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Managing Your Expenses.

managingexpensesMany of us pay a large amount of money (in the form of loan interest and fees) to others for the privilege of borrowing their money. We pay loan interest on our cars, homes, and other loans. If we carry a monthly balance on our credit cards, we can be paying an interest rate as high as 29.99% or more.

We also pay other people to help us manage our money. At our financial institutions, we pay ATM fees, debit card fees, account maintenance, and transaction fees. In our qualified plans, we pay transfer fees, paper fees, and service fees, to name but a few.

To move toward and achieve financial independence means that we must grow our money over time. We want to use specific financial vehicles to achieve compound growth of our money without risk of capital loss, restrictions, or loss of liquidity.

Any approach we choose for our lifelong strategy should allow us to reduce the amount of loan interest, fees, and service charges we pay. By reducing loan interest, fees, and service charges, we decrease how much money we let leak out of our financial system. Consequently, we grow our wealth faster. Think about filling a child's inflatable swimming pool. When there are leaks, it takes a lot longer to fill the pool and it does not stay full. When you find and seal the leaks, it takes a lot less water to fill the pool and it stays full.

When you eliminate many of the fees and service charges banks and other lenders charge, this money stays in your financial system. Over time, the effect of reducing these financial leaks can be significant. Just as with our swimming pool metaphor. Once you eliminate the small
but steady leaks in your financial system and capture or reduce the outflow, your money stays with you. You don't have to earn, or grow, as much money over your lifetime if you're not losing it.

 

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