How quickly they grow, these little ones in our life that we love. They give us so much, they fulfill us in ways we never thought possible. They start out so small and as they grow we reevaluate how we feel about life, wondering if things will ever return to "normal."

Of course, I'm talking about our credit card balances.

Each year Americans consume more credit than the year before. In the last quarter alone, consumer debt rose 4.3 percent according to the Federal Reserve. Take a real short breath (or a long drink) and visit this website to see just how the numbers have climbed: www.federalreserve.gov/releases/G19/Current/.

It's all right there in front of us. We know this because we haven't changed our habits. Well, maybe a bit, but not enough to get rid of the payment for "the house that I'm paying off that I'll never own," as one of my clients has so painfully put it.

Why does it grow so quickly? One of the most venerable minds of out time, Albert Einstein, called compound interest the eighth wonder of the world because it applies to more than just money. It's the building of interest upon interest and you can easily apply it to anything: the rotation of planets, the flow of water, the weight of rock or sand, or even that last project that your boss just dumped on you that made you scream. Compound interest is the straw that crushes the camel into dust if given enough time and interest (pressure). Why is this important? Because it graphically shows how compound interest can roll over you or roll you into an early retirement.

Here's what it looks like if it's rolling over you. If you pay the minimum payment on a $3,000 balance on a credit card (about $65 per month) with 19 percent interest (not uncommon) it will take you 36 years to pay it off. This is compound interest working against you. This is also compound interest stealing the new Honda for your 16 year old daughter, or worse yet, robbing from her college fund. I'm guessing that the execs at the credit card company bought their daughters a new car for their Sweet 16.

Now let's see how it can work for you.

Here's a quick way of calculating the Rule of 72 (that's the rule that determines how often your money will double given the interest rate it is earning).

If you took $10,000 and applied the Rule of 72 to it, you'll be amazed at the differences a few percentage points can make. The Rule is simple; divide your rate of return by 72 and that will tell you at what interval your investment amount will double.

Let's take a look at three different rates:

$10,000 earning 2 percent interest divided by 72 equals 36. That means your $10,000 doubles once in 36 years from $10,000 to $20,000. Not much of a retirement, is it?

$10,000 earning 6 percent interest divided by 72 equals 12. That means your investment will double every 12 years, going from $10,000 to $20,000, from $20,000 to $40,000 and then from $40,000 to $80,000 in the same 36 years (remember we're doubling every 12 years). How long could you live on $80,000?

And finally, $10,000 earning 10 percent interest divided by 72 equals 7.2. That means that your investment will double every 7.2 years, going from $10,000 to $20,000, from $20,000 to $40,000, from $40,000 to $80,000, from $80,000 to $160,000, and from $160,000 to $320,000. This is certainly a more attractive option than the previous examples. The trick is achieving these kinds of rates of return while minimizing risk.

It's important to educate yourself on the effects of debt. There are many resources for you to explore such as www.mbaonline.com/resources/the-truth-about-credit/.

Keep working at it, and keep reading. With a little work you can change the habits that are keeping you frustrated and struggling.

What's in your wallet? Perhaps, it's their fingers.


Ken, vice president of Total Financial Solutions, cuts up credit cards in his spare time. You can e-mail him at krice@tfswealth.com.