Back when I was mired in debt, I was really just living in a fantasy world. Charging on my credit card meant nothing to me. When the statements came in, I’d look at the interest I was paying (and the late fees if I was dumb enough to be paying late) and make some sort of rationalization like “Oh, $48, that’s not too bad.”
And so went the vicious cycle, until I finally decided to do something about it.
I often wonder now if I had some sort of tool that would have added up all of this wasted money (which is exactly what it is), would that have motivated me to do something about my financial mess sooner.
Well, a colleague of mine has created something that you might find useful. Before I go any further, I am not trying to sell you anything. Just thought you might want to take a look at a tool that I think is really neat. It is called the Lifetime Credit Card Cost Calculator.
It appears on the PF blog of a friend of mine Joel. He designed this tool to show you how much you’re actually paying for a purchase when you put it on a credit card and do not pay it off in its entirety before any interest accrues. It is really quite cool. Just move the “slider bar” to correspond to your interest rate and how long you think you’ll need to pay it off.
A quick example that I just did. Say you have a card that charges 15% interest and you think you’ll need a year to pay it off. If you go to groceries, you’ll see that $150 worth of groceries will actually cost about $163. So, thirteen dollars isn’t too bad, you say? Well, I’d guess the average household spends about that much in groceries a week, so over the course of a year, you are paying an extra $675 for ABSOLUTELY NOTHING!
Why not get your finances straight, to the point where you pay your balances off completely at the end of each month, and spend this $675 on something else. A vacation, maybe? A new flat screen TV, perhaps?
As you can see, this is not an article about ways and ideas to get you out of debt; this is an article that, if you look at Joel’s tool, should help open up your eyes to the degree that money is being wasted in your life, and to motivate you to do something about it.
Joel is a CFP and a firm believer in using cash back credit cards to make credit cards work for you by earning cash back rewards instead of against you by carrying a balance and paying interest charges.
Comments about Joel’s calculator? Share them with my readers below.
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Wow, cool tool!
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