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Old 01-14-2015, 05:13 PM
 
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Quote:
Originally Posted by sj08054 View Post
Let's just take a look at mortgage

Mortgage: We are talking about a mortgage for a house your live in. Not investment properties because that is another whole different scenario.

One has a mortgage payment that usually covers principal, interests, taxes, insurance and whatever else. Within that payment, the amount is distributed in different proportion over time. In the beginning, almost nothing goes toward the principal. Your monthly payment is the cost for your shelter. Instead of paying for a mortgage, one could rent instead. That is call rent. BOTH ARE EXPENSES!!
No matter how you want to call it, it's your monthly expense. Just because you may eventually gain asset down the road doesn't make the mortgage payment not an expense.
Expense in accounting is a very specific word

A mortgage and rent are not the same. One is past borrowed money that you are paying interest on. The interest itself is your expense. The principal paymrnt is money borrowed which is already borrowed from before/past you're simply returning it. It can't be a expense. Look say I'm borrowing 100,000 in 1990 on a 20 year loan in 2010 I'm still returning only 100,000 to the lender. Plus interest. That interest my expense for 20 years. The principal ( what you're referring to as expense) is returning the initial 100k I borrowed in 1990. That has never changed in the 20 years. It's still the 100k I borriwed for 20 years. The other part of the "expense" is the insurance/taxes. So yes I'm making a payment every month but part of that payment is simply returning past borrowed money.

Now rent is ALL expense. I'm simply paying for a service.

The real issue is that people don't differentiate to that minutiae. They simply don't. I do to a certain extent but I'm not that detailed. To average person ANY money going out are bills. Money coming in is my money. As long as my money is more than my bills I can still buy x y z. It's literally a checkbook register.
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Old 01-14-2015, 05:43 PM
 
18,719 posts, read 13,492,794 times
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Quote:
Originally Posted by Jeo123 View Post
Still not sure what this "Personal" version of Net Income is that's something beyond Income - Expense. That's the only definition I've ever seen for it.

And for what it's worth, I treat that as Investment Income when I track my finances. The fact that I haven't sold it, doesn't mean I haven't made money. Similarly holding onto shares of a company that went bankrupt doesn't mean I hadn't lost money.

It may not be taxable, and you could wind up with an expense when it gets cut in half next month, but it's still income now.


Quote:
2. An individual's income after deductions, credits and taxes are factored into gross income. Deductions and credits are subtracted from gross income to arrive at taxable income, which is used to calculate income tax. Net income is income tax subtracted from taxable income.
Quote:
DEFINITION OF 'INVESTMENT INCOME'
Income coming from interest payments, dividends, capital gains collected upon the sale of a security or other assets, and any other profit that is made through an investment vehicle of any kind.

There you go
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Old 01-14-2015, 05:55 PM
 
70,830 posts, read 71,210,489 times
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Quote:
Originally Posted by Electrician4you View Post
Expense in accounting is a very specific word

A mortgage and rent are not the same. One is past borrowed money that you are paying interest on. The interest itself is your expense. The principal paymrnt is money borrowed which is already borrowed from before/past you're simply returning it. It can't be a expense. Look say I'm borrowing 100,000 in 1990 on a 20 year loan in 2010 I'm still returning only 100,000 to the lender. Plus interest. That interest my expense for 20 years. The principal ( what you're referring to as expense) is returning the initial 100k I borrowed in 1990. That has never changed in the 20 years. It's still the 100k I borriwed for 20 years. The other part of the "expense" is the insurance/taxes. So yes I'm making a payment every month but part of that payment is simply returning past borrowed money.

Now rent is ALL expense. I'm simply paying for a service.

The real issue is that people don't differentiate to that minutiae. They simply don't. I do to a certain extent but I'm not that detailed. To average person ANY money going out are bills. Money coming in is my money. As long as my money is more than my bills I can still buy x y z. It's literally a checkbook register.
like i said rent and mortgage represent your housing costs ,they are expenses.

they are consumption items until the day comes they are not then they can be moved from the expense side to the asset side in my opinion.

if you live in your house forever everything you paid represents the expense of using that house to live in. everything we own has a residual value but until we no longer use whatever it is and sell it that fact is a moot point..

perhaps your heirs may sell it and stop consuming it. your house has a resale value like my mountain bike my paintings and even my furniture. but as long as i am using it that fact is not relevant.
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Old 01-14-2015, 06:01 PM
 
2,303 posts, read 2,248,297 times
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Quote:
Originally Posted by Lowexpectations View Post
There you go
So you're saying that my definition of Net Income is incorrect because I haven't included an example with Taxes and Deductions yet? If not, then what's your complaint about my use of Net Income?

And yes, if you wanted me to follow true GAAP accounting by keeping the income as Unrealized Investment Income, I would need to keep it out of my Net Income while it was unrealized since in a Business it would simply be held in the equity section.

But a) I think that's a bit overkill to separate realized/unrealized investment income, and b) compared to the belief that increasing an expense makes your retirement account go up, it's a minor classification different.
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Old 01-14-2015, 06:03 PM
 
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even at zero interest buying a house to live in is an expense. buying a car vs renting it to drive is an expense in both cases .

in our apartment we can buy or rent a refrigerator from the building if we need a new one. they are all expenses for as long as we use them.

if they have residual value at the end that is a plus but it is a different issue from the expense of buying it.

we do not consume investments ourselves and that is the difference. even a landlord who takes an apartment for himself is giving up the rent on that apartment by consuming it himself.
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Old 01-14-2015, 06:07 PM
 
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Quote:
Originally Posted by Jeo123 View Post
So you're saying that my definition of Net Income is incorrect because I haven't included an example with Taxes and Deductions yet? If not, then what's your complaint about my use of Net Income?

And yes, if you wanted me to follow true GAAP accounting by keeping the income as Unrealized Investment Income, I would need to keep it out of my Net Income while it was unrealized since in a Business it would simply be held in the equity section.

But a) I think that's a bit overkill to separate realized/unrealized investment income, and b) compared to the belief that increasing an expense makes your retirement account go up, it's a minor classification different.


Net income is Income net of tax liabilities not all things considered "expenses"
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Old 01-14-2015, 06:07 PM
 
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consuming a house is an expense . it takes cash flow to house you..

The problem with things like a house is even if we sell it we need another place to live. So you either have to buy another house with the money or take that money and pay a life time of rent.

If you get to pocket a few bucks by selling one and buying another great because now you can put it towards the expenses associated with even the cheaper house.

Housing costs are a life long thing and that makes those expenses unique.

Last edited by mathjak107; 01-14-2015 at 06:23 PM..
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Old 01-14-2015, 06:22 PM
 
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Quote:
Originally Posted by Lowexpectations View Post
Net income is Income net of tax liabilities not all things considered "expenses"
So what would you call the monthly difference between the total of all money earned/received, and the total of all expenses.

Last I checked, Monthly Net Income is a pretty common term for that with regards to personal budgets. Sites like Mint and other personal finance tools use the term, so I'm far from the only one.
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Old 01-14-2015, 06:28 PM
 
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When you add up a lifetime of housing costs whether renting or buying odds are after 60 years or more until you die you are at a loss no matter what that house is worth.

The only question is which cost more over that lifetime. Just keep adding up every penny related to your housing home after home and rental after rental.

There will be no profit after decades of that.

Housing costs are just that. They are the expense of housing us and our families forever.
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Old 01-14-2015, 06:30 PM
 
18,719 posts, read 13,492,794 times
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Quote:
Originally Posted by Jeo123 View Post
So what would you call the monthly difference between the total of all money earned/received, and the total of all expenses.

Last I checked, Monthly Net Income is a pretty common term for that with regards to personal budgets. Sites like Mint and other personal finance tools use the term, so I'm far from the only one.
Discretionary Income Definition | Investopedia
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