Major Purchases
Few understand the full impact that transferring interest in the form of finance payments has on their financial future. Most of us understand paying non-deductible interest is not a winning strategy, but we often view it is a necessary evil. Over a lifetime, the interest paid to finance cars can grow to be a significant wealth transfer. Credit card debt is another major wealth transfer that is obvious, often out of control. Buying cars and the use of credit cards is a necessary way of life, how you handle this expense can play an important role in your financial future.
If you find yourself in a financial position where you are not earning interest but are paying interest on your cars and credit cards, you need to pay close attention. If you are earning interest in an investment but also paying interest, you need to understand that the interest you are transferring away is reducing the effective yield on the money you have invested.
Even though most people are aware that the interest they pay represents a transfer of their wealth to the lender, they do it anyway. Month by month it does not appear to cause too much hardship, but over a lifetime carrying credit card balances and/or financing cars can be devastating to your wealth potential.