—I’m Going to Make Money Buying My Next Car—
So it actually happened—after 18 years of driving, I was involved in a wreck. Someone ran a stop sign, and he was going so fast that there was literally nothing I could do to avoid the collision
I purchased this car with a scarcity mindset: I treated the payments as if the bank’s money was more valuable than my own. I made a high down payment, and paid the rest of it off in 30 months even though I was financing it for 36 months. I just didn’t like that feeling of *owing* someone else.
A funny thing about cars is how rapidly they depreciate. Several factors have accelerated that depreciation during the current economic climate. In order to really “get your bang for your buck” buying a new car, the old adage is that you had to hold it 10 years. I was 6.5 years to that goal before someone took the choice away from me. I’m now forced to accept depreciation that I wanted to defer for 3.5 more years.
But, there’s a silver lining to all this. First of all, no one was hurt other than the regular soreness to be expected. Secondly this gives me the opportunity to practice debt recapture! What is debt recapture? Simply put, it means trading places with the bank and turning interest payments into interest earnings.
When I purchase a car through a policy loan, I owe the general fund of the insurance company that I own—not a 3rd party. As those monthly payments go in a few great things happen:
1) I continue to earn interest on my full account size since it is not diminished when I borrow the money. In fact, I will earn more in interest and dividends than the amount the insurance company charges for the loan.
2) Policy loan interest is simple interest, compounded annually. This gives me a couple of advantages: any loan repayments paid before the end of the year are credited back pro-rated interest charges; and if I find a better use of those car payments in the meantime, I can redirect my funds there. Can you imagine telling Chase or Bank of America, “I don’t want to make my payments for the next 6 or 12 months because I found somewhere else I’d like to put that money”?! With IBC I can do this at any time, for any reason, without having to ask or tell anyone. That is freedom.
3) As I make payments to an account that is growing with uninterrupted compound interest (rather than a 3rd party’s account), I am increasing that exponential curve for the rest of my life.
So stay tuned to find out how much my next car purchase is going to earn for me! I’ll post it all right here. Until then, keep learning how the wealthy grow, store, and transfer their wealth!
Learn more at www.livingwealth.com.
The information presented here is solely for informational and educational purposes. Jeff Watkins is not a registered financial adviser. He can be reached at: LivingWealthJeff@gmail.com.