Is It Possible To Save And Spend Money At The Same Time?
Most people view investing and spending as opposites. However, real financial growth comes from balancing the two. One of the most basic principles in finance is that you can’t become wealthy by spending. It seems pretty basic, and yet we are surrounded by many poor and rich individuals. Rich because they earn a sizable income, and poor because not only do they spend it all, they spend beyond it. In my country, the average citizen spends 75% of their salary on debt service.
This is literally insane. There are occasions when I will advocate debt, but only under certain conditions. Once you understand how I manage spending/debt and investing, you will realize it is even better than you could have imagined. How you execute an idea or principle can vary greatly, ultimately affecting the broader outcome. Devising strategies to accomplish multiple objectives is crucial. We will explore why you don’t need to choose between spending and saving.
In essence, I am spending, but in reality, I am not. This approach has a strong foundation in building passive income streams and bulk holdings over time. So let’s examine this idea, which I believe far outperforms the traditional view of paying off a car or even a house. However, it will require initial discipline. Once an investor has a lump sum, opportunities within the finance world explode. Such an investor no longer has to sacrifice wealth to spend and invest.
Turning The Tables On Traditional Finance: A New Way To Think About Money
I have always advocated working hard for your money until you can make your money work hard for you. If you are spending your entire salary every month, then I am sorry to disappoint you, this will never become your reality. When purchasing a vehicle through financing, you will always end up paying far more than the vehicle’s actual cost. This is due to the interest accrued every year. Generally, vehicle repayment terms are 5 to 6 years.
Let’s say that the vehicle you are eyeing has a price tag of 200K. You have two options: you can either save up 200K or finance the vehicle and enter into an agreement that enslaves you for the next 5 to 6 years. If you save the money, you will be able to obtain your new car, but you will no longer have your 200K. This inevitably causes you to lose your leverage.
When you hold cash or assets with a cash value, you have an advantage over the system. Just as he who is indebted to the system is subservient to the system. Ideally, you don’t want to sacrifice that. If you finance the vehicle, you are now enslaved and will end up paying closer to $300K for your 200K vehicle over the next 5 to 6 years. If you view these two options, you will note that neither is attractive nor, by any means, wise.
Why You Should Combine Spending And Saving Instead Of Choosing One
This is where my approach comes into the scenario. Before I continue, we need to know what the monthly repayment would be if we were to finance this vehicle. In general, the monthly repayment of a $200K vehicle over 6 years is approximately 3.8K. With this figure in mind, let’s continue. Given Crypto’s high returns, achieving relatively safe yields is quite attainable. I am generally going to ignore the high-risk sector and design something much safer.
Let’s say you have built up a stash of Crypto over time, and it is now worth 200K. Instead of following the traditional methods above, there is a smarter alternative. By leveraging lending, staking, low-risk DeFi, and stablecoins, I generate an average monthly return of 4%. Let’s make it 3.5% instead to account for market volatility.
What Does This Produce? Understanding Value In Systems, Crypto, And Finance
So we have our 200K locked away and earning 3.5% per month. This equates to 7K per month. You will note that this is almost double the monthly repayment cost if the vehicle were financed. This also means that the market could drop more than 50%, and you would still be able to secure your monthly repayment. I say more than 50% because much of that capital is in stablecoins, which would offset the loss in this case. Further safety measures can be taken by not spending the excess but instead compounding it into the principal, thereby growing the investment and the monthly income. This is a win/win.
Conclusion
Let’s review each outcome to assess the implications and benefits, and determine the smartest way to get the job done!
Purchasing the vehicle outright. The only benefit here is that you acquire the vehicle, but in doing so, you forfeit your capital. Financing the vehicle. Once again, you have the vehicle, but now you are enslaved because you must generate the income to repay the loan over many years. Using my approach, you get the vehicle and can hold onto your 200K. Furthermore, your investment increases in value over time, especially if you are compounding the excess.
Final Thoughts
It is always wise to ensure that the income generated exceeds the required amount by a substantial margin. This is quite important, as Crypto markets are quite volatile. That is why it is advisable to incorporate stablecoins into the mix. Thanks for reading. I hope this article has ignited some creative financial solutions.