Posts Tagged ‘Financing’

“Even if you buy a car with cash, you are forfeiting the opportunity of investing that cash and earning a return on it. So even people who always ‘pay cash’ still experience the same implicit trade-offs between spending now versus later…the real question is whether you are going to obtain your financing from a bank controlled by outsiders, versus a bank that you control.” -Robert Murphy

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What does debt do?  Debt takes the control of money out of a person’s hands in the following ways:  1) Mortgage financing:  up to 90% of payment is front-loaded interest, 2) Auto financing:  20-25% of every payment is interest, and 3) Credit cards:  up to 70% of minimum payment is interest.  These things actually enslave money and prevent one from becoming financially free.

Consumer debt example:  Borrowing $50,000 over 30 years at 5% interest; results in a total payout of $96,628.  Private reserve example:  Hold a $50,000 balance over 30 years at 5% interest; results in a $223,387 ending balance.  By simply changing financing strategies, a person can make significant changes to their financial future.

Consumer Debt

Posted: September 16, 2011 in Money Matters
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There are four major issues with consumer debt; 1) it obligates future earnings, 2) a person loses capital to purchases and financing costs forever, 3) in debt to a creditor, and 4) lose control over money to the creditor.  In essence, it is an inefficient purchasing strategy.

Consumer Debt

Posted: September 11, 2011 in Money Matters
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There are a few big problems with consumer debt; 1) it’s an obligation on future earnings, 2) one loses capital to purchases and financing costs forever, 3) one becomes a debtor to the creditor, and 4) control over money is lost.  It is ultimately an inefficient strategy.

Two families purchase personal vehicles over 40 years.  Both purchase 12 vehicles for $20,000 each, at 6% interest.  Monthly payments are equal.  One family, using traditional financing, pays $38,000 in interest and $240,000 in principal to the finance company. The other family, using their own personal system, recaptures both totals back into their own pocket.  That is a swing of over $500,000.