Are You a Borrower or a Lender? Part II

 

 

As mentioned in my previous blog, you have two choices.  Here, again, 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. 

 

The real difference is this.  The borrower makes the same payment the lender (investor) does for the exact same time period.  When the time period is up, the borrower stops making all payments; so does the investor.  At the end of the six years, the borrower has a used vehicle of questionable value.  At the end of six years, the person who chooses not to borrow for a new car or truck, but instead invests the exact same payment, has a total sum of $55,741.  This is just for the onetime purchase of just one vehicle.

 

Wait, that’s not all.  Both persons have made the very same monthly payment.  However, the investor (the one who does not borrow) makes no more payments, but continues to let the accumulation of his or her six-year payments grow in the marketplace, gaining return upon compound return at the very same rate. 

 

In just 4 additional years, the lump sum of payments has now turned into $90,082.  Add on another 10 years and it becomes $299,081; yet another 10 years and the total is now $992,985.  Finally, after another 10 years it has grown to $3,296,826. 

 

Amazing!  All the accumulation has come from just six years of monthly payments.  The borrower described in Proverbs 22:7 has a used vehicle of questionable value after six years.  But with absolutely no additional contributions, look what the wise person of Proverbs 22:7 has accumulated!  This is a clear reminder that the Bible really does make a lot of sense.

 

 

 

The details will be broken down for you on my next blog.

 

 

Your thoughts on this subject?  Your comments appreciated!

Content © Rich Brott, 2011

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