Thursday, February 12, 2009

An interesting thought: all that glisters could compound

Albert Einstein is quoted as saying 'the most powerful force in the Universe is compound interest'. Yes folks, compound interest has more effect on your life than a poorly groomed beard (see below - that's Gwyneth with the formerly handsome Joaquin Phoenix).

Question is, is it working against you?
Compound interest is interest on your interest. If you borrow $1000 on your credit card, you pay interest on that - say 15 per cent. Every month, you pay 0.15 of not only the $1000, but the interest accrued the month before. At the end of the year, you'll owe $1347.35, assuming you've made no payments over the year.
The key to winning against credit card debt is paying off as much as you can every month. The minimum repayment is not enough to make inroads (unless you have about 11 years to pay off $1000, but that's another story).
Take a stand. Don't let the force win! Or you could end up looking like Joaquin Phoenix ... who used to look like the picture below.

Pictures: GoFugYourself and GreenFrogStudio

1 comment:

Please feel free to comment. Copyright © Alex Brooks, Allison Tait and other bylined writers 2007-2009. Please do not use anything without permission or without noting its origins on your blog or website.