The evils of debt add up fast

I dont know if I would really call interest evil. I understand the need for interest payments and I dont fault them. If you take out a loan or use a credit card its the way the bank makes their money from the loan. They are a business and need to cover business expenses and make a profit. Without it why would banks take the risk of giving you money? Now if you go overboard with debt an only pay the minimums then interest can seem evil and can really add up over time.

Throughout my young life (well even till a couple years ago) I never really paid attention to the interest payments, always making the miniumum payments. I would always look for new credit when there was something I wanted (i.e. not need) just because I didnt want to take out of savings (when I had it) or just really wanted it.

How much interest?

I bring this up now because I was laying in bed playing with the mint.com app on my iPad. I got to the payments im paying now on my credit card and for the first time (well maybe first time, with my memory maybe I did look before) it dawned on me how much I am paying wasting on interest payments.

I currently only have one credit card left at 12.9% interest rate. I was paying about $350 a month on it and $130 was going to interest. Over a year thats $1560 and since I have kept this card near max up till earlier this year and I have had this card for lets say at least 8 years thats about $12,500 in interest at least over its life (thats more than the current balance).

Sorry just had to go throw up a little.

I also have a 2nd mortgage outstanding at %4, again I have kept it maxed out foolishly. It comes to about the same payment and again the $130 going to interest. So over the 8 years thats $25,000… Could get one of those Kia hamster cars for that (love their commercials). On top of that add up the car loans (this year is my first time without a car payment in almost 20 years) and all the other credit cards I have had, and there have been many, not to mention the house mortgage. Its not to far fetched that I have paid over $100,000 in interest over my life.  Time for some of that pink liquid….

All you younger folks pay attention to that before you start that slippery slope of credit/debt.

So what am I going to do about it?

Well the first thing is I have to get rid of the credit card debt asap. The one minor good thing about the 1st and 2nd mortgage is that the interest is tax deductible. So I took the available credit on the 2nd and applied it to the credit card, only $1,000 but its at a lower rate now. Next Im going to do what I can to pay at least $1,000 a month to the Visa with the goal of having it paid off by June of 2012, sooner if I can of course. With normal payments to the 2nd I can do another $1,000 from it in February. After that I will concentrate on the 2nd mortgage. Even though it is tax deductible It rather not be paying the interest and much rather have the $350 a month in my pocket or invested somewhere.

Im in my forties now and I wish I had someone to point this out to me in my 20s (or pound it into me, I was stubborn) So lessons learned a little late for me but I hope that maybe the younger crowd, even my kids would read this and pause to think before they start to charge everything they want in life. Credit when used safely is one thing, as a lifestyle not so much.

Have you ever stopped and thought about how much you have paid in interest?or even calculated it?

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