In the video below, I’ll teach you the interest myth that’s silently stealing your money. (their is more to read below the video, too)
The Interest Myth Makes Months Tight
If you’re like many couples with kids and careers, you have some months where money is tight. In my own life, when I examine why these months seem short on cash, I always spot the same culprit: interest on debt.
Debt costs money, period. I agree with Dave Ramsey: get rid of it. Why? Debt carries interest, which costs us money. But, we still take it on. We still pay the fake tax (the interest) on the cash. Why?
I set out to understand what was causing many of us (myself included) to think debt was alright. I looked for that angle that caught us up in the interest trap. And, I searched for a new approach to understanding debt and why it silently steals our money.
Think about it. Interest rates are at historic lows across the board. Money is cheap. So…
Why are we struggling with “low interest” debt?
But before I reveal the interest myth, their is something you need to understand. If you’re carrying debt, you’re not alone (sadly). I have debt. My friends have debt. Their friends have debt. We all fell for the interest myth pitched by the financial industry (thank you Mr. Credit Card Salesman at the airport (huh?)). Their approach and advice has been sleekly crafted into a slogan we all focus on. And it makes us broker… and them richer.
And it goes like this:
“You’re going to get a great rate.”
Great being… 4% (house), 7% (auto), or 12% (credit card).
Or my favorite, which I’ve succumb to myself, “0%.” And there we find the interest myth. We focus on the interest rate, not the interest cost (the cost is what affects cash flow, which affects how much financial stress we feel each month).
When you know the interest cost, you make decisions completely differently. Specifically, I believe it’s time to start focusing on the monthly cost of interest. Why?
We can wrap our head around monthly costs.
If I’m paying $900 a month in interest (most of us are paying at least this much), I can now adjust my money allocations to attack that interest (debt). It’s an easier number to grasp.
Thinking about the total debt, $200,000 (house), $15,000 (auto), $10,000 (credit card) can get overwhelming. The conversation in one’s head goes something like this, “$225,000… it’s going to take forever to pay that off. But, it’s alright… I got great rates.”
So what… you (we) are still tossing $900 a month out the window… poof, into thin air. What else could we do with $900 a month? Wow! (that’s me daydreaming about the possibilities).
However, focusing on the interest’s monthly cost makes it easier to swallow, in terms of understanding how it’s hurting us. We can see it clearer. Who cares about the rate? The interest rate is what it is once we’ve taken on the debt.
I give a simple example in the video. It’s applicable to most of us couples with kids and careers. And, I’ll show you where you can go to quickly figure out how much the interest myth is costing your family each month.
So, watch the video (or block out time to do the exercise in the video). Start focusing on interest costs, not interest rates. When you do this, you’ll
- Keep more of your money.
- Regain more of your freedom.
- Enjoy less stress.
- Actually Get ahead.
Leave your monthly interest costs (or comments) below! I’ll list mine first!