Episode 40: The True Cost of Debt

ABOUT THIS EPISODE

On this episode of the Build Your Life Podcast with Financial Expert John Browning, we're discussing the true cost of debt and how it can affect your life and retirement.

Tune in today to hear John share all about the mystery of compound interest and how credit card debt can change your life and your future for many years to come. Listen in for all the details!

For more information, visit www.GuardianRockWealth.com to learn more about what John can do for you. Or, give us a call at (312) 372-5000.

Welcome to the build your life podcastwith John Browning. Build your life as a relaxed and unedited conversation with financialexpert John Browning. John's the founder of Guardian Rock Wealth, with offices inHawaii, Colorado and Illinois. John's also the author of the book build alife, not a portfolio, a guide to your financial future based on yourpersonal values, which you can purchase on Amazon, or stay around to theend of today's show and I'll tell you how to get a free copy mildright to your door. I'm Michael Delan, your host for the next few minutesas we chat with financial expert, business owner and author John Browning.Well, hello, John Browning, welcome to another episode of Your podcast.How are you doing today, sir? I'm doing well. And how aboutyourself, sir? You know I'm still peach king. How about that?I'm going to hang on all right, right, like, yeah, yeah. So, the the other thing that...

...we like is, as a society, we like going into debt. You know, because I've heard of alot of people, talk to a lot of people recently who are pretty muchin debt and you hear, especially during the pandemic, people are living paycheckto paycheck and all of that. But what people don't understand, John,is there's a different there are more cost to dead if I buy something ona credit card or something, if I'm not paying that bill at the endof the month in full, I'm paying a whole lot more for thanks.So there is, as you would say, there is a true cost to debtand that's what we want to talk about today. So I'm back forus the the true cost of debt. Well, the same thing that appliesto investing and the whole idea of compound interest, which is Einstein said itwas the eighth wonder if the world and and I would agree. It's justfascinating to do that study of compounded interest. But the same thing works in reverseand that's how the big banks make...

...their money, and they make themake that money from people with all sorts of debt, but especially one thatI want to talk about today is credit card debt, because credit card debtis so easily assessible accessible. Yeah, and you can even get it right. As you Graduate College, I'll give you a credit card with a certainamount and unfortunately I've talked to three or four. I'm not going to callthem kids, three or four young adults recently, and it's kind of throughno fault of their own, right. They they were furloughed and they neededto eat and they called that unemployment line. They called it and they called itand they called it and they called it and they called it and theycouldn't get the unemployment for weeks and weeks on end. What are they goingto do if they don't have, you know, their parents or somebody elseto come in and just supply that for them? And so they have thecredit card and they used it and you know what, in some respects maybe, maybe that's what credit card was for...

...in this case. Yeah, butnow they're looking at it and, you know, at their salary level,because they're just starting out. They're looking at, I've got five thousand dollarsin credit card debt. What am I going to do? They're looking attheir budget and what they're they're not making more now that they're not on furloughanymore. Right one of them is still unfurlough, but at least she's gettingunemployment now. But what that? What happens, especially with credit card debt, is not only does it compound on a monthly basis, but most ofthe time credit card debt compounds on a daily basis. So these credit cardcompanies absolutely. Yes, so you get that. They like to tell youget thirty days where you don't get charged. Right then, if you carry thatbalance, many of them will charge you. You know they'll take that. Say It's fifteen percent, and a lot of them are fifteen percent right. So them were even higher. Twenty One, one, twenty four percentinterest rates on an annual basis. They...

...divide that by three hundred and sixtyfive and charge every day. So you talked about compounding interest that it getsreally ugly. Yeah, so that's that's okay. I was saying it's kindof like when we bought a couch, it was like six months, sameas cash, but if we would have gone over one day, they wouldhave charged essentials from the very beginning. That's kind kind of what you're talkingOh that's interesting. Did Not know that. Okay, very good. There's thosezero percent those zero percent things are great as long as you keep ontop of them and you pay your payments when do exactly, and a littlebit more. Whenever I take advantage of one of those, I always paylike, I'll go overboard, I'll pay double, so I'm not getting thefull effect of the zero. But I know for sure they're not going toattack on all the interest cost from all the way back. So yeah,that's a big but there's actually, Michael, this is something I want everybody totake advantage of. It's absolutely free...

...on Guardian Rock wealthcom. Under resourcesthere's calculators there and you can calculate things for your automobile, for credit cards, and you can see, based on your balance, you're interest rate andeverything else. It's really is. You just plug it in and the calculatorjust calculates exactly what you're going to pay. An it is. I opening theplug and just plug in Tenzero, so that calculator and say fifteen percenter. Take your credit card and find out what you're into. A lot ofpeople don't know. That's very true. is on their credit card. Yeah, well, that know, that's really cool. In there and and they'llhand figure calculators will there and they'll do the payment and everything. Oh,that's way cools. Yeah, so I did one right before this podcast becauseI know you're going to ask me that question. So if you had tenzeroson a credit card and then you had to pay fifteen percent interest in youwere paying just two hundred dollars a month.

It would take you six point sixyears to pay off that tenzero and in the process you would pay anextra five thousand, seven hundred hundred and ninety one dollars in interest. Sofor a five Thou Car Credit Card Company will actually say that you don't haveto pay two hundred dollars. You could actually be there. You can paythirty five dollars a month. That's really what they wanted to do. Yeah, is make that minimum payment. That's always thearing one. How will theymake any money on that? Well, because you're going to be making thattill you die or until you want to retire. So, yeah, exactlythe yeah, that. So that's that really is, is the hidden cost. You know where at first hit me, John, is when my wife Jilland I bought our we're in the process of buying our first house,and it was back back in the day. It was like seventy Threezero, doyou know, which was a big deal for us, and we gotthe mortgage papers or whatever and you look...

...at the number and they say,Oh, by the way, over thirty years, you're going to pay ahundred and eighty two thousand dollars for this, seventy three thousand doll or something crazylike that. You're like, HMM, that was the true golf of debt. You you look at automobile loans, which is another big one, butthey're required to put on there what you're actually going to pay, whichusually over the right hand side on those loan papers, and it's pretty bignumber compared to what you thought you were going to pay for that car,which, by the way, is a depreciating asset and in addition to beingdepreciating, you're going to have to fix it. Everyone's going to be maintenancecost on that as well and all that. So that's another debt that I recommendthat. If you, if you, I mean if you don't absolutely,absolutely need to have a car to get to and from work or somethinglike that, I recommend to won't go into debt for for a vehicle.Well, and and that's so true.

And if you do need a car, you don't need a fancy one, because most people never know what kindof car you drive. Anyway. I learned a long time ago there's oneperson, there's one person on earth, John, who really cares about whatcar I drive. That's me. Nobody else scares. So nobody cares.That's right. So get over at work in the back of a lot Turk, in the back of a lot of worried about what somebody thinks about sir. Right, that's right. Yeah, but the true cost of debt,and it is. It is crazy. The other place that this really comesin, and you're not I've talked about this, is, you know,my wife and I are refinancing our house right now and they wanted, whenwe got the first papers, they wanted to they know, there's the costof the law and then there's like, you know, a s scrow whereyou put in for Insurance and taxes and thanks, and they said, Iwe'll just we'll just roll that in a long because I was like fivezero dollarsor something, and we thought, wow, we don't have to come out ofpocket with that money. That's pretty...

...cool. Until we realize that.Wait, we wait, wait, wait, wait, wait, they're financing thatover the next thirty years because they're wanting to make money, right,is it common? Yep, that's exactly right. Yeah, they get tomake money on five thousand knowledge for thirty years. Not a bad deal forthem. No, wonder, you don't wonder. They're the ones with allthe big buildings everywhere, right, that's right, in the fancy offices andeverything else. That's right. Yeah, yeah, so there is a truecost of debt and up and there. You know. That's yeah, Imean the other cost of debt most people don't talk about is is behavioral financeside of things, which is how debt eventually makes you feel. And thisis where you get into the touch, you feel the thing in this iswhere, you know, I talked about my book build a life, nota portfolio. It's not all about the...

...numbers. Once you start to realizethat you've got this pile of debt and you're paying so much an interest andhow much of your paycheck is going to that, just paying down the debtthat you can't put towards retirement or or maybe things that bring you joy,like that Lotte in the morning or something like that. Because you've amassed thisdebt over here, it becomes a psychological bird and that that just becomes tosome people almost unbearable. So that's another part of the true cost of debtthat I always like to mention well and and that that's a big part becauseunfortunate, when we start feeling depressed because we're in debt, guess what wedo? We typically go spend more money on ice cream or a Lotte andwe just keep rolling instead of going to Guardian Rockwellcom, having a conversation withJohn and saying help, I've got kind of like the three or four peopleyou talked to. I've got TENZERO dollars in dead I'm not making a lotof money. What can I do right?...

And I bet you have some counsel, maybe some strategies to go. Okay, here's one thing you cando, here's two things you can do. Don't panic, right. So ifsomebody finds himself in that situation, especially right now, in the midstof this pandemic, when they've been furloughed or something, would you are youopen to having a conversation with them, John? Absolutely, it's a it'sbecoming a bigger part of what we do. It's people will tend to when they'vebeen furloughed or laid off. The last thing I want to do isgo to financial advisor, but it might be the first thing they should doright. And I even had one gentleman say he's like, well, hecanceled an appointment with me because he's like, you know what, I'm in furlough, it doesn't make sense to talk to a financial advisor, and Isaid no, this is exactly when you need to talk to a financial advisor. Is Let's develop some strategies to get...

...through this. We don't know howlong it's going to last. We don't there's a lot of we don't know'sinvolved here. So how do we plan for that and strategize for that basedon the assets and income that you have right now? So it's we encourageeverybody to come, give us a call and come out with the website,hit that contact US page and send us a note. Will gladly speak withyou for a bet. That's that's good, because you have a an environment whereit's, as I would call it, it's a what, a guilt freeenvironment, or no condemnation. We've all had issues, right, andyou're not there to look at something. Goel, you did what? No, no, it's like, okay, let's find your situation and figure outwhat your what are you up against and what do you have to work withand let's figure out how. You know, because the thing about you, Johnand Guardian Rock Wealth, as you guys said, you know you dothis all day, every day. You speak money, you know the thesolutions and nothing that somebody brings to you is going to be a new situationfor you. Probably Right. You're not...

...going to get caught off guard togo while. I've never, never seen that before and you've got strategies aroundit, and that's one thing. People just need to reach out. So, Guardian rockwealthcom check out the calculators that's under the resource tab, see howmuch you're really paying and start to understand the real cost of debt. Andthen, while you're on that page, is reach out to John on thecontactest page and say hey, let's have a conversation and you can start iton email or phone or zoom and see where it goes, because John canreally help you manage your debt, get out of debt and plan for afuture where you're not going to be believing the three lies of retirement, whichwe talked about last episode, and understanding how do you develop a great lifestylethe day and in the future, which was like two episodes go. Soyou've got to go back and listen to those episodes as well, John,but thanks for helping US understand a little bit more about the true cost ofdebt and why we probably need to give you a call and make sure we'remanaging that debt properly. Right, it's...

...right, yeah, all right,all right. Well, buddy, you take care and we will be backagain next time for another exciting episode of the John Browning podcast. See Boddy, all right, we'll see you soon's for listening to the building your lifepodcast with John Browning. Be Sure to subscribe to this podcast so each newepisode will be sent to you automatically when it is released. Have a terrificday.

In-Stream Audio Search

NEW

Search across all episodes within this podcast

Episodes (101)