Foregone Interest Earnings
Have you ever stopped to consider that when you spend a dollar on interest charges, not only are you forever giving up the right to spend that dollar on anything else, but you are also giving up the right to earn compounding interest on that dollar ...
... for the rest of your life!
I refer to this loss as "the opportunity cost of foregone interest earnings."
Of course, the concept of foregone interest earnings applies to every dollar you spend on interest charges (or anything else that has a dwindling or non-existent resale value) during your lifetime.
These foregone interest earnings can add up to hundreds of thousands, even millions of dollars.
The rich and those who are on their way to becoming rich understand the principle of foregone interest earnings (opportunity costs), whereas most people who are not rich do not. The latter group keeps sending their potential future wealth to the rich -- mostly in the form of interest payments.
The Tsunami Effect
I'm sure you've heard the term "ripple effect," which is a term often used to describe the ever-expanding consequences of an event, action, or decision. Of course, the term is coined from the ever-expanding ripples that are created by dropping an object into a pool of water.
When you make a one-time purchase of a non-appreciating, inexpensive product or service, the result is a small ripple effect throughout your financial future.
However, when you make repetitive expenditures for non-essential products or services that have a dwindling or non-existent resale value, the results are similar to what happens when two geological plates shift on the bottom of the ocean floor.
A small, almost undetectable underwater shock wave is sent out in all directions. But by the time this shock wave reaches land, it can form a huge wave that springs from out of nowhere and hits with devastating force. In this case, the "Ripple Effect" results in a "Tsunami Effect."
As the calculator will attempt to show, charging up balances on credit cards while making only the declining minimum monthly payment can have the same devastating impact on your financial future as a Tsunami has on the shores it hits. And while it's too late to erase mistakes from your past completely, it's never too late to attempt to minimize the damages.
Get Paid to Lower Your Rates
As you will see from the calculated results, the time you devote to researching and studying ways to lower your current interest rates can pay huge dividends down the road. Even achieving a 1% drop in your APR can save you thousands of dollars in foregone interest earnings -- thereby reducing the size of the financial Tsunami your past actions may have created.
Then, if you are successful at lowering your interest rates, the savings (earnings, i.e., "a penny saved is a penny earned") can be used to speed up the repayment of high APR debts, thereby further reducing the negative impact on your financial future.
Remember, money invested in paying down high APR debt will bring you a guaranteed, tax-free return equal to the debt's high APR.