Mike's Minute: We need to understand debt better

There is a growing idea in economic circles in America that young people might never own anything. 

It's based on the recent news that a new car average price cracked $50,000 for the first time. 

It was added to by Trump's idea that we have 50-year mortgages. 

In the US, 30 years is pretty standard, and they have the fixed interest rate that lasts decades. 

Here it's completely different. 

But all of it is based on the thinking that more and more people can't afford stuff and, if they can, they will need to borrow basically forever to do it. 

The wisest piece of advice I ever got was when i was about 18. I was in the bank trying to sort a mortgage and we were tossing numbers about and the bloke behind the counter swung his computer screen around to face me. 

On it were the numbers I would be paying – what I was borrowing, what the interest rate was and what the monthly bill would be. 

And the killer was the bit that showed just how much in interest I would ultimately give the bank over the period of that debt. 

Needless to say, it was more than the debt itself. Compound interest is either your friend if you're saving and you're enemy if you're in debt. 

That pretty much changed my view on debt. But a 50-year mortgage is clearly designed to lull you into the idea that things are affordable. Just don’t worry about ever paying it off. 

It's probably why they are putting mortgages into the school curriculum in Britain. 

If every kid came out with just a basic idea of the way things work in the real world, we may solve ourselves a lot of long-term issues and a lot of personal heartache. 

And that is before we get to the fact that a lot of this country's so-called prosperity is a perception and the perception is created by the idea that you have more money simply because someone told you your house was worth more. 

Or, if you are in the market, Nvidia for no particularly specific reason just added another nine zeros to their market cap. 

If more people understood debt, both its option, pitfalls, upsides and problems, we would see the idea of a 50-year mortgage for what it is. 

But basically, the state of the world, both at personal and national level, is the way it is because we don’t. 

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