3 Things 11-27
THINGS I WISH SOMEBODY HAD TOLD ME IN MY TWENTIES
A recent article with that title had a long list of items on it. Here are five of our favorites:
1) Credit cards are black holes. (see thing two below for more on this).
2) Thirty years from now you'll wish you had invested more in stocks.
3) Put retirement first (not buying a house).
4) Insurance is a must.
5) You'll end up treasuring almost nothing you buy.
We'll expand on each of the other five points specifically in a future newsletter.
Credit Cards Are Black Holes
We all generally understand how credit cards work. You buy something using a bank's money instead of your own. If you use the bank's money out of convenience and pay the money back before the interest clock starts to tick, you'll be just fine and will never experience the phenomenon described in the title. On the other hand, if you weren't just borrowing out of convenience and actually didn't have the money, the bank allows you to pay the money back over time. In fact, they are so intent on easing your financial burden that they will even allow you to make minimum payments, which are typically between 1% and 3% of the outstanding balance. But if you opt to take advantage of that added convenience, you'll end up paying back much more than you initially borrowed. As an example, a $5,000 purchase made at 20% interest (typical on credit cards) where only a minimum payment of 3% is made will cause the borrower to make total payments of $10,990 and not clear the debt for 21 years! That's what a financial black hole looks like.
P.S. Any company in the credit card business hopes you don't ever think about this too hard. We hope you do
Just A Thought
“An investment in knowledge pays the best interest." --Benjamin Franklin.
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