by Michael Killian

Created on: February 13, 2007   Last Updated: January 08, 2008

Have you ever asked yourself why there always seems to be too much month left over at the end of the money? This article attempts to explain that monthly crisis by exploring how we have been lulled into thinking in terms of "monthly" instead of "total" cost.

Actually, the monthly phenomenon has more to do with compound interest. So the question really becomes, do you have compound interest working for you or against you?

"Easy Monthly Payment" Scam

Have you ever noticed that car dealers always ask something like, "how much did you plan to spend per month"? That is not meant to be a friendly introduction, though that is how it comes across. Rather, by design it is a sales technique because the car does not cost $20,000. It only costs $385. That's it. No strings attached. Just $385... for the next 60 months.

I was a retail manager for many years. The greatest pitch offered was a standard refrain, "anything in the store is yours today for just $39.00." We did not say, "per month". We did not say "forever". We simply said an amount.

When you see a written or video ad, which price is plastered in huge, bold print. Is it the total price or the monthly amount? Obviously, it is the monthly especially if the retailer or dealer does his own financing. Selling money is a very lucrative business. (See Credit Cards Dirty Lil Secrets.)

The merchant lists the total price only because the law says it has to be there. But it is usually off lurking in some small corner nearly invisible. And mention of the monthly payment stays away from such naughty words as "price", "cost", or anything else that smacks of anything other than "easy payments".

It is all based upon the same monthly scam that you can still afford it even if you don't have all the money. Ask yourself if that really makes sense. Is it truly based upon sound judgment or is it based upon instant gratification? Then why do we do it?

We do it because we have been brain washed to think not in terms of total cost but "easy monthly payments". The thought process goes something like this: "Well, let's see. This bill will be paid next month. That frees up $22.50. And that pay raise is another $15. And if I can just squeeze another $7.50, I can buy it... I'll do it!"

I know,I've done it and so have you. This is how we think because this is how we have been trained to think and the retailer and creditor knows it. We put ourselves into their clutches, because that is what we have been taught to do by the system.

Affect of Compound Interest

When

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