Secrets of a Wealth Creator: How to Buy, Borrow, and Pay Smarter

Let’s face it, we all buy things, and we will need to buy things our entire life.  These things can impact our wealth positively or negatively based on the strategy used to acquire them.

It’s not necessarily what we buy, but rather the way we choose to pay for them that can have a lasting impact on our financial well being.

Especially those things we call Major Capital Purchases. These are things that cannot be paid for in full with our regular monthly cash flow.

Certainly, things like cars, vacations, weddings are major but a new set of tires for many Canadians could be a major capital purchase as well. If you can’t pay for it in full you are going to have to finance it.

Let’s take a closer look at this with the graph below:

The first thing I want you to notice is the $0 black line in the center.

This is the Zero Line and represents the point at which a person has nothing or owes nothing.

When you owe more than you have accumulated you are below the zero line. Unfortunately living above the zero line takes more than a good job.

Let’s begin talking about The Debtor

The Debtor doesn’t have any savings or resources and is forced into borrowing. They borrow the money against their future earnings, and work toward paying it off and getting back to zero.

The Debtor hopes to have finished paying back what they owe before another need arises. They spends their lives working to pay for what they have already spent plus interest.

The only way they can support their lifestyle depends on money they have yet to earn. This obligation on future earnings is one of the biggest problems with debt.

It can be very depressing when you can’t see the way to even get back to zero.

Another difficulty is that when you become a debtor to a creditor, you lose control.

The creditor is then in control of your resources, not you.

The Saver

The Saver, being well aware of the wealth transfers inherent in borrowing at interest, will postpone a purchase until they have saved enough to pay cash in full, up front.

However, at the same time they make a purchase they also consume their savings and move back toward that zero line.

A very precarious position indeed. A single unforeseen circumstance could lead to depleting their savings bringing them closer to the zero line.

The saver constantly moves from having access to money and needing to save to get back to where they were before they had to spend their savings. They do not like to pay interest so the drain their accounts and kill compounding each time they do.

Paying cash seems to be the best way to pay for things because it avoids the necessity to pay interest but to pay cash you must also give up the ability to earn interest on those same dollars.

Another problem with paying cash is that first, you must save it which is not necessarily an easy thing to do.

Depending on where you are saving those dollars, the government may also require that you pay taxes on the growth of that money. And when you do make a purchase not only do you consume those savings, but you also negate the ability of those dollars to earn interest because they have been spent.

Many people choose to pay cash in order to avoid paying interest to a lender, which seems smart.

However, the part that is often missed is that they are also losing interest they could have earned had they not had to pull dollars out of the account to make a purchase in the first place.

But it’s not possible to keep the dollars in the account earning interest and still make the purchase, is it?

An example of the saver are those who fall into the trap of RRSPs – because they redeem from their investment for income during retirement.  This interrupts compound interest and reduces wealth for their survivors. 

The Wealth Creator

The Wealth Creator utilizes a unique approach.

They also save, but when it is time to make a purchase, they use their savings as collateral to secure a loan, preferably at a lower interest rate than they are earning on their money.

The absolute best savings vehicle for this purpose is a high-yield dividend-paying life insurance policy.  Read this to learn why it is the perfect investment.

Now, there are a couple of key benefits here.

The first is that this strategy keeps you from having to deplete your savings to make a purchase.

At the same time, it allows those savings to continue to compound interest without interruption.

Secondly, while the Wealth Creator does pay interest on the loan, they can often do so at negotiated rates.  This option provides them with money without cutting down the apple tree.

As the loan is repaid, the amount of savings available to be collateralized increases proportionately until the loan obligation is met.

Resetting compounding on dollars we remove from accounts that are earning interest is not an efficient purchasing strategy.

The Wealth Creator is someone who utilizes privatized banking. Another name for privatized banking is the Infinite Banking Concept®️ or IBC®️.

By doing so, they don’t have to redeem from an RRSP to provide income – they do not interrupt compound interest.  They get the money they need by borrowing from their ever increasing asset knowing their ever increasing life insurance death benefit will be more than enough to pay off the loans when they die. 

For a certified Wealth Creator advisor use only an Authorized IBC®️ Practitioner®️, many who are members of the Infinite Banking Canada Group.

Next Step

If you’re ready to become a Wealth Creator, contact us here.

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