by: Trudy Palmer
What if there was a way to buy a car and increase your standard of living at the same time? There is...
My partner and I bought a brand new car because we wanted to increase our monthly income. Huh? That doesn’t make sense! Buy a brand new car to increase your income? Usually buying a brand new car means that your disposal income goes down not up. Hmmm, financial literacy is a dangerous thing.
It all began with a shift in thinking. The key is to understand the difference between assets and liabilities and to have your assets PAY for your liabilities, so you don’t have to.
Have you ever noticed that when you apply for a loan, the bank tells you that your car is an asset? Under the true definition of assets and liabilities, anything that takes money out of your pocket is a liability.
So, not only were our cars liabilities, but they were taking more money out-of-our-pockets every month just to keep them running. Both my partner and I owned older vehicles, which were starting to break down more often.
Then a light bulb went on. What if we could unlock the money we had tied up in our cars and buy a brand new car without lowering our lifestyle but actually increasing it? That’s exactly what we did.
We sold our cars and used the money to buy income-producing assets, which more than covered the payment on our brand new car. It is a sweet little car that comes loaded including leather interior.
Not only is the payment covered, but we also managed to take advantage of the 0% financing for five years deal, so every dollar goes towards paying the car off.
At the end of five years:
What else could you apply this strategy to - anything that you would spend a chunk of money for. So, the next time you’re thinking about buying a car or some other "liability", consider if there might be a better way.