Are you Paying to Much Interest

Of course one of the major deterrents to financial freedom is the amount of interest that you will pay to the bank. Banks loan people money and make their money on the interest they charge. They entice us with these low introductory rates which enables us to go out and charge things that we do not really need. We do this for the instant gratification to help us feel better and because we have been programmed to spend. Where this effects our networth is that we do NOT realize what this purchase will cost us over time, What is the time value of money?

As an example, if you were to charge something on credit you will not only pay for that purchase but you will also pay interest on that amount that you charged. In turn you are paying almost twice as must of your original purchase. So you get this low introductory offer, go out and find sometime on sale and you think, "Wow I get a great deal". Now your intention is to pay it off as soon as possible but what happens, you get busy, money gets tight and you just keep paying the minimum payment.

If you were to go out and buy a big screen TV and let's say you spend $2500. Of course they are going to give you a six month 0% interest card to entice you even more, So you purchase the TV with your new credit card, the rate adjust and you end up paying $4148 over time because of the interest you will pay over time. And unless you come up with the money sooner to pay off this debt you will pay for this purchase over the next 13 years. (This calcuation was done at an adjusted interest rate of 15%).

So as you can see you would still be paying for this televison long after you have thrown it away. You see, you are not only throwning the TV away but you are also throwing your money away. Learn the time value of money and how compounded interest can work for you or against you. If you continue to pay high interest charges and don't budget your money or learn good credit verses bad credit it will be a challenge to grow your networth and become financialy free.