You’ve probably looked at your paycheck before and seen the tax man take a huge bite out of your income. I know I have. But how much of your paycheck is going towards paying interest on debt? And how can you reduce it?
When I was looking for my first home the real-estate agent started showing me homes in the $150,000 price range. But I ended up buying way more house than I should have (the bank said I could afford it). One out of every two of my paychecks went towards the mortgage. Almost all of it was interest payments. But hey, I had 30 years to pay it off.
How long are you working to pay off interest?
So if you work 100 hours – 34 and 1/2 hours – is working to pay off interest.
That’s gut-wrenching, right? That’s money you’re never going to see!
How much interest will you pay over your lifetime?
The Lifetime Cost of Debt tool at Credit.com is a neat little tool. You can quickly check how much you can expect to pay on interest on some of the loans you have over your lifetime.
Does that sound like a lot to you?
Now that number is based on a lot of assumptions. Like how frequently you purchase new vehicles. The size of your mortgage. Your credit card balance. Your credit score. It also doesn’t include student loans.
However, what I do know to be true is this – the average person is going to have over their lifetime multiple car loans, mortgages, student loans, and may have credit card debt. A lot of interest to pay, right?
What can you do to stop paying interest?
Let’s look at a life without interest payments:
- No credit card interest
- No car loan interest
- No student loan interest
- No mortgage interest
- Retiring early – because you’re debt-free
I started getting out of debt by paying off my student loans at a faster rate. When I had them paid off in 2 1/2 years – 7 1/2 years early – it was such a fantastic feeling. I had an extra few hundred dollars in my wallet each month. I wasn’t throwing away money on interest to my university anymore.
If you’re knee deep in debt, it’s the prospect of paying *for decades * that keeps you awake at night. You can avoid paying out hundreds of thousands of dollars in interest payments over your life by getting out of debt. When you do the feeling will be amazing.
What do you think about how much you’re paying in interest? Please leave a comment below.
Image Credit: TaxCredits.net