Time Value of Money
11-18-2006, 09:01 PM
#31
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Joined APC: May 2005
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Costs
Originally Posted by nicholasblonde
where in the hell are you getting this 150K figure??? Anyone who pays that much is stupid enough that they would probably be in poverty anyways, regardless of what they're doing.
Try 35-40K. Now, with a realistic figure like that, how many houses that cost 35-40K are you going to buy? Trailers don't appreciate in value very well last time I checked.Maybe a timeshare in Panama City?
You're also assuming that someone is going to keep paying that loan down over 20 years. If someone gets on with a major, do you think they're going to continue paying interest + principal payments on that flight training loan for 15 years more? Doubt it. If I'm making 60-90K/yr as an FO at a major, you bet your arse I'm paying that entire loan balance off in 12 months. So there goes your comparison to investing that money.
Anyways, your 1.6 million figure doesn't mean crap if you didn't a) have flight training or b) have a college degree that would allow you to get a job and pay for food and utilities for that 35 years. How many banks out there will loan 150K to a high school graduate, even for a home? You're comparison assumes the individual can make ends meet for 35 years to see that money, without having to withdraw anything to pay bills.
Try 35-40K. Now, with a realistic figure like that, how many houses that cost 35-40K are you going to buy? Trailers don't appreciate in value very well last time I checked.Maybe a timeshare in Panama City?
You're also assuming that someone is going to keep paying that loan down over 20 years. If someone gets on with a major, do you think they're going to continue paying interest + principal payments on that flight training loan for 15 years more? Doubt it. If I'm making 60-90K/yr as an FO at a major, you bet your arse I'm paying that entire loan balance off in 12 months. So there goes your comparison to investing that money.
Anyways, your 1.6 million figure doesn't mean crap if you didn't a) have flight training or b) have a college degree that would allow you to get a job and pay for food and utilities for that 35 years. How many banks out there will loan 150K to a high school graduate, even for a home? You're comparison assumes the individual can make ends meet for 35 years to see that money, without having to withdraw anything to pay bills.
If one could be relatively assured of making it to a major airline within a few years of graduation these numbers would make better sense. However If you have spent much time on this forum at all you would realise that the odds of reaching a major is slim and getting even slimmer with time. Even if you are one of the lucky ones in the future it is highly likely that you will earn far less than what traditional wages were. The odds are that a new pilot today would spend most of a decade earning less than 45K. The average would be in the range of 25K. Carrying a loan payment of perhaps $1200 to 1600 per month would be devastating.
My entire point of this exercise is to point out that it takes a huge amount of resources to gain at best a modest return. Most likely you would carry the debt well into your 40's.
High education and training costs plus a low probability of earning a significant wage to pay back the loans equals financial disaster. If you were to place the money into a stable investment instead you would be far better off in the long run.
SkyHigh
11-18-2006, 09:48 PM
#32
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Joined APC: May 2005
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Costs
I took a few minutes and went to a local state college web site and collected some estimates costs for a four year degree in aviation from a state university.
Tuition and Books for four years $ 28,000
Room and Board for four years 57,600
Flight training through CFII 60,000
Total 145,000
Lets not forget that the average college student takes five years to get through a four year degree and if they are smart will add a minor and that will also add to that number. I can only imagine what a the price would be from ERAU.
A payment on a loan of $145,000 at 12% interest amortised over 20 years is $1596.57. Before taxes you would have to earn $1900 just to make the payment. That is far most than what most CFI's or new hire regional FO's earn.
Each person has a different set of circumstances of where their money is coming from but this is a good measure of what the true price is. Another example would be to pay cash for a house with the 150K and enjoy rent collection and appreciation over the next 35 years. Rent doubles on average every 10 years and real estate appreciates 6% on average every year.
In 35 years the rent collected would be $14,400 per month and your 150K home would be worth $1,152,913.02. Add to that the collected rent over 35 years of $3,276,000 less of course for maintenance vacancies ect....
I am not suggesting that everyone run out and buy a house but it is displays the value of the resources spent in comparison to what is to be gained. It is unlikely that a career in aviation could out preform the cost of its training and education.
SkyHigh
Tuition and Books for four years $ 28,000
Room and Board for four years 57,600
Flight training through CFII 60,000
Total 145,000
Lets not forget that the average college student takes five years to get through a four year degree and if they are smart will add a minor and that will also add to that number. I can only imagine what a the price would be from ERAU.
A payment on a loan of $145,000 at 12% interest amortised over 20 years is $1596.57. Before taxes you would have to earn $1900 just to make the payment. That is far most than what most CFI's or new hire regional FO's earn.
Each person has a different set of circumstances of where their money is coming from but this is a good measure of what the true price is. Another example would be to pay cash for a house with the 150K and enjoy rent collection and appreciation over the next 35 years. Rent doubles on average every 10 years and real estate appreciates 6% on average every year.
In 35 years the rent collected would be $14,400 per month and your 150K home would be worth $1,152,913.02. Add to that the collected rent over 35 years of $3,276,000 less of course for maintenance vacancies ect....
I am not suggesting that everyone run out and buy a house but it is displays the value of the resources spent in comparison to what is to be gained. It is unlikely that a career in aviation could out preform the cost of its training and education.
SkyHigh
11-18-2006, 10:13 PM
#33
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Joined APC: May 2005
Position: Corporate Pilot
Posts: 7,119
Stock Market
Here is another even bigger shocker.
$150,000 invested in the stock market over 35 years with an expected annual growth of 12% grows to $7,919,942.94
Save your money.
http://www.tcalc.com/tvwww.dll?User
SkyHigh
$150,000 invested in the stock market over 35 years with an expected annual growth of 12% grows to $7,919,942.94
Save your money.
http://www.tcalc.com/tvwww.dll?User
SkyHigh
11-19-2006, 01:42 AM
#34
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Joined APC: Nov 2006
Position: she flies thats all it matters
Posts: 68
SH
i appreciate your dedication in giving to the people another side of the "moon", even if its the dark side.
i can tell you this, I have one wife and one son (both not working).
my wife spends (so she costs me) about 10K$/yr my son about 5K$/yr.
for a total of 4yrs of marriage plus the son they costed me 60K$.
I will never change the money with my family no matter what ROI i can get.
the reason is simple because i love my family.
I hope you get my point, as a matter of fact what you can do with your money if not spending them for something you love.
so SH if you love to possess a beautiful house...well its up to you.
as well if i love to flying for living...well its up to me.
i think the return of my investment is not only money (actually not at all).
my pay back is the sky over me and the smile of my son.
i appreciate your dedication in giving to the people another side of the "moon", even if its the dark side.
i can tell you this, I have one wife and one son (both not working).
my wife spends (so she costs me) about 10K$/yr my son about 5K$/yr.
for a total of 4yrs of marriage plus the son they costed me 60K$.
I will never change the money with my family no matter what ROI i can get.
the reason is simple because i love my family.
I hope you get my point, as a matter of fact what you can do with your money if not spending them for something you love.
so SH if you love to possess a beautiful house...well its up to you.
as well if i love to flying for living...well its up to me.
i think the return of my investment is not only money (actually not at all).
my pay back is the sky over me and the smile of my son.
11-19-2006, 04:41 AM
#35
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Joined APC: Sep 2006
Position: earning pro rata soon
Posts: 59
Originally Posted by kaos
SH
i appreciate your dedication in giving to the people another side of the "moon", even if its the dark side.
i can tell you this, I have one wife and one son (both not working).
my wife spends (so she costs me) about 10K$/yr my son about 5K$/yr.
for a total of 4yrs of marriage plus the son they costed me 60K$.
I will never change the money with my family no matter what ROI i can get.
the reason is simple because i love my family.
I hope you get my point, as a matter of fact what you can do with your money if not spending them for something you love.
so SH if you love to possess a beautiful house...well its up to you.
as well if i love to flying for living...well its up to me.
i think the return of my investment is not only money (actually not at all).
my pay back is the sky over me and the smile of my son.
i appreciate your dedication in giving to the people another side of the "moon", even if its the dark side.
i can tell you this, I have one wife and one son (both not working).
my wife spends (so she costs me) about 10K$/yr my son about 5K$/yr.
for a total of 4yrs of marriage plus the son they costed me 60K$.
I will never change the money with my family no matter what ROI i can get.
the reason is simple because i love my family.
I hope you get my point, as a matter of fact what you can do with your money if not spending them for something you love.
so SH if you love to possess a beautiful house...well its up to you.
as well if i love to flying for living...well its up to me.
i think the return of my investment is not only money (actually not at all).
my pay back is the sky over me and the smile of my son.
I bet if a family member were dying of cancer he would have to whip out the "time value of money" calculator to see if it would be worth paying for treatment or if he would be better off purchasing a new home.
11-19-2006, 06:37 AM
#36
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Joined APC: May 2005
Position: Corporate Pilot
Posts: 7,119
Evaluating
Kaos, Mike,
You guys both bring up some good points. As pilots we often are making a choice between our families welfare and our own selfish wants. A pilot career is suppose to be satisfying but as with any career it needs to be able to provide enough return to overcome the costs of training and education. If it cannot then it isn't a profession at all but really a working hobby.
Responsible people take these facts into consideration. Everyday adults make choices that have their own better welfare in mind. Aviation is a powerful seductress. I hope that one day you will not be in a position of wishing that you were able to provide better for your family.
When evaluating the value of life and family use your heart. When determining the income potential of a career use mathematics.
SkyHigh
You guys both bring up some good points. As pilots we often are making a choice between our families welfare and our own selfish wants. A pilot career is suppose to be satisfying but as with any career it needs to be able to provide enough return to overcome the costs of training and education. If it cannot then it isn't a profession at all but really a working hobby.
Responsible people take these facts into consideration. Everyday adults make choices that have their own better welfare in mind. Aviation is a powerful seductress. I hope that one day you will not be in a position of wishing that you were able to provide better for your family.
When evaluating the value of life and family use your heart. When determining the income potential of a career use mathematics.
SkyHigh
11-19-2006, 07:08 AM
#37
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Joined APC: May 2005
Position: Corporate Pilot
Posts: 7,119
Fun
I realise that this isn't a fun topic for anyone, but it is very important to understand. The retreats made over the past 20 years have made this career choice not a financially viable one anymore.
Things change. Aviation is in decline and will never return to its former glory. In 5 years regional jobs will be aquired through through fancy flight academies. If you have an interest in self preservation you might consider broadening your scope when evaluating this as a career option.
Choose something that is on the upswing like telecommunications or police and fire.
SkyHigh
Things change. Aviation is in decline and will never return to its former glory. In 5 years regional jobs will be aquired through through fancy flight academies. If you have an interest in self preservation you might consider broadening your scope when evaluating this as a career option.
Choose something that is on the upswing like telecommunications or police and fire.
SkyHigh
11-19-2006, 07:08 PM
#40
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Joined APC: May 2005
Position: Corporate Pilot
Posts: 7,119
Forum
Originally Posted by sigep_nm
This is a discussion that belongs in a career counseling office, not on a forum involving the opinions of PROFESSIONAL PILOTS. WE are for the most part have already arrived at the point in which we cant go back.
It seems to me that almost a third of the people who frequent this forum are wannabes. Another third are new entrants. Even those who have already bitten the bullet still have the choice not to invest the best years of their life. There is always hope.
SKyHigh
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