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The Path to Financial Freedom:
A simple and easy guide to assist you in reducing or eliminating the negative flow of
money
Learn how to live within your budget and how to have your money earn money.
Discover how to live within your income, reduce or eliminate the negative flow of money
and to have your money earn money.
Step 1: Reduce or eliminate the negative flow of money.
The negative flow
∗
of money is credit card interest, impulse buying and gambling.
Contrary to what most people think, the average monthly interest rate on a credit card, if
you pay the minimum amount required by the bank is:
70% - 90%
Yes, you read that right! To determine what the interest rate of your card(s) is to divide
the finance charge by the minimum payment.
Let’s say you have a credit card with a $5,000 balance due at 20% APR.
($5,000 x 20% = $1,000) This is the yearly amount the bank will charge you to use the
credit card. The bank bills monthly; so $1,000 divided by 12 months equals $83.33. The
bank no longer calls it interest; it is now referred to as Finance Charges. Since a credit
card is not an installment fixed loan, and is in effect a revolving payment, the bank sets
the minimum payment due. This minimum payment is approximately 2% of the balance.
In this example 2% of $5,000 is $100.
So here is the whole picture:
You owe $5,000. You pay the minimum payment of $100, of which $83.33 is the
Finance Charge, leaving only $16.67 to be applied to the principle.
Now, divide your Finance Charge ($83.33) by your minimum payment due ($100) and
you get 83.3% interest for that month! Since only $16.67 us being applied to the debt, if
you divide $5,000 by $16.67 it will take you approximately 299 month (24.9 years) to
pay off this credit card. That is, provided you don’t purchase any more on that card, it
could take you to infinity.
Now, let us look at this scenario: