When you buy things with cash you are financing them no differently than had you gone to the local bank and borrowed the money.
Yes, you read that right.
You are like everyone else who has been taught to buy with cash. You do it because you believe it’s the best way to make purchases. Cash allows you the ability to own the item without having to owe anyone money and you are free of monthly payments.
Cash Is Financing
Using cash is just like financing.
Sit back and think about this. You gave someone else cash for the item you purchased. You lost the opportunity to make money on this cash because it has left your hands and is now in someone else’s. You have given up the opportunity to make money in exchange for your item.
Below you will see an illustration of why this is true. In this illustration, you have purchased a car with cash. You saved $7,500/year in order to buy a new car every four years for the next 30 years.
We are assuming in this example that you have your money in an account that pays 5% interest (no this is not a stretch). As you can see by the red line, each time you buy your car, your account total drops and you lose the ability to make 5% on that money. Now look at the green lines, this shows you what you would have had had you left your money in the account earning compounding interest. Hence, you never withdrew money, draining your account and losing the opportunity to make interest off of it.
Because you used cash you lost the opportunity to make an additional $469,641 over the next 30 years.
This is why using cash is still financing everything you buy. Your cash is gone and you have lost an opportunity to make any kind of interest off that money.
We only know what we know. Using cash is great and allows you to stay out of financial trouble, kudos for doing that! However, if you put that cash to work for you and use it more efficiently you will be one step ahead of everyone else.
Stop giving away your money and start making it work for you. By putting your money into a whole life insurance policy and implementing the Infinite Banking Concept you can take advantage of this scenario. You will borrow against your cash value and use the insurance company’s money. This allows you to earn money while spending someone else’s.
Keep tuned in because next weeks blog is going to address those questions going off in your head such as “I don’t like payments”, “I don’t want to owe anyone money” and “no debt means I am financially free.”
As always make sure you let me know if you have any questions or comments.