"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.
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.
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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7 Reasons to Invest for Income -- NOW More Than Ever
Rick Stooker
- The greatest secret to income investing (Einstein called it "The most powerful force in the universe")
- What -- historically -- gives stock market investors 1/2 of their total returns (from 1929-1954; 1966-1981; and 1999-mid-2008 it was the ONLY way to make money from the stock market!)
- How to avoid suffering from accounting fraud. Automatically keeps you from throwing you money away on future Enrons, Tycos, and WorldComs
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Disclaimer:
I am not a financial advisor. I am not a broker. I am not a financial planner.
I have no professional licenses.
I am a wide reader and an independent thinker and this site gives my opinions on the subject of income investing.
Nothing in this site is to be construed as professional advice.
I am not responsible for the results of your investment decisions.
Past results are no guarantee of future returns.
You must read, think over what I say, make your own investment decisions and take responsibility for your own life, including the results of your investment decisions.
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