Bizarro is that reverse Superman villain. He is the exact opposite of everything Superman represents.
Let’s review the principles from the last post:
1. Money is never stagnant (it’s always moving, growing, or shrinking).
2. Money earns money on money (the power of compound interest).
3. More time = more money (exponentially so!).
Using credit cards is Bizarro Investing. Rather than the power of compound interest working for you, it works against you in the exact same way. If you put $5000 on a credit card, even at 10% interest, it’s going to cost you quite a bit more than that. If you never touched that debt again, it would be up to around $8000. If you decided you want to pay it off in 5 years at $100/month, you’d end up paying about $6500 - that’s $1500 in interest.
Want to know the true cost of your credit? There are some tools to help. Here’s a little calculator for you.
Want to know a secret? A credit calculator is the same as a mortgage calculator. Just think of debts as little mortgages. Go ahead, put the same numbers in the credit calculator and this mortgage calculator to see.
That’s all for now. You can also watch my video about debt to hear more.
Yours,
Sam
P.S. As I say in the video, I don’t pass on any of this information to be judgmental. We’ve all been there — I just to want to help!
I just discovered these two sites through Money magazine that are relevant to my last video:
These two sites are legit and give you a good idea of where you stand in the area of debt and credit. They’re both free and easy, and can show you where you stand in the areas of payment history, debt usage, credit age, account mix, and inquiries.
Good information to have, but don’t obsess over it. In the big picture, try to keep paying down your debt and put money in savings. The credit card companies want you to get emotionally involved so that you spend more - whether in principal or in interest.
Questions or comments? Get in touch with me.
Sam
The first video in an ongoing series answering financial questions. This video covers how to establish credit and how to get out of debt - and whether getting into debt in the first place is a good idea.
