PRIVATE RESERVE STRATEGY
Albert Einstein once said that compound interest was the eighth wonder of the world. Understanding this important concept could have the biggest impact on your financial success or failure in life. A fundamental premise of compound interest is that it works best over time and without interruption. The Private Reserve Strategy™ will give you insight into how to maximize the power of compound interest not only in the money you are saving and investing for your retirement but how you spend money as well.
The Private Reserve Strategy™ is a concept that gives us a way to look at how money works. It’s a strategy designed to help you develop or improve your financial position by avoiding or minimizing unnecessary wealth transfers where possible and accumulate an increasing pool of capital that you can access and control. Some transfers (income taxes, property taxes, car payments, educational costs) are avoidable while others you can only minimize.
As an example, for most of us owning a car is an unavoidable expense. How we pay for the car can help to minimize the expense. Some methods of paying for the car could be better than others. You are actually financing everything you buy because you are either earning interest or foregoing interest. You might be saying to yourself, I don’t finance, I pay cash. The reality is that you too are financing because you must make payments to yourself to get back to the same financial position you were in before you made the purchase. A key point to understand is that every dollar that we do not save is consumed and lost forever. You may be able to put back the money you spent from future cash flow, but the money you spent is gone and can’t be recaptured.
The video below on the Private Reserve Strategy™ below will illustrate how the following 3 types of strategies for making a major capital purchase, or a purchase that cannot be paid for in full from your monthly cash flow will greatly impact your long-term financial security.
The Debtor
When the debtor needs to make a major capital purchase, he leverages his future earnings to pay for the purchase now. He is always in debt to someone else and never earns interest and never saves dollars. He constantly falls below a zero balance and works constantly to pay back his debts and get back to a zero balance. Not only does this individual lose interest, but he also loses the opportunity for those lost dollars to earn interest.
The Saver
The Saver handles his finances a little bit differently. He too makes a payment, a payment to himself, in order to save for his major capital purchase. He avoids paying interest, but every time he makes a purchase he drains his savings setting him back to zero.
The Wealth Creator
I would like to introduce you to the Wealth Creator. The Wealth Creator realizes the value of compound interest and never wants to set himself back to a zero balance. He knows that if he empties his account he will start back at zero. So he utilizes the private reserve strategy. He utilizes a private reserve that is always compounding. He then collateralizes that reserve to access capital for his purchase. As he pays back the money borrowed against his private reserve, he pays down his continuously decreasing balance. This minimizes his interest expense. Meanwhile, as he’s paying for the money borrowed against his reserve, his reserve is continuously compounding. By doing so, he knows that the compound growth will always increase his reserve substantially more than the interest expense on the money borrowed. His money never stops compounding, and he guarantees himself a substantial amount of money in the future, while providing the money necessary for his major capital purchases today.
WATCH THE VIDEO ON THE PRIVATE RESERVE STRATEGY BELOW
The Private Reserve Strategy™ is a concept that gives us a way to look at how money works. It’s a strategy designed to help you develop or improve your financial position by avoiding or minimizing unnecessary wealth transfers where possible and accumulate an increasing pool of capital that you can access and control. Some transfers (income taxes, property taxes, car payments, educational costs) are avoidable while others you can only minimize.
As an example, for most of us owning a car is an unavoidable expense. How we pay for the car can help to minimize the expense. Some methods of paying for the car could be better than others. You are actually financing everything you buy because you are either earning interest or foregoing interest. You might be saying to yourself, I don’t finance, I pay cash. The reality is that you too are financing because you must make payments to yourself to get back to the same financial position you were in before you made the purchase. A key point to understand is that every dollar that we do not save is consumed and lost forever. You may be able to put back the money you spent from future cash flow, but the money you spent is gone and can’t be recaptured.
The video below on the Private Reserve Strategy™ below will illustrate how the following 3 types of strategies for making a major capital purchase, or a purchase that cannot be paid for in full from your monthly cash flow will greatly impact your long-term financial security.
The Debtor
When the debtor needs to make a major capital purchase, he leverages his future earnings to pay for the purchase now. He is always in debt to someone else and never earns interest and never saves dollars. He constantly falls below a zero balance and works constantly to pay back his debts and get back to a zero balance. Not only does this individual lose interest, but he also loses the opportunity for those lost dollars to earn interest.
The Saver
The Saver handles his finances a little bit differently. He too makes a payment, a payment to himself, in order to save for his major capital purchase. He avoids paying interest, but every time he makes a purchase he drains his savings setting him back to zero.
The Wealth Creator
I would like to introduce you to the Wealth Creator. The Wealth Creator realizes the value of compound interest and never wants to set himself back to a zero balance. He knows that if he empties his account he will start back at zero. So he utilizes the private reserve strategy. He utilizes a private reserve that is always compounding. He then collateralizes that reserve to access capital for his purchase. As he pays back the money borrowed against his private reserve, he pays down his continuously decreasing balance. This minimizes his interest expense. Meanwhile, as he’s paying for the money borrowed against his reserve, his reserve is continuously compounding. By doing so, he knows that the compound growth will always increase his reserve substantially more than the interest expense on the money borrowed. His money never stops compounding, and he guarantees himself a substantial amount of money in the future, while providing the money necessary for his major capital purchases today.
WATCH THE VIDEO ON THE PRIVATE RESERVE STRATEGY BELOW