We agree with many of the entertainers out there – credit card debt is the worst! The interest rates are confusing and dependent on purchase amounts and time. For many, once you have dug too deep, climbing out can seem near impossible. If you find yourself in this position, please contact our team before a debt consolidator. There is more than one method of paying off credit card debt. Debt consolidators should be a last resort, and are generally a partnership between a lender and a group of attorneys ruining your credit while negotiating payments on your behalf. What about non-credit card debt?
What about your mortgage? Should you be making additional principal payments each month to pay off your mortgage? Or, should you refinance your home and stretch out that debt as long as possible? We believe the answer lies somewhere between the life you want to live right now and your ideal vision of the future.
When you hear the term: “30-year fixed mortgage,” where do you focus? Is it 30 years? That sounds like a long time to be making payments to anyone. To put into a different perspective, that is 360 fixed monthly payments over your lifetime. Our advisors focus on the word “fixed.”
Fixed means your payment is not going to change. While the interest to principal ratio gradually shifts over time, the actual payment you are making to the lending institution stays the same. So why does that matter?
From a financial planning perspective, it creates an opportunity. For many people as their career develops, their income increases, hopefully outpacing the rise of prices on goods we consume for everyday life. From groceries to insurance, year over year, most consumer goods increase in price at the minimum with the rate of inflation, if not a lot more. Think of the movies? When you were a kid, how much did it cost to see a film? Today, you have to sneak sugary contraband into the theater just to be able to afford admission to the show. What if the cost of a ticket was the same as it was 30 years ago? Would you pay to see more movies, or would you spend more at the concession stands?
We are not saying go out and spend more on junk food because your mortgage payment is going to stay the same for the next 30 years. Rather than focus on the 30 years, consider that one expense in your life is going to remain consistent. Eventually, your mortgage should feel like a much smaller piece of your budget, and you can use the excess cash flows for whatever you like. Maybe it’s a college fund? Perhaps it’s a vacation?
We want you to understand the different types of debt available to you as a consumer, so you have the flexibility to create the life you want. The institutions lending this money have billions of dollars, and rarely show mercy when the repayment of that debt is temporarily unable to be met by the borrower. These institutions are lending money at near all-time low costs for 30 years! So, why pay them off early if it is not what is best for your life. Please contact our team if you would like to discuss how you can be more efficient with your cash flows to create your vision of the future.
Can We Help?
The Twin Rivers Team wants to help you be successful, and help you on your journey to becoming debt free. If you need help with anything you read in this post or have other questions, please reach out to us!