Interest is the gentle, but deceptive, name for the insidious extra cost of purchasing beyond one’s means. We are very familiar with the sundry and inescapable taxes on income, sales, property, etc. Interest fees, however, are almost always voluntary but are seldom viewed in their true light as an avoidable tax on stupid people.
Income tax and sales tax are paid but once on the item being taxed. Interest fees on debt, similar to the tax on property, are paid as long as one possesses the debt.
Debt is analogous to body fat. Both are the logical consequence, and inevitable result, of unhealthy lifestyles. Most adults are painfully aware of the sacrifices necessary to lose body fat, but seem unmindful of the future pain and cost of debt. The mental and physical suffering necessary to decrease monetary debt is every bit as real as those incurred by efforts to lose excess body fat.
Taxes are a means of government to extract money from the public. Interest is a means of bankers and businesses to extract money from the public. Interest on debt, unlike taxes, is usually avoidable by those individuals with an adequate measure of wisdom and discipline. Self control and delayed gratification generally provide rewards far disproportionate to the temporary discomfort they might entail.
If you have been preparing a mental list of potentially justifiable interest incurring situations, simultaneous while reading this essay, you have approximately the same odds of improving your lifestyle as an alcoholic reading about the benefits of sobriety.
Yes, there are situations that justify borrowing funds and paying interest. If you can re-invest the money at a higher rate than at which you borrowed it, of course you should incur the debt. A residential home is a classic example of such an investment.
Incurring debt and interest on non-essential, non-investment, consumable or pleasurable items, is almost always unwise. Paying interest on those types of items absolutely insures that one will live, long term, beneath the level that his income should provide.
Credit cards are a convenient and marvelous means to borrow money short term, without interest, if one has the means and discipline to retire the dept each month before interest is charged. To pay 15% to 20% interest on perpetual credit card debt, however, is just short of insane. Why would anyone voluntarily reduce his affluence?
Planning, prudence and discipline, enable the avoidance of paying interest in most situations. The stupid, however, usually offer a myriad of excuses for their lack of sense.
Interest is a tax on those folks not proficient in mathematics. Interest is a tax on impatience and stupidity.
Wow, that is a fantastic post! Is it online anywhere else? I’d love to link to it.