for 20 years?
I think the x20 comes from how much money you would need to invest in order so 5% of it can make you the subscription. Basically it's how much do you need to save so your return equals the price of the subscription.
As he said, if you had a 5 dollar subscription, you would need to invest 100 dollars so the 5% return rate can afford you the subscription
Basically, anything that returns 5/year is worth 100 in value right now. Meaning if I give you a contract that says "I will pay the owner of this contract 5/year" it would be worth about 100 to sell to anyone (this is basically what a government bond is).
It depends heavily on your assumptions, what the multiple factor is! If you think that 5% a year is a bad deal because you know a surefire way to get 10% a year, then you would only value the contract at 50, because then it would still give you that same 5/year but now it's 10% return also. It all depends on what else you can do with the money. This is what is called "opportunity cost". You give up the opportunity to do something else with the money you pay for anything.
Say you buy a picture with a return policy of 10 years no questions asked. You might think "great, a free picture!" But it still costs you the opportunity to do something productive with your money like invest in an etf with 5% return
@@dundeedideley1773 great explanation!
I really don't get it. If something costs $5 a year, why does $100 get cancelled? Is that per year too? Where did that x20 come from? And why do you keep saying investments, do salaries or other sources of income not count?
If you wanted to pay for the subscription (5$ per year) with savings (that give out 5% per year). 100$ in savings x 5% = 5$ per year. So, assuming you have some money saved away, your subscription will cancel out the income from 100$ of those savings. For as long as you subscribe. Hope that helped have a good day! :)
@@leolindahl4514 Thank you, it sorta did. So, savings in a bank give out that %5 interest, correct?
@@herr_crustovsky No savings in a bank no longer give out any kind of interest, and in fact most banks now charge a fee to keep money in them.
A better way of doing this would be to become your own bank, by investing your $100 into a business that will generate your 5% income. In fact, any good business should generate at least 50% income if you are the business owner. That means that for every $1 you invest into your own business you should be making $1.50 in raw sales, which means you generated $0.50 income.
No bank in the world can do this for you.
For example, selling things online such as cheap jewelry, candles, cool clothing, or collectible items.
Edit, It is important to remember that you have to have a job, and on top of that you need to have your own business. So that way you can use the money you make from working at your job to invest into your business.
@@herr_crustovsky Most simple savings accounts to do NOT give 5% net interest. If they give any, it is usually a small fraction of one percent. In this context "savings" really means "a diverse investment portfolio with moderate risk tolerance." The 5% annual growth is just a rough approximation of what a reasonably diverse investment portfolio can expect LONG TERM over many years, not per year. Some years will be very good some will be very bad, but on average, based on previous data (which is no necessarily a perfect predictor of future behavior), the average annual net return is around 5%.
This video assumes you are paying for your subscription with the earnings from current investments. In this form, you are "using up" some of the earning power equal to the amount necessary to earn, on average, the cost of the subscription.
Another way to think of this is as money you spend now instead of investing it for your own future. This is true no matter what you buy, whether it's subscriptions or clothes or a movie or anything. If you are 20 years old and expect to retire when you turn 60, at which time you will spend that money, then the $10 you spend on a fast food lunch instead of investing costs you over $70, long term. And that's actual value after taking 40 years of inflation into account.
This is all assuming you live another 40 years, that the global economy will continue on more or less the same path for the rest of your life , and that there isn't some disaster that happens close to the time you hope to spend those investments. While it's a pretty good bet, it's still a gamble.
@@herr_crustovskyno, but bonds, loans or stocks
Why Times 20?
The inverse of 5%
Nice content❤
thanks!
What is the name of this song?
Where do you place these investments?
Likely s&p 500
There is neither psychology nor complex logic being explained in this video. A number multiplied by 12 is a bigger number, yeah thx for the math, my subscription isn't cheap, mind = blown.
I might have misunderstood your comment, but the point is not to multiply by 12. It is comparing the amount of money you need in stocks to pay for the subscription. 12$/year would become 240$ in stocks. This allows us to compare purchased goods and subscriptions. You can sell purchased goods to get money back. If you ”sell” (cancel) your subscription you get 240$ back in the form of stocks
Assuming stocks give 5% interest rate /year
yeah buddy you understood nothing
@@spitalhelles3380to be fair, this is like his worst explained video
Only a fool would pay monthly for aservice they could've paid a single fee for, yearly.
Amazon Prime may cost $120/yr, but at least I'm not paying, like, $14.99/mo, which equals up to nearly $180 fora year!