Debt and Pie:
The Surprising Connection You Need to Understand

Do you like pie? If you're like me, there's nothing quite like enjoying a warm slice of pumpkin pie at Thanksgiving, especially with a scoop of ice cream on top. But did you know there's an intriguing connection between pie and debt? While debt might not be as delicious as pie, let's explore this analogy a little further.

Debt is like pie in the sense that it's circular, and the bigger it gets, the more problems you face—both in your waistline and in your pocketbook. In this case, the size of your pie represents your Total Interest Dollars.

Three key ingredients control the size of your pie, or in this case, your interest dollars:

1. Interest rate %

2. The debt instrument (e.g., car loan, mortgage, credit card)

3. Time

Now, if I asked you to guess which of these three factors is the most important in determining the size of your pie, what would you choose: interest rate, instrument, or time? You might be surprised to learn that time is the most crucial factor.

Why?

Because the longer you're exposed to debt, the more interest you accumulate. In other words, more time equals a bigger pie of interest dollars. A 30-year mortgage or a 60-month car loan costs far more in total interest than a 15-year mortgage or a 36-month car loan.

Interestingly, we're often conditioned to ask the wrong questions about debt. The two most common questions people ask are:

1. What's my interest rate? and

2. What's my monthly payment?

But the questions you should be asking are:

1. When's my get-out-of-debt date (time!!)? and

2. What's the total cost of this thing (car, house, TV)?

By making informed decisions about debt and understanding its impact on your financial life, you're much more likely to avoid the pitfalls of paying interest over the long term. This approach will leave you with more money to invest—and earn interest—instead of just paying it.

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About PhilanthroInvestors

PhilanthroInvestors combines traditional venture capital financing tools with philanthropic principles to achieve social impact. By secure, meaningful, and profitable investments, they bring capital and also change people’s lives.

PhilanthroInvestors are currently working in four sectors – Housing, Water, Health and Environment – and will be adding more investment sectors in the future. PhilanthroInvestors founder Ivan Anz owns companies on three continents and has investors in 14 countries.

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