This Week’s Blog Is Written By Scott D. Heins, CFP®, IAG Chief Investment Officer
April 22, 2026

Permanent Impairment

My family’s home is approaching the 20-year mark this year, and with that milestone comes the need to evaluate a number of structural and mechanical components.

Our project this spring is to assess the cost of replacing our furnace and air conditioning equipment which we have been warned are nearing their demise.

The good news is that there are lots of choices ranging from basic units that are functional to top-of-the-line units that proactively adapt to incoming weather. The bad news is it appears the cost will be somewhere between $12,000 and $20,000.

Thankfully, we have known this day would come. All of the equipment that makes modern life convenient and comfortable has a limited lifespan – vehicles, houses, appliances, etc. Knowing the inevitable nature of constant deterioration, we have been saving up for this expense on a monthly basis for many years.

The cumulative results of these planned monthly payments to ourselves will give us the opportunity to write a check whenever this project is completed. However, if we had not planned ahead, the contractors are currently offering special financing for our project for a mere $200 per month. For 10 years.

Curious about this option, I did the math. It turns out this special financing came with a spiffy 10% interest rate. Our cumulative payments would total $24,000 for a $15,000 project, resulting in a 60% additional interest cost (or permanent loss of capital, if you will).

When the financial markets go down by 60%, panic fills people’s minds, headlines highlight the latest bad news, and despair rules. All this for what is historically a temporary decline in value that will resolve itself sometime in the next 8 years (though this is certainly not guaranteed).

But gradually lose 60% on a guaranteed basis with zero chance of capital recovery and we call it the American way. Interesting, and sad.

High-cost debt poses a far greater threat to individuals’ future financial well-being than any market swoon. Yet, many Americans contently pay merely the minimum payment on their credit card bills each month without thinking twice and shun the financial markets which can unevenly compound in their favor.

Even our esteemed federal leaders seem to be math-challenged. They have chosen to accumulate an insurmountable mountain of debt, are only making interest payments on that debt, are borrowing money to make those interest payments, and have generously added $1,600,000,000,000 to the mountain of debt over the last 12 months.

Eventually, math catches up with you. Whether you are financing federal spending, floating your lifestyle on credit cards, or caught with a “surprise” expense on a predictably deteriorating asset, a high interest rate always results in a slow, significant, and permanent loss of capital.

Avoiding this permanent impairment requires planning ahead and optimal financial prioritization in a world where bad financial decisions are readily available and bad financial advice abounds.

If you or someone you care about is looking to avoid permanent impairment and instead build a solid financial foundation for your and your family’s future, our caring advisors are here to help.

Quote of the week: Morgan Housel: “The cost of debt is the interest rate (easy to calculate) plus the loss of future flexibility and options (hard to calculate).”

Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through IAG Wealth Partners, LLC, (IAG) a registered investment advisor and separate entity from LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. No strategy assures success or protects against loss. Investing involves risk including loss of principle.

ART: 1096364
Photo Credit: iStock 1367012803