Double Dipping: Another Leverage Recipe Part 2
I often seefinancial strategies as recipes. The main reason being you need the right ingredients, the right utensils and a good cook to make a feast. The problem is that most people have some knives and spoons here and there, get a few things at the grocery store because they have been told to and have no clue how to cook their meal at perfection. Enough with the analogy and let’s get going with some calculation!
The following assumptions will be used to show the effect of a double dip over 10 years. You
marginal tax bracket is 40%, interest rate on investment loan is 6,5% (so my
post can be accurate next year as well!), amount of the loan is 100K, expected
return on investment is 7,2%. The chart below shows the result of the double
dipping technique.
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$107 200 | $ - |
$ 2 600 | $ - |
$ 6 500 |
$ 1 440 |
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$114 918 | $ 2 600 |
$ 3 640 | $ 2 787 |
$ 6 500 |
$ 1 544 |
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$123 193 | $ 3 640 |
$ 4 056 | $ 6 890 |
$ 6 500 |
$ 1 655 |
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$132 062 | $ 4 056 |
$ 4 222 | $ 11 734 |
$ 6 500 |
$ 1 774 |
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$141 571 | $ 4 222 |
$ 4 289 | $ 17 105 |
$ 6 500 |
$ 1 902 |
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$151 764 | $ 4 289 |
$ 4 316 | $ 22 935 |
$ 6 500 |
$ 2 039 |
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$162 691 | $ 4 316 |
$ 4 326 | $ 29 212 |
$ 6 500 |
$ 2 185 |
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$174 405 | $ 4 326 |
$ 4 330 | $ 35 953 |
$ 6 500 |
$ 2 343 |
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$186 962 | $ 4 330 |
$ 4 332 | $ 43 184 |
$ 6 500 |
$ 2 511 |
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$200 423 | $ 4 332 |
$ 4 333 |
$ 50 938 |
$ 6 500 |
$ 2 692 |
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$214 854 | $ 4 333 |
$ 4 333 | $ 59 250 |
$ 6 500 |
$ 2 886 |
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$230 323 |
$ 4 333 |
$ 4 333 | $ 68 161 |
$ 6 500 |
$ 3 094 |
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13 |
$246 906 | $ 4 333 |
$ 4 333 | $ 77 714 |
$ 6 500 |
$ 3 317 |
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$264 684 | $ 4 333 |
$ 4 333 | $ 87 955 |
$ 6 500 | $ 3 555 |
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$283 741 | $ 4 333 |
$ 4 333 | $ 98 933 |
$ 6 500 |
$ 3 811 |
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$304 170 | $ 4 333 |
$ 4 333 |
$ 110 701 | $ 6 500 |
$ 4 086 |
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$326 070 | $ 4 333 |
$ 4 333 | $ 123 317 | $ 6 500 |
$ 4 380 |
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$349 547 |
$ 4 333 |
$ 4 333 | $ 136 841 | $ 6 500 |
$ 4 695 |
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19 |
$374 715 | $ 4 333 |
$ 4 333 | $ 151 339 | $ 6 500 |
$ 5 033 |
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$401 694 | $ 4 333 |
$ 4 333 | $ 166 881 | $ 6 500 | $ 5 396 |
| Tot |
