Are You a Borrower or a Lender? – Part I

 

 

Let’s contrast a real-life scenario of the borrower versus the lender that happens tens of thousands of times every day.  A person walks into an auto show room and falls in love with that new car or truck that has everything he ever desired.  The design is superb, the model fits his or her personality, the safety features are comforting, the interior is sleek and the instrument panel comes with satellite navigational features.  Not to mention the surround sound, satellite radio and the leather interior.  Just sitting behind the wheel makes you feel rich and successful and gives you a sense of well being.

 

Of course, in reality, if you do not have the cash to pay for it, and you are not already completely debt free, you are headed for financial disaster.  At the very least, you are falling for a lifestyle of debt that has been disastrous to many people today.  Current marketing culture paints a glorious picture of the rich and famous as opposed to the down and out.  Yet millions have bought into the payment-poor, debt-bondage lifestyle.

 

Look at the difference between the borrower and the lender in purchasing just one moderately priced vehicle.  Given a very common loan repayment schedule of six years, a huge gap occurs between the two situations. 

 

Here are the two choices:

 

1)    making vehicle loan payments

2)    taking that very same payment and investing it in the equity market yielding average equity returns over the past 40 years. 

 

We will continue this next blog.

 

Your thoughts on this subject?  Your comments appreciated!

 

Content © Rich Brott, 2011

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