Every Penny Counts

How many of you have seen a penny on the ground and just walked on by? I know I am guilty! If it is silver I would stop... but a penny...not every time. Well, I just read an article about the worth of a penny and paying down debt. This really hit home to me because sometimes I feel overwhelmed with all the bills that are coming in, and I wonder if I will ever be debt-free.

The article basically showed how a penny really makes a difference in paying down your debt. I knew that you should pay as much as you can towards your debt because you'll pay it off faster (duh!). But what surprised me was how much a PENNY could make a difference!

Here is the example he gave:
The example loan is $10,000 at 18% and you're making monthly payments of $150.

Question: How long does it take to repay this loan?

Answer: You can never repay that loan by making payments of
$150 per month. No matter how many payments you make, you will always owe $10,000. Why? The amount of monthly interest is exactly equal to how much you're paying. That monthly interest fee is $150 ($10,000 x 0.18/12). You'll never owe any more than $10,000, but you'll never be able to pay off the loan.

Next question: What happens if you add just one penny to that payment? Just one cent? That's right, now the payment becomes a big $150.01. Now how long will it take to pay back that loan?

Answer: It takes 53 years, 10 months! Okay, that's a lifetime
for some people, or at least half a lifetime. Now, because of
that one penny, instead of paying $150 for eternity, the loan
is eventually paid off.

Okay, so you don't want to be in debt for almost 54 years.
What can you do? You guessed it. Add another penny. So here's
the next question:

Question: How much do you save by making payments of $150.02?

Answer: It now takes exactly 50 years to pay back the loan!
That extra penny knocked almost 4 years off the payback time
of the loan. How much money did that extra penny save? Let's
see. The out-of-pocket cost of the first loan is $150.01 for
53 years, 10 months. That comes to a total repayment of
$96,884.72 (the last payment is less than $150.01).

WOW!! What a difference a PENNY can make... guess I'll stop and pick up those pennies... how 'bout you?

Read the whole article at the Dollar Stretcher. The article is titled, "Every Penny Counts," by Scott Bilker.