"Interest is the Fixed Income You're Paid for Loaning Money"
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In technical financial terms, investing interest is not the "reward" or payment you get for loaning money. That's how most people think of it, and that's the practical effect, but to be more precise --
Interest is the Time Value of Money
That's how financial professionals understand interest, and so that's how I want you to get used to thinking and talking about it.
When you pay interest rates on your credit card debit, car note or home mortgage, you're paying the price for having the use of that money now even though you're not going to pay back the principal until the future.
When you receive interest by putting money into a fixed income investment, you lose the use of that money now in the present, so you must be paid interest to compensate you for that.
Tis Better to Receive Interest Than to Pay It
Although investing in fixed income assets and receiving interest is not the very best way to invest (in my opinion), receiving interest income is far far far better than PAYING interest!
Therefore, before you begin investing outside of tax deferred retirement plans (IRA, 401(k), federal government Thrift Plan and so on), you should pay off all your credit cards and car notes.
Pay off highest interest credit cards first, then work your way down to the lowest interest credit cards.
If you have other debts such a student loans, etc -- pay them off.
Paying Interest on Debts Drains Your Money Away
When they're all paid off (and I know that this will take months to years for some of you), begin saving money to pay off your car loans
Continue to make your regular monthly car note payment, but put as much money as you can into a savings account or money market fund.
When you have enough money in that savings account to pay off the remaining principal of your car note, write the check and do it.
Now your only debt is your home mortgage.
Now you're ready to profit yourself from: Discounting and the Time Value of Money
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