Winning the Money Game: A Rule Book to Achieving Financial Success for Young People by Adam Carroll & Chad Carden

Author:Adam Carroll & Chad Carden [Carroll, Adam]
Language: eng
Format: epub
ISBN: 9780976792406
Google: f282AAAACAAJ
Goodreads: 2835447
Publisher: NFE Publishing
Published: 2005-04-01T00:00:00+00:00

• Understanding Interest

Interest, like time, can be your best friend or worst enemy. If you are paying interest it can become your worst enemy and if interest is being paid to you, then it is your best friend. Interest can be very complicated, but we are going to keep it simple. Here is a golden rule when it comes to interest and winning TMG, Do Your Homework! If you borrow money – for a car, house, personal loan, or whatever else, you must figure out the total cost of the loan. Most people look only at their monthly payment. The question you have to ask yourself is how much interest am I being charged and what will it cost me in the end? Get the lowest interest rate possible by shopping around — don’t settle on the first loan you see.

“People are living longer than ever before, a phenomenon undoubtedly made necessary by the 30-year mortgage.”

~ Doug Larson

You’ve no doubt heard about the sub-prime mortgage meltdown that caused so many problems in the real estate industry (and eventually brought down some of the largest and most well-known investment banks!). One of the underlying causes of the unraveling of the financial sector was the fact that so many consumers got adjustable rate mortgages (ARMs). There was a significant lack of education when these individuals and couples got their mortgages, many of whom had no idea what the real effect of their interest rate going up at least a point and in some cases multiple points was going to be. In the end, a vast majority of these homes that had adjustable rate mortgages were foreclosed on as the homeowners couldn’t afford the new payments. The foreclosures created a gigantic problem with home values across the country and eventually caused the housing bubble to burst and home prices to plummet.

It wouldn’t be safe to assume that none of this would’ve happened if consumers had ultimately been educated about the effect that the interest would eventually play. It is safe to say that a greater number of homeowners would’ve either kept their homes or not bought them in the first place. Either way, you can prevent a mistake of this kind by understanding the choices and options you have when you finance a house, a car, or anything else for that matter. The key is asking around, doing your research, and knowing your options before making a decision.

Now on the opposite side of the fence, if you are earning interest, you are beginning to understand how to win the game we all play with money. Just as you pay interest to the credit card companies, the mortgage company, the car financing company, you can also loan money out or invest it and earn interest (sometimes with great rates of return).

The simplest ways to earn interest on your money would be to invest in a CD (Certificate of Deposit), a money market account, a savings bond, or a municipal bond. There are other options but are a little more involved and require additional information and education before investing.

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