Interest Rate Is NOT Your Problem

Almost every day on my drive to work, I hear at least two advertisements on my local radio station from mortgage lending companies.  The "Normal" way of handling money in America that is marketed through these advertisements REALLY gets under my skin.  I sometimes find myself telling my radio just how dumb it is...don't judge.

The phrase that really chaps my hide is, "We helped a local family pay off all their high-interest credit cards."  Read this next line very slowly (or a couple of times) to make sure you get it.  SHIFTING CREDIT CARD (OR CAR, OR STUDENT LOAN) DEBT TO YOUR NEWLY REFINANCED MORTGAGE DOES NOT "PAY OFF" THAT DEBT.  You are playing a shell game and only moving the ball to another location...YOU DID NOTHING!

Let me tell you something that may shock you, INTEREST RATE IS NOT YOUR PROBLEM.  Your lack of discipline and ability to stop yourself from buying crap you don't need, with money you don't have...THAT'S YOUR PROBLEM!

"But my interest rate went from 19% down to 4%."  Let me show you why you need to think.  Let's say you have $10,000 owed on a credit card at a 19% interest rate.

        Option #1:  You refinance your house to "pay off" that high interest credit card.  You choose a 30 year mortgage at 4% interest and pay $3,000 in closing fees to get this new loan.  You feel good about yourself because you don't owe $10,000 on that credit card anymore, but let's look at the actual math.  At the end of your loan (30 years later) you would have paid $17,130 + $3,000 in closing fees ($20,130) on the $10,000 you "paid off".  That's ove $10,000 in INTEREST/CLOSING ALONE.

       Option #2:  You decide to get pissed off enough at the situation you've put yourself in and change your behaviors.  You decide to put off some temporary WANTS, buckle down your budget and put $907 per month toward this credit card.  After 12 months of scraping, scratching and sacrificing to win, you've paid off that credit card.  The total you paid is $10,886...ONLY $886 IN INTEREST (even at 19%).  Oh, and you're done! You don't have the next 29 years to pay on this stupid thing.

Again, interest rate is not your problem.  The problem is you looking for "easy" ways out.  The problem is your inability to tell yourself "no" for a short time in order to win.  Your problem is you can't control you.  Get control of you and you can do this!