Financing Just Got Way Better!!!
Eliminate Bank Qualifying
The Financing Cheat Sheet from the Financial Success Template teaches how to utilize a Private Reserve account for financing. A fundamental key to the Private Reserve account is that the money in the account must grow with uninterrupted compounding, and be accessible through collateralization.
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Financing
The very first principle that you must understand is…
“You finance everything you buy. You either earn interest, or you pay interest.”
Every dollar not saved is consumed by transfers and lifestyle.
Before any capital outlay, before you spend any money, you first should consider the cost. And not just the cost, but the opportunity cost as well. Remember, it’s not just what you pay for, but how you pay for it.
Financing Major Capital Purchases
How People Buy, Borrow, and Pay for Major Capital Purchases.
What is a major capital purchase? It is an expense you have that you cannot pay-in-full from your weekly or monthly cash flow – like a car or wedding.
Let’s look first at how we BUY things.
First is the Debtor – a person who “works to Spend”. They have no savings, they don’t earn any interest, they pay interest.
Next, the Saver – who saves to avoid paying interest. They earn interest on their savings, and when it comes time to make the purchase, they pay cash.
Finally, the Wealth Creator saves too, but chooses to use Other People’s Money to maximize efficiency. They compound their interest and when it comes time to make the purchase, they collateralize – meaning they use someone else’s money and keep compounding interest on their money.
Borrowing
Because all three must borrow to make their purchase…
The Debtor borrows from the lender at the highest market rates, using their future earnings as collateral.
The Saver borrows from themselves which reduces their current collateral position and resets compounding. They also bring Human Nature into the discussion. There are a few people who borrow from their own accounts and put the money back, but I know of no one who also puts money into the account equal to the interest they lost while they had the money out.
The Wealth Creator borrows from a lender at negotiated rates, using their own money as collateral and continues to earn uninterrupted compound on the money they have in their account.
How each PAYS for their purchase
The Debtor makes payments to the lender at the highest rates. No options.
The Saver makes payments to their own account to get back to where they were before the purchase, giving up the money they spent plus the interest their money could have earned as well.
The Wealth Creator must make payments to the lender which allows their money to earn uninterrupted compound interest and maximizes the benefits available in their Private Reserve Account.
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