Do you know the three different types of consumers? If not I am here to share them! Each of these consumers represent a different purchasing strategy when buying a major purchase (something you cannot pay for all at once out of monthly cash flow) like a car.
1. The Debtor. The debtor has no savings, earns no interest, and finances purchases.
2. The Saver. The saver has savings, earns interest on their money, and pays cash. This isn’t a bad situation to be in, however there is a more efficient way to do it.
3. The Wealth Creator. This person saves money, compounds interest on their money, then collateralize their purchase. They borrow against their savings without interrupting compound interest.
The best example of this is a Home Equity Line of Credit. You borrow cash against the value of your home. You are still going to enjoy the (hopefully) appreciation of your house even though you have have the HELOC, yet you get to utilize the cash at the same time without interrupting that appreciation.
Which consumer do you want to be?