No one will ever care as much about your money as you do. This is a point I like to make in my financial education sessions with students. It’s our money and our responsibility to manage and grow it.
But I also say this to make a point about how interest goes both ways, that is, you can earn it or pay it.
Interest is simply money paid for the use of money.
Are you borrowing money? Then you’re paying interest to use that money.
Are you depositing money into your savings account? Then the bank will pay you interest on your savings. They can do this because your money doesn’t just sit there, the bank uses it to make loans to others.
Compound interest, or interest on interest, also goes both ways. It can work for you to help you grow your money or it can be compound interest working against you on money that you owe.
Do you have a credit card balance that isn’t paid off at the end of the month? Then compound interest is working against you because each month the credit card company charges interest on the balance. But then the following month the interest is charged on the new balance which includes the prior month’s interest and there you are, paying interest on interest aka compound interest.
You’re not alone. While it may take some time to get out of debt. It helps to have a strategy, so I’ll cover that next week. Meanwhile, focus on not adding additional debt and/or paying in full any new charges.
Remember, it’s your money and no one else will care about it as much as you do.