Looking at Daily Interest on Debt is Scary
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After calculating his interest costs for the month of January, @MattJabs exclaimed in a recent tweet of how he was paying $40.13 per day towards interest on debt that he currently owes. Talk about a hole in your wallet!
His post made me grab the calculator to do the same thing he did. Although I only have to pay interest on my school loans (credit card is at 0% introductory rate), I wanted to see how much money I was leaking thanks to interest.
Since my parents bought out one of my student loans, I used the figures from my January student loan statement. On about $8,800 of college debt, I paid only $39.18 per month towards interest – which equates to $1.26 of interest per day. I am fortunate to be looking at such small numbers but I’d still like to keep that money instead of giving it away. With about $40, it could go towards a nice automated savings plans (or a treat such as a Netflix subscription or more text messages for my iPhone).
The Frightening Cost of Debt
Interest is an unnecessary expense and it creates deadly spiral – it buys time and smaller debt payments but it is time and small payments that actually puts us deeper into debt. The more money one can put towards the principal, the less one will be paying in interest.
Take out your own calculator and find out how much money you lose on interest per day. You don’t have to be a stickler and count for every penny. Just add up the interest that you are paying for all your debts and divide it by 30. This will give you a rough idea of how interest is killing you.
Even if it is just a few bucks per day, it is quite scary to see that you are losing money on a daily basis because of your debt.
A Great Way to Motivate
Now just think this to yourself:
I work hard every day to put food on the table for me and my family. But, every afternoon on the way home, a thief robs me of $40 cash from my wallet.
Matt watches $40 vanish every day because of his debt. Watching money disappear like that serves as fuel for his anger and hatred towards debt – which ends up being a great reason to rid of that debt even faster.
Wouldn’t you be mad if you became a victim of a magazine scam or fitness club scam that takes $40 from your checking account every month for no reason? Is $40 per month in interest any different?
(Photo credit: Thirteen Of Clubs)
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Andrew said:
Great post! What a constructive way to examine the effect of debt.
February 17th, 2010 at 6:48 pm
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