Episode 1346
In this episode, we break down amortization, a core financial concept that describes the spreading of payments over multiple periods. We explore its two distinct applications: managing business expenses and paying off personal debt.
First, we look at the accounting definition, where amortization is used to calculate the expense of intangible assets—such as intellectual property—over their useful economic life. We discuss how this process mirrors depreciation for tangible assets and how it allows companies to reduce the carrying value of an asset on the balance sheet while recording an expense on the income statement.
Next, we decode the amortization schedule used for loans and mortgages. We explain why the allocation of your monthly payment changes over time, starting with a heavy emphasis on interest before shifting toward the principal balance as the loan matures. We also analyze the math behind a 30-year mortgage, revealing why it can take over two-thirds of the loan term before your payments primarily target the principal, and review different repayment methods, such as balloon payments and negative amortization.
Published on 9 hours ago
If you like Podbriefly.com, please consider donating to support the ongoing development.
Donate