A Mindful Money Test to Tell If You’re Being Crushed by Interest
You’ve been diligently paying off your debt, but it seems like you’re barely making a dent. Your balance is the same as it was last month, and you’re getting frustrated. Before you give up, it’s important to understand the role that interest plays in your debt.
Interest is the price you pay for borrowing money, and it can have a major impact on your ability to pay down an account. When you’re trying to pay off debt, you’re essentially in a race against time. The longer it takes you to pay off your debt, the more interest you will accrue, and the higher your balance will become.
Taking a Mindful Approach to Money
This is all simple in theory, but in actual practice we rarely think of what we’re paying in interest. It isn’t because we don’t think it’s important. It’s because credit card companies creatively set the information out-of-the-way so it rarely comes to mind.
But, with just a few moments of mindfulness, you can get a whole new perspective on the interest you’re paying every month. This 10 minute mindful money test will tell you if you’re being crushed by interest.
Gather Your Recent Billing Statements
For this exercise, you’ll need to have at least one recent credit card statement on hand. If you can, grab two or three months’ worth of statements, but only do the exercise with one month at a time.
If you don’t have physical statements, you can usually log onto your credit card issuer’s website and view them electronically.
Add Up the Interest You Paid
The first step is to add up all of the interest you paid over the course of the month. This should be listed as a single line item on your statement. If you’re looking online, you can use the FIND function on your computer to search for the terms “interest” or “finance charges.”
Jot down the interest charge on a piece of paper, and tally up how much you paid in interest.
Check Your Gut
Once you’ve arrived at your final number, take a few minutes to sit with the information you’ve jut learned. Jot down some thoughts if it seems helpful.
Take into account your immediate gut reaction. Did the number of digits to the left of the decimal point shock you, or were you relieved that it wasn’t more?
Next, (and this part is really important) think about what you got for that money. Do you feel like the ability to use the credit card was worth the price of the interest you’re paying?
We can’t provide a formula or calculator for this part, because it’s different for everyone.
Maybe you’re totally okay with the interest because of the convenience and rewards you get from using the credit card. Or, maybe you feel like the interest is totally unreasonable, and it’s time to focus on getting rid of the debt as quickly as possible.
There’s no shame in either reaction. The goal of this exercise is to get you thinking about your debt in a new way, and to help you make decisions about how to best take control of your financial future.
If you decide you don’t like the way interest is impacting your ability to pay off debt, give us a call. Our debt relief attorneys and their legal team will present clear options so you can find a solution that works for you.