What Type of Person are You?

There are two types of people in the world. Those who pay interest and those who EARN it.

Which are you? 

Me, I'm no fan of paying interest. That's why I try to keep debts to a minimum, if not nonexistent. I recall having a car loan twice in my life. The first time the interest was close to 6% and the second time, just under 3%. That 3% difference is a big deal. While I paid the first note off early and the other on time, the one with the higher interest rate still costed me more as far as what I paid in overall interest. 

So what is the point? 

Do not get caught in the neverending car loan cycle. I've heard countless stories on how people have long-term finance agreements, paying small amounts monthly, but when you look at what they pay in interest over the life of the loan it'll make your jaw drop. I mean some end up paying for the vehicle twice once you factor in the interest. Oftentimes those small notes are not even worth the trouble. 

Instead of paying interest, how do you earn interest? 

Opening a high yield savings account is one way to earn interest. Other options include IRAs and other investment vehicles. Unfortunately, interest rates are ridiculously low these days. A high yield account which at one time brought me a whopping 2.2% (in reality a small amount - but better than some) is currently bring in a measly .5% (makes me sick to even think about it). Eventually, it'll go back up when the economy strengthens, but that is typically a good way to earn more than the typical .02% -.1% offered by most banks. 

Beware of Interest Sharks

The key here is for you to identify what's eating away at your money. You want interest to work in your favor. Be mindful of interest rates on auto loans, personal loans, mortgage loans, credit cards, and whatever else is killing you in interest payments. Focus on making interest work in your favor; think money market account, CDs, bonds. 

It's also important to pay down large debts on high-interest loans and credit cards.  If possible, try to make an extra mortgage payment a year (if allowed) to pay it down faster, pay more on your car note (towards principle) to get that bill down faster. Believe me, small changes can make a big difference. 

The key to managing money like a boss is finding more ways to grow your money and avoiding high-interest liabilities as much as possible. Find ways to make interest work for you and not against you!