I have been reading Rich Dad Poor Dad for a while, to implement the learning there is an app called RatRace2 on android and on apple store which I am playing currently. The problem is from a game but definitely should be asked in the math stackexchange only, as I am trying to create mathematical model to solve this iterative problem in a better and efficient way. Since I tried multiple brute force ways with pen & paper to solve it, but having a hard time grasping the essence to create the linear equations. There is level 5 of Escape Rat Race, where I am facing problem with optimizing between EMI, if cleared soon then I would have enough cash to invest and grow, OR Investment, which invested from early on would give me a better return on invested sum of money.
I have an initial cash balance of 25,000 rupees. I have regular monthly income of 50,000 rupees, with monthly expenses of 22,500 rupees and yearly income tax expense of 30,000 rupees. I have a education loan liability of 1,000,000 rupees with 12.5% interest rate and 120 months loan return tenure, for which I have to pay regular EMI as a monthly expense. Now the challenge is to complete the game with cash balance of >600,000 rupees and no liability of loan by the end of 72 month.
Note:
- I can only proceed to next month by paying all expenses of current month.
- I can invest current month saving to fixed deposit, which gives 8% yearly Simple Interest return and I can invest any amount of lump-sum money and withdraw the invested money anytime whenever I need.
- I can use the remaining cash balance of the current month to payoff my remaining loan principal amount.
I used EMI calculator to find the amount of money I need to payoff by manipulating the number of month.
Would appreciate your insight and comments to help me formulate the equations(if can be made) or strategy to win the game. If need any more details or clarification, please let me know on the comments.
Thankyou