I had this thought last week and now I want to share it with you. It's not completely valid but there are several reasons that I want to share it with you.
First, it is a great illustration and may help people see their money in a better way.
Second, a couple of days after I had this thought, an odd thing happened. I didn't tell anyone this thought as I was still thinking about it. I had never read this before so I was contemplating its usefulness. My wife came home a couple days after my initial discovery and told me a story. Someone at work was talking to her about money and while listening, my wife had the exact same thought. That kind of serendipity means something.
Third, I'm going to include this when I compile all this information into one spot so this gives me a chance to think out loud, a rough draft of sorts.
The thought that occurred to me and then to my wife is simple and probably not original even if I haven't seen it before. It's this. Add up all the interest rates that you are paying.
Add up the interest rate from your house, your cars, your credit cards, and anything else that you have that carries an interest rate. If you want to have an idea of where your money is going, add them all up. It doesn't have to be exact. Round the numbers off and add them up.
The object of the game is to be paying at the very most 0% interest. You want to get to the point where you are being paid interest but for now, let's aim for 0%. How close are you to paying no interest at all?
My wife and I are at 21% and that's 21% more than we would like. But when we look around, there are people who are paying more than that on just one credit card. Yikes! And they have several of these cards. Double Yikes!
Make a commitment today, if you haven't already, to start reducing the total amount of interest that you are paying out.