Raining MoneyIf you're sick of high interest rates, or fearful of how the new laws designed to protect you from yourself will most likely bankrupt you, you're probably feeling pretty stressed, like I am.

I don't like having credit card debt, but giving a good vacation to the wife/girlfriend, trying to not have a disappointing Christmas, or buying furniture for that new house usually forces most people to put some amount on the credit cards. Since the credit card companies want you to stay in debt, and have made an entire industry out of doing just that, it's difficult to get out from under that stress.

I have an idea. Haven't tried it yet myself, but I wanted to open it to the blogosphere and get some feedback, because technically it makes sense…

Debt (credit cards, loans, bills) is what you owe people, this is negative. Assets (a car you have paid off, stuff you can sell on eBay, money) are what you use to get rid of debt (anti-debt?), which is positive.

Here's the interesting thing:

The positives can have interest rates (stock market, savings account), but this interest rate is usually small, as in 3% or lower small.

The negatives have larger interest rates, but the range is much larger, from 0% on a new car to 30%+ on a credit card.

There's nothing we can do about the positive interest rates. We can get better real estate or invest in riskier stocks to try and get more in interest, but we'll never get to a 30%+ gain per year.

So let's try to get rid of the high-percentage negative stuff.  Let's say our bad interest is in the range of 0%-15%.

An optimistic good interest range is in 5-10%/year, for stocks, real estate, etc. Yes, there are exceptions, but this is an example. Let's say we're gaining 10%/year on a $200K house, and 10%/year on $30K of investments. That means our money is making us about $23,000 per year.

However, in the bad interest group, we have 13% on the $5000 of credit card bills, 8% on the $200K mortgage, and depreciation on the paid-off car, currently worth $10K. That means our stuff is costing us $22650.

Overall, our investment gains are being eaten up by our debt interest, so here's the plan: make the debt's appetite smaller.

 

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