Canadian Debtor VS Saver

Canadians love their cars, right? We love to get a fancy new car because it's so darn easy to go and get a car these days. So we're going to talk about the ways in which you can go about financing things and we're going to use two simple examples. We're going to talk about a debtor and we're going to talk about a saver. Let's first examine the debtor because most Canadians are on the top part of the ledger here. They are the debtor. So what does that mean? Well, we need, I don't really care what the number is, but I'm just going to say, you know, we need 40k to get a vehicle because again, we had the baby, we got the house, all those things. So what they're going to do is they're at the zero line here. They're going to go into the bank or the dealership and they're actually going to drop way down. And they're now they're negative. And what they have to do is they have to agree on someone else's terms to come back and now make a monthly or a biweekly payment for in some cases all the way up to eight years. In Canada you can stretch these loans out for cars very, very far. So now you're making payments and you're working hard, blood, sweat and tears and you're watching those $299.37 biweekly payments come out of your bank account and every time it happens.

Just reminds you that someone else is getting the money. Now what you do is you work for those eight years and you get all the way up here just to get back to zero. And by then you have an eight year old vehicle or maybe you have extra kids or maybe your husband or wife went to work now. So now we have two incomes, possibly, but. Well, if we have two incomes now, we got to get two cars or we got to upgrade the older. So what are we going to do? We're going to go all the way back down into debt. And you know what, maybe you're earning more. Maybe you decide now you're going to get a fancier car. So now you're even, even more debt and the payment is even larger. And now we're flowing that money back and we think everything's all well and good as long as we can continue to make that payment. There is a hidden problem that you're not aware of and that's what we help our clients do. We help them solve problems that they didn't even know they had yet or haven't shown up yet. The problem is what happens if life happens. God forbid, you get ill, you get hurt, you lose your job, the economy takes a turn, who knows what they change your industry. Many, many things can happen that may interrupt your ability to make your payment. And if your ability to make your payment gets interrupted, you don't actually own anything until the last payment is made. We know what's going to happen if you can't make your payments. Maybe that was you, but we've all known someone who's had a vehicle repossessed or they filed bankruptcy or they had to fire sell their home. You don't actually own anything until the final payment is made. How does that make you feel? Should make you feel extremely uncomfortable and a bit vulnerable. Everything's all good until it isn't. And so that's exactly where the banks want you. You continue to make those payments. And now if we go all the way down through life, yeah, we've been able to get all of the things that we needed throughout life. Let's assume it all just went good and you've been able to do all this and no repossessions, none of those things. That's the worst case scenario. But at the end.

We'Re right back where we started. Zero. Okay, now let's take a look at. We have some very clever people out there, God bless them. Look, you do the best you can with the knowledge and resources that you have. There's nothing wrong here. We're not beating up on you. The debtor is aware. They know that they're paying interest. They know how much they're going to pay because it's all wrapped up in the financing. They know what the payment is going to be and they know when it's all said and done, exactly how much interest they have to pay. Right. So now having said that, maybe the debtor one day becomes the saver. And he says, no, I learned that lesson. I am not paying all this interest to other people. What I'm going to do is I'm going to pile up money, I'm going to save money. Where are they going to save it? They're going to save it in someone else's bank. So the bank is going to have use and control over that money, lending it out and multiplying it, turning that inventory over for however many years or it takes for you to achieve the objective to get to your, whatever that number is, 30 or 40k or 10k or whatever, whatever the large expense that you have the objective that you want to solve, there's a cost associated with it. And they're going to pile up money in someone else's bank. And if I mirror this for a moment, doesn't that piling up of money, those deposits, doesn't that look an awful lot like a payment? So one of the things that the saver says, well, I want to avoid payments. Well, that looks like a payment to me. You're actually making a payment. It's just in the form of a savings deposit in someone else's bank. Right. And now just so that the problem or the opportunity can show up. And now you need to solve that problem and you're going to drain that bank down to zero just so that you can get the car. So now you have the car, but someone else has all of your money and it's been permanently transferred away from you forever. You're never going to get it back. And now what do you have to do? Well, you have to be very disciplined because you know the car is only going to last so long and life will happen. So what you need to do is go and pile up money again in someone else's bank so that you're prepared for your next large expense or whatever, the next opportunity that you need to solve. And now if you again examine this simple graph here, does the saver actually wind up in much better of a spot than the debtor? And the answer is no. Because they're piling up money and then they're draining it down and they're always interrupting the momentum that's being created on their money. They're taking that financial energy, the growth potential, every dollar can grow and multiply into more dollars. And we want to harness that energy. We want to put that energy back into our own grocery store, that is the life insurance company that we co own so that they can multiply those dollars and share more with us. But what we're doing is we're transferring all that energy to someone else and letting them multiply the dollars. And what the saver is blissfully unaware of, God bless them, they are unaware of what are they actually giving up. They can see that they're not paying interest, but what they can't see is the opportunity of what they could grow that money into, the lost opportunity cost. Every single time you spend a dollar, you've perman that dollar and the opportunity to grow it. So you're either going to pay interest to someone else or you're going to lose out on interest you otherwise could have earned. And at the end of the day, both methods are a permanent transfer of money away from you and your family. A permanent transfer away. And you're allowing somebody else to harness that energy and put it to work. Every payment, whether it's principal interest or a savings deposit, I don't care what it is, every payment is a deposit into someone else's bank.