Chapter 8

Where the rubber meets the road

In America today, our relationship with conventional financing is a peculiar scenario. It is commonplace for a young adult to start their working career with student loans hanging over their head straight out of school. Couple this with housing, in most cases, a car, oh, and welcome to the big leagues, with your own utilities and taxes, and on that list somewhere is living expenses, food, clothes and the like. And, in most cases, conventional financing is there to meet the need. Now we are not going to dive into the “Good debt, Bad debt,” lesson. Suffice to say, all debt could be “better” if you own it. This may seem impossible, and, true, from this view, it is a monumental task, but how did the ant eat the elephant: “one bite at a time.”

In this scene of finance, wealth, the storage, and the building of it, is all relevant. When stopped at the stoplight, this young person we were just depicting is stopped right beside a young family who has twenty-seven years left on a thirty-year mortgage. Two car payments, a teenager in the backseat who was just fitted for $5k worth of braces, and the list goes on. Two cars back is another Lady who owns a small business. She needs to put $30k together by the end of the week to make payroll and expenses this week. And, of course, somewhere in this line, or maybe they already went through the intersection-is another guy who is rolling a much bigger ball than that. Anyway, you get the picture. Truth is, these imaginary people in the intersection all face the same hurdle: Cash Flow, money in, money out.

Back to that “Peculiar Relationship,” statement. Nowhere else in the transaction of business is the balance of control more one-sided, than in our relationship with con ventional financing. Let’s examine the mechanics of a car loan. First off, by the very definition, banks do not loan money, they collateralize money. The car must have a value that justifies the lender. Starting with the premise that the car has a greater value than the amount financed, from the first payment, the lender is in a better position with every payment. Oddly enough, anywhere else in a healthy business cycle, when there is a percentage of the contract met, the entity performing the work is recognized as having a stake. For the W2 employee that has two days’ work toward their work week, from an employee/employer relationship both parties understand that the employee has payment coming for the two days, whether the work week is finished or not. With the contractor, when an agreed upon percentage of the job is complete there are draws, or payment for services rendered. We as a populous have been conditioned to work within the parameters of conventional financing. Until the last payment is made on the car, the borrower’s position never changes. At payment 47, the contract has been no more satisfied than at payment 2. Until the conditions of the contract are fully satisfied there is no percentage of ownership. From beginning to end, it is the borrower who shoulders the exposure.

Now let’s contemplate the value of capturing the position of financier, in our family, businesses, and charitable giving. Over a lifetime, the word is astronomical.