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 Brownie, build your life as a relaxed and unedited conversation withfinancial expert, John Brownin John's the founder of Guardian Rock Wealthwith offices in Hawaii, Colorado and Illinois Johns. Also, the author of thebook build a life, not a portfolio, a guide to your financial future, basedon your personal values, which you can purchase on Amazon or stay around tothe end of today's show and I'll tell you how to get a Frea copymilld rightto your door. I' Michel Delon your host for the next few minutes, as we chatwith financial expert business owner and author John Trowning Wello John Browning, welcome to anotherepisode of Your podcast. How are you doing today, sir? I'm doing well and how about yourself,sir? You know I'm still peachy King, how about that I'm going to hang onright, R, yeah...

...yeah, so the o. The other thing that welike is as a society we like going into net.You know, because I've heard of a lot of people talke to a lot of peoplerecently who are pretty much in debt, and you hear, especially during thepandemic. People are living paycheck, the paycheck and all of that. But whatpeople don't understand, John, is there's a different. There are morecost to dat if I buy something on a credit card or something, if I'm notpaying that bill at the end of the month in full, I'm paying a whole lotmore 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 onback forse, the true costof debt. Well, the same thing that applies toinvesting and the whole idea of compound interest, which is Einstein,said it was the eighth wonder of the world a D, and I would agree it's justfascinating to do that. Study of compounded interest, but the same thingworks in reverse and that's how the big banks make their money...

...and they make the make that money frompeople with all sorts of debt, but especiallyone that I want to talk about today- is credit card debt because credit carddebt is so easily assessive accessible yeah and you can even get it right asyou graduate college I'll, give you a credit card with a certain amount, andunfortunately, 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 nofault of their own right. They they were furloaed and they needed to eatand they called that unemployment line. They called it and they called it andthey called it and they called it and they called it and they couldn't getthe unemployment for weeks and weeks on end. What are they going to do? If theydon't have? You know their parents or or somebodyelse to come in and just supply that for hem, and so they hadthe credit card and they used it. And you know what in some respects- maybemaybe that's what credit card was for...

...in this case yeah, but now they'relooking at it and you know at their salary level, because they're juststarting out they're looking at I've, got five thsand dollars in credit carddebt. What am I going to do? They're lookingat their budget and whatthey're, not making more now that they're not onfertoe anymore right? One of them is still in furthough, but at least she'sgetting unemployment now. But what at what happens, especially with creditcard debt, is not only does it compound on a monthly basis, but most of thetime credit card that compounds on a daily basis. So these credit cardcompanies. Absolutely yes, so you get that y. They like to tell you you getthirty days where you don't get charged right. If you carry that balance, manyof them will charge you. You know, they'll, take that say it's fifteenpercent in a lot of them are fifteen percent right, so e o them are evenhigher twenty twene and twenty four percent interest rates on an annualbasis. They divide hit by thre and...

...sixty five in chargeyou every day, soye talk about compoundind incaurs. It gets really ugly yeah. So that's that's!Okay. I Wasay it's kind of like when we bought a couch. It was like six monthssame as cash, but if we would have gone over one day, they would have chargedthe entros from the very beginning, that's kind of what you're talking. Ohthat's interesting did not know that okay, very goodthere's, the Zerot,those zero percent things are great as long as you keep on top of them and youpay your payments Windo exactly and a little bit more. Whenever I takeadvantage 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'renot going to tack on all the interest cost from all the way back. So yeah,that's a big but there's actually Michael. This is something tha. I wanteverybody 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 automobilefor credit cards and you can see based on your balance, your interestrate andeverything else. It's really Easyo just plug it in and the calculator justcalculates exactly what you're going to pay in. It is eye opening the plug andjust playin ten sanddollar for that calculator and say fiftiteen percent Oto take your credit card and find out what your into a lot of people don'tknow. That's Waarin Trut is on their credit card yeah well and that nothat's really cool in there in the and they Hanto your calculators. Willthere and they'll do the payment and everything? Oh that's way, cool yeah. So I did one right before thispodcast, because I knew you're going to ask me that question. So if you hadtensand dollars on a credit card, and then you had to pay fifteen percentinterest and you were paying just two hundred dollars a month, it would takeyou six point six years to pay off that...

...tenosand dollars and in the process youwould pay an extra five thouand and seven ohundred and ninety one dollarsin interest. So for a five thousandoar ovet. OurCredit car company will actually say that you don't have to pay two hundredollars. You could actually be. You can pay thirty five oars a month. That's really what they wantyou to do. Yeah is make that minimum payment.That's always there in you, I. How do they make any money on that? Well,because you're onnto be making that till you die or until you want to retire, so yeaheayeah that so that's that really is the hidden cost. You know where itfirst hit me John, is when my wife Jill and I bought our- were in the processof buying our first house, and it was back back in the day. It was like.Seventy three housand dollar, you 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 hundred and eighty twohousand dollars for this. Seventy threeousanolar something crazy likethat. You're like that, was the true cost of Death Yep. You look at automobile loans, which isanother big one, but they're required to put on theire what you're actuallygoing to pay. It's usually over the right hand, side on those loane papersand it's pretty big number compared to what you thought you were going to payfor that car, which, by the way is depreciating asset and, in additionto being depreciating you're, going to have to fix it there, one as going tobe maintenance, cost on that as well, and all that. So that's another deatthat I recommend that, if you, if you I mean, if you don't absolutelyabsolutely need to have a car to get to and from work or something like that, Irecommend Ou don't go into debt for for...

...a vehicle. Well, and that's so true,and if you do need a car, you don't need a fancy one, because most peoplenever know what kind of car you drive. Anyway. I learned a long time ago, there's operson there's one person on Earth John. Who really cares about what car I drive.That's me. Nobody else cared so nood, that's right so get over inthe Beck of a La Tark in the bag of a lot worried about what somebody thinksabout Si 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 and I've talkedabout this- is you know my wife and I are refinancing our house right now andthey wanted. When we got the first papers they wanted to wro. You know,there's the cost of he loan. Then there's, like you, know, ascrow, whereyou put in for insurance and taxes and things- and they said Oh well, just reljust roll BA in along, because it was like five hsand dollars or somethingand we thought wow. We don't have to come out of pocket with that money,THAT'S PRETTY COOL UTIL! We realize...

...that waiw Wa Way Way Way. They'refinancing that over the next thirty years, because they're wanting to makemoney right is that common Yeph, that's exactly right. Yeahthey get to make money on FIVEZ DOLLAR FOR THIRTY YEARS, not a bad deal forthem. No wonder you wonder, they're the ones with all the big buildingseverywhere right, that's right in the fancya offices and everything else.That's right, yeah yeah! So there is a true cost of debt andup and there youknow that's yeah. I mean the other cost of debtthat most people don't talk about is is behaviorl finance side of things, whichis how debt eventually makes you feel, and this is where you get into thetouchy feeling thing- and this is where you know I talk about my book bill, alife not a portfolio. It's not all...

...about the numbers. Once you start torealize that you've got this pile of debt and you're, paying so much aninterest and how much of your paycheck is going to that just paying nown thedebt that you can't put towards retirement, or- or maybe things thatbring. You joy like that late in the morning, or something like that,because you've amassed this debt over here, it becomes a psychological burdenthat that just becomes to some people almost unbearable. So that's anotherpart of the true cost of debt that I always like to mention. Well, N and that's a big part, because, unfortunately, when we start feelingthe presst, because we're in debt guess what we do, we tipin Le Go, spend moremoney on ice cream or a late, and we just keep rolling I, instead of goingto Guardian Rockwellcom, having a conversation with John and saying help,I've got kind of like the the three or four people you talk to. I've got tenhosarddollars in Deat, I'm not making a...

...lot of money. What can I do? IGHAND? Ibet you have some councel, maybe some strategies to go. Okay, here's onething you can do here's two things: You can do, don't panic right. So ifsomebody finds himself in that situation, especially right now in themidst of this pandenic, when they've been furlowed or something would you are you open to having aconversation with them? John, absolutely it's a it's becoming abigger part of what we do. It's people tend to when they've been furtherd torlaid off. The last thing they want to do is go to financial advisor, but itmight be the first thing they should do right and- and I even had one gentlemansay he's like well, he canceled anapployment with me because he's likeyou know what I've been furloed. It doesn't make sense to talk to afinancial advisor, and I said No. This is exactly when you need to talk to afinancial advisor. Is Let's develop...

...some strategies to get through this? Wedon't know how long it's going to last. We don't there's a lot of. We don'tknows involved 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 encourage everybody to come.Give us a call Getan come out o the website hit that contact US page andSOMD US a note. Well gladly speak with you for a bit. That's that's good,because because you have a an environment where it's a as I wouldcall it it's a what a guilt, free, envirement or no condemnation. We'veall had issues right and you're, not there to look at some go. You did whatno N N it's like. Okay, let's find your situation figure out what your! Whatare you up against and what do you have to work with? And let's figure out howyou know, because the thing about you Johna and Gardan Rock Wealtis, you guyssaid you do this all day. Every day you speak money. You know that thesolutions and nothing that somebody brings to you is going to be a newsituation for you, probably right,...

...you're not going to get caught off.CARDIGO wel. I've never never seen that before and hes he strategies around itand that's that's one thing. People just need to reach out so guardianrockwelthcom 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, just reach out to John on the contact USpage and say: Hey, let's have a conversation and you can start it onemail or phone or zoom and see where it goes, because Jan can really help you manage your debt, get out of debt andplan for a future where you're not going to be believe in the three livesof retirement, which we talked about. Last episode and understanding. How doyou develop a great lifestyle of the day and in the future, which was liketwo episodes go so you've got to go back and listen to those episodes aswell John, but I thanks for helping us understand a little bit more about thetrue cost of that and why we probably need to give you a call and...

...make sure we're managing that debtproperly right. That's right, e Righ, all right! Well, Butty! You take careand we will be back again next time for another, exciting episode of the JohnBrowning podcast seebody. All right, we'll see Soen you'rlistening to the building your life podcast with John Brownie, be sure tosubscribe to this podcast. So each new episode will be sent to youautomagically when it is released, have a terrific day.

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