The True Cost of Debt

debt-problemsOne of my favorite personal finance blogs is The Simple Dollar. You could spend hours on that site gaining insight from its contributors and learning from their experiences. A post on Dec. 5 reiterates the true cost of debt.

Doug Hoyes wrote:

  1. Interest eats up your budget
  2. Amortization is not always your friend
  3. Debt is a deterrent to saving
  4. Debt limits freedom of choice
  5. Debt delays retirement
  6. Debt has an unexpected life cycle
  7. Debt strains marriage

He wrote: “Simply put, debt is complicated. Yes, you will pay interest — but you will pay much more.

  • Debt grows faster than you expect.
  • Debt takes longer to pay off than you expect.
  • Debt adds risk when life throws an unexpected curveball.”

I couldn’t agree with Doug more, especially about interest eating up my budget. It has cost me to delay moving to another city or to give up trips. As a little exercise, I totaled up the interest charged on four credit cards, one of which I paid off, in 2014.

  1. Card 1 – $577.55
  2. Card 2 – $517.68
  3. Card 3 – $346.98
  4. Card 4 – $53.25

Grand total: $1,495.46.

Yep. That’s a sizable emergency fund. A great vacation to a beach locale. A nice Roth IRA deposit. ARGH!!!

The numbers don’t lie. They’re telling me that I dug myself a deep hole, and I must climb out of it ASAP.

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