Tale of Two Tellers - Part IV

We agreed you aren't spending, and that decision creates options!

The options are to save, or repay

If we look at this simple decision to save or repay - you want to consider the location of where you would save or repay. We always look at that decision from a Safety, Liquidity and Return perspective:

Example: Save in (location) checking account:

Safety - yes it is guaranteed

Liquidity - yes you can get it immediately via online transfer

Return - 1%

If you choose to Save you are losing 15.5% monthly by doing that - if you are earning 1% on that $500 in checking while still paying 16.5% on credit card - that is a poor RETURN. The Tale of Two Tellers is winning big for the bank.

Example: Save in (location) investment account paying 8% dividend:

Safety - yes but not guaranteed

Liquidity - yes you can get it immediately via online transfer

Return - 8%

If you choose to Save you are losing 8.5% monthly by doing that - if you are earning 8% on that $500 in that investment while still paying 16.5% on credit card - that is a poor RETURN. The Tale of Two Tellers is winning big for the bank.

Example: Repay in (location) credit card balance:

Safety - guaranteed

Liquidity - yes you can get it immediately via using the card again

Return - 16.5%

If you choose to Repay you are earning the 16.5% interest you would have paid on the credit card - that is a great RETURN. The Tale of Two Tellers is losing big for the bank.

We'll repeat this in multiple examples, but the decision is the same: If there is money available you can spend it, save it, or repay it.

Let's look at a simple impact of one decision over time:

TIP: You can think of these decisions as insignificant - but a decision you make now is likely a decision you'll repeat in the future. A single decision now to repay -vs- spend a small amount of $500 can have huge implications over longer periods of time.