Interest: the rowboat analogy

Let's imagine you're in a rowboat on a lake.  Your rowing speed is about 5 mph, and that's exactly how fast the boat is going.  The faster you row, the faster you go

Now imagine you're on a river whose current is about 2 mph.  If you're rowing upstream, your overall speed will be 3 mph.  

Yes, I know that's not a rowboat; bite me

You're still rowing at about 5 mph, but the stream is eating away at your speed.  If you were to row downstream, you'd be going at 7 mph.

What's my point with all this rowboat stuff and the bad drawings?  It's a good analogy for interest.

If you've ever bought a car, had a savings account, or owned a credit card, you probably know what interest is.  It's the extra money you have to pay back on top of the money you spent/borrowed.  Interest can suck when it's working against you (when you're in debt), but it's pretty awesome when it's working for you.

When you're on the lake, you move as fast as you row.  That would be like a bank account.  Your money grows as fast as you add to it.  When you're rowing upstream, that's like being in debt.  You can throw $500 at your debt, but if your interest this month is $200, you really only chipped away at $300 of the loan.  Interest works against you in this case.

Rowing downstream is like having investments.  You add $500, and the interest that your money earned makes it grow.  So not only did your money grow by the $500 you added, but by an extra $200 that your portfolio earned for you.

This is why it's so important to get and stay out of debt.  Debt is a killer of financial independence and having a comfortable retirement.  Get out of debt ASAP, and save as much as you can.  Your future self will thank you for it.