(from Seth Godin’s blog dated January 30, 2019. Click here for the original post. Seth is the author of more than 18 books that have been bestsellers all over the world. He writes about the post-industrial revolution, the way ideas spread, marketing, quitting, leadership and most of all, changing everything. You might be familiar with his books Linchpin, Tribes, The Dip and Purple Cow. Follow him on Twitter @thisissethsblog.)
If you live in the city and grab a coffee or a snack every afternoon for about $4, it’s a vivid example of the cost of debt.
You’re either a little behind or a little ahead.
Over ten years, if you’re funding that daily purchase with ongoing credit card debt, at $1,000 a year, it’ll cost you $24,408.40, and you might never find the means to repay the debt.
On the other hand, if that same $1,000 went into a low-cost investment fund that paid about 7% a year, you’d end up with $13,816.45 in the bank.
That’s because interest compounds. It’s because banks like to charge more than they pay out. And it’s mostly because we’re very aware of the short-term and happily ignore the long term.