Do you know how much your hard-earned cash in savings or other accumulated assets is worth to you? That may sound like a rather simplistic statement. But if we’re honest, we’ll have to admit, when we get ready to make a major purchase such as an automobile, home, wedding or college education, we recoil at the idea of using the bank’s money because of the interest we have to pay. We’d say that money is expensive to use, and we’d be right.
Those of us who are cash-payers think nothing of taking our own money, however, and plopping it down to save the interest we’d have to pay if we financed that purchase. Most likely, we even feel a mite proud of such a noble accomplishment in our financial journey, and, indeed, we should be. The discipline it takes to postpone gratification until we can afford the purchase is worthy of approval.
The concern I want to raise is this: we treat our own cash as if it is free, as if it doesn’t cost us anything to use it. Is that true?
One question begs to be answered: Is our cash really free? What if the cash we used to make our purchase would have earned us more had we kept it and put it to work than we’d have paid for the use of someone else’s money? You see, our money is not free, because, when we pay cash for major purchases, we give up whatever we could have earned had we left our money to compound interest without interruption for the rest of our lives.
There is a fundamental difference between amortized interest and compounded interest. There is a huge discrepancy between the interest I pay on the decreasing balance of an amortized loan and the interest I earn on the increasing balance of a compounding account. If I can leave my money to work for me without interruption, without having to spend down my reserves, I will earn more than enough to pay for the use of someone else’s money and pocket the very significant difference.
What if there is a way to make those major purchases without spending down your own reserves. What if, instead of spending your reserves, you could use them as collateral? Then your money could continue to earn and grow. We call this concept the Private Reserve Strategy and would love to show you how it works. Contact us for more information.