Saving After Securing No Money Down Loans
Saving after securing no money down loans can be a game changer for your financial future. It could also help you start your own business, invest in real estate, and enjoy many of the benefits that were only for millionaires just a few years ago.
In this article, you will learn about how saving "after" getting an unsecured loan is more important than saving "before." You will also learn about the importance of understanding liquidity rates and preserving capital. Finally, you will learn how to use a few simple math tricks to ensure that your cashflow is the highest it can be.
Saving "After" Securing Loans
The older you get, the more important it becomes to save "after" securing a loan. If a few decades ago most of your income was spent on living expenses (rent and mortgage payments, utilities, food, etc.), then chances are that money would be spent and eaten quickly. Your savings would be eaten up by essential living expenses in only a few years.
But now things have changed. The age of the working class has come to an end. Now you are most likely living in a world where housing prices have gone up substantially. Your house is probably worth more than it was 20 years ago. In addition to this, your living expenses have drastically decreased too. You no longer spend $1,000 per month on food and your internet bill costs $50 per month instead of $750 per month. Your costs have decreased substantially.
It is important to save after securing a loan, because your living expenses have decreased. Saving after securing a loan ensures that your savings will last the rest of your life. You no longer have to worry about eating up your savings because you have too many essential payments to make. You are now in a situation where you can live off of only the interest on your loan, dividends, and sales and hopefully grow your wealth substantially with every passing year.
Liquidity Rates and Preserving Capital
I assumed for the sake of this article that you will be taking out a loan with a fixed interest rate to pay off all of your debt; credit cards, car loans, mortgages, etc. Your loan will not have any clauses where interest rates can rise or fall like adjustable rate mortgages (ARMs). And since your monthly payments will consist of only the interest on the loan and nothing more, then it becomes very important that you understand liquidity rates.
Liquidity rates are the interest rates that bond investors require to make an investment (such as a bond) profitable. They are what your lender will charge you when they lend you money on a secured loan.
If you take out a $20,000 mortgage loan with a 4% interest rate, then your monthly payment will be $1,200 per month. The lender will charge you 4% on the entire loan with no clauses or incentives to lower their rate.
If you take out a loan with an interest rate of 3%, then you will pay $560 per month. This is because the lender has to charge more to make up for lower interest rates and to profit in some way.
These are the rules of the game. If you enter into a contract, then you need to understand how it works. A lender will never give you a lower interest rate than what they have set for their investors. You will always have to pay an interest rate above what the lender charges its investors. This is the nature of a loan.
Since interest rates are set at certain levels above what the lender pays its investors, it becomes very important to preserve your capital. If you want to grow your wealth, then it is imperative that you preserve your capital so that there is more of it left over after paying your expenses and debt payments.
How to Preserve Capital
If you have no debt, then it is easy to preserve capital. All you have to do is make sure that all of your expenses are covered. If your mortgage payments are paid off with an interest rate above 4%, then you would be in a great position to preserve capital. You would not need to be concerned with preserving capital at all. In this situation, the interest rate will be used solely as a payment of principal.
But, if you are in debt, then things become more complicated. You will need to learn all about your loan agreement and follow the rules.
If you have car loans that have interest rates with clauses where interest rates can rise 3%, then this is a good time to pay off some debt. Since the rate on your loans cannot rise above 4%, then paying off debt will help preserve capital and ensure that you do not need to worry about preserving capital at all.
Conclusion
In conclusion, it is important to save "after" securing a loan in order to preserve your capital. It is also very important to understand the importance of preserving capital when you have debt. Saving "after" securing a loan ensures that the money that remains after paying all of your debts will be able to grow substantially for many years to come.