Interest is the foundation of finance. Interest is a financial tool, and it is controlled by the laws of math. If you understand the laws, you can make interest work for you. If you don’t understand, you may become a victim of interest. Simply stated:
- Interest is the money you earn when you lend money. Or,
- interest is the money you pay when you borrow money.
Albert Einstein is often attributed to saying, “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.“
Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it,.
Albert Einstein
Think about that. How much interest did you earn last month? Or, how much interest did you pay last month?
- Do you pay credit card payments?
- Do you have a balance on your credit card?
- Do you have a car loan?
- Are you still paying on a car loan?
- Do you have a mortgage?
- Are you still making monthly payments of your home?
If you’re paying any interest, apparently you don’t understand how it works.
Let’s look at how interest works.