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 podcast with John Browning. Build your life as a relaxed and unedited conversation with financial expert John Browning. John's the founder of Guardian Rock Wealth, with offices in Hawaii, Colorado and Illinois. John's also the author of the book build a life, not a portfolio, a guide to your financial future based on your personal values, which you can purchase on Amazon, or stay around to the end of today's show and I'll tell you how to get a free copy mild right to your door. I'm Michael Delan, your host for the next few minutes as 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 about yourself, 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 a lot of people, talk to a lot of people recently who are pretty much in debt and you hear, especially during the pandemic, people are living paycheck to 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 on a credit card or something, if I'm not paying that bill at the end of 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 debt and that's what we want to talk about today. So I'm back for us the the true cost of debt. Well, the same thing that applies to investing and the whole idea of compound interest, which is Einstein said it was the eighth wonder if the world and and I would agree. It's just fascinating to do that study of compounded interest. But the same thing works in reverse and that's how the big banks make...

...their money, and they make the make that money from people with all sorts of debt, but especially one that I want to talk about today is credit card debt, because credit card debt is 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 certain amount and unfortunately I've talked to three or four. I'm not going to call them kids, three or four young adults recently, and it's kind of through no fault of their own, right. They they were furloughed and they needed to eat and they called that unemployment line. They called it and they called it and they called it and they called it and they called it and they couldn't get the unemployment for weeks and weeks on end. What are they going to do if they don't have, you know, their parents or somebody else to come in and just supply that for them? And so they have the credit 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, but now 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 dollars in credit card debt. What am I going to do? They're looking at their budget and what they're they're not making more now that they're not on furlough anymore. Right one of them is still unfurlough, but at least she's getting unemployment now. But what that? What happens, especially with credit card debt, is not only does it compound on a monthly basis, but most of the time credit card debt compounds on a daily basis. So these credit card companies absolutely. Yes, so you get that. They like to tell you get thirty days where you don't get charged. Right then, if you carry that balance, 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 percent interest rates on an annual basis. They...

...divide that by three hundred and sixty five and charge every day. So you talked about compounding interest that it gets really ugly. Yeah, so that's that's okay. I was saying it's kind of like when we bought a couch, it was like six months, same as cash, but if we would have gone over one day, they would have charged essentials from the very beginning. That's kind kind of what you're talking Oh that's interesting. Did Not know that. Okay, very good. There's those zero percent those zero percent things are great as long as you keep on top of them and you pay your payments when do exactly, and a little bit more. Whenever I take advantage of one of those, I always pay like, I'll go overboard, I'll pay double, so I'm not getting the full effect of the zero. But I know for sure they're not going to attack 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 to take advantage of. It's absolutely free...

...on Guardian Rock wealthcom. Under resources there'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 and everything else. It's really is. You just plug it in and the calculator just calculates exactly what you're going to pay. An it is. I opening the plug 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 of people 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'll hand 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 because I know you're going to ask me that question. So if you had tenzeros on a credit card and then you had to pay fifteen percent interest in you were paying just two hundred dollars a month.

It would take you six point six years to pay off that tenzero and in the process you would pay an extra five thousand, seven hundred hundred and ninety one dollars in interest. So for a five Thou Car Credit Card Company will actually say that you don't have to pay two hundred dollars. You could actually be there. You can pay thirty 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 they make any money on that? Well, because you're going to be making that till you die or until you want to retire. So, yeah, exactly the yeah, that. So that's that really is, is the hidden cost. You know where at first hit me, John, is when my wife Jill and 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, do you know, which was a big deal for us, and we got the 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 a hundred and eighty two thousand dollars for this, seventy three thousand doll or something crazy like that. You're like, HMM, that was the true golf of debt. You you look at automobile loans, which is another big one, but they're required to put on there what you're actually going to pay, which usually over the right hand side on those loan papers, and it's pretty big number 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 being depreciating, you're going to have to fix it. Everyone's going to be maintenance cost on that as well and all that. So that's another debt that I recommend that. If you, if you, I mean if you don't absolutely, absolutely need to have a car to get to and from work or something like 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 kind of car you drive. Anyway. I learned a long time ago there's one person, there's one person on earth, John, who really cares about what car 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 comes in, 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, when we got the first papers, they wanted to they know, there's the cost of the law and then there's like, you know, a s scrow where you put in for Insurance and taxes and thanks, and they said, I we'll just we'll just roll that in a long because I was like fivezero dollars or something, and we thought, wow, we don't have to come out of pocket with that money. That's pretty...

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

...numbers. Once you start to realize that you've got this pile of debt and you're paying so much an interest and how much of your paycheck is going to that, just paying down the debt that 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 this debt over here, it becomes a psychological bird and that that just becomes to some people almost unbearable. So that's another part of the true cost of debt that I always like to mention well and and that that's a big part because unfortunate, when we start feeling depressed because we're in debt, guess what we do? We typically go spend more money on ice cream or a Lotte and we just keep rolling instead of going to Guardian Rockwellcom, having a conversation with John and saying help, I've got kind of like the three or four people you talked to. I've got TENZERO dollars in dead I'm not making a lot of money. What can I do right?...

And I bet you have some counsel, maybe some strategies to go. Okay, here's one thing you can do, here's two things you can do. Don't panic, right. So if somebody finds himself in that situation, especially right now, in the midst of this pandemic, when they've been furloughed or something, would you are you open to having a conversation with them, John? Absolutely, it's a it's becoming a bigger part of what we do. It's people will tend to when they've been furloughed or laid off. The last thing I want to do is go to financial advisor, but it might be the first thing they should do right. And I even had one gentleman say he's like, well, he canceled 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 I said 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 how long it's going to last. We don't there's a lot of we don't know's involved here. So how do we plan for that and strategize for that based on the assets and income that you have right now? So it's we encourage everybody 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 with you for a bet. That's that's good, because you have a an environment where it's, as I would call it, it's a what, a guilt free environment, or no condemnation. We've all had issues, right, and you're not there to look at something. Goel, you did what? No, no, it's like, okay, let's find your situation and figure out what your what are you up against and what do you have to work with and let's figure out how. You know, because the thing about you, John and Guardian Rock Wealth, as you guys said, you know you do this all day, every day. You speak money, you know the the solutions and nothing that somebody brings to you is going to be a new situation for you. Probably Right. You're not...

...going to get caught off guard to go while. I've never, never seen that before and you've got strategies around it, 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 how much you're really paying and start to understand the real cost of debt. And then, while you're on that page, is reach out to John on the contactest page and say hey, let's have a conversation and you can start it on email or phone or zoom and see where it goes, because John can really help you manage your debt, get out of debt and plan for a future where you're not going to be believing the three lies of retirement, which we talked about last episode, and understanding how do you develop a great lifestyle the day and in the future, which was like two episodes go. So you'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 of debt and why we probably need to give you a call and make sure we're managing that debt properly. Right, it's...

...right, yeah, all right, all right. Well, buddy, you take care and we will be back again 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 life podcast with John Browning. Be Sure to subscribe to this podcast so each new episode will be sent to you automatically when it is released. Have a terrific day.

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