The following is a guest post from Nick Drzayich, an advisor at Eagle Capital Management where unique and innovative financial strategies such as Becoming Your Own Bank are taught.
We all know that banks are some of the most powerful and lucrative institutions around, so it would make sense to mimic their business model. I'm not talking about going out and getting a bank charter, buying a piece of land, constructing a bank and then going out to find customers, that is way too much work! I'm talking about the bank being your source for money when it comes to big ticket items such as cars, boats, remodels, furniture and the list goes on and on. What if you could hop over the counter and become your own banker?
Let me take a minute to explain that understanding this concept will involve a paradigm shift for the typical person. We are simply "used to" relying on banks to help us purchase things we can't afford up front, like I said before you have to be able to play both roles, both the banker and the customer. If you can grasp this concept I can guarantee you will see the potential that lies in Becoming Your Own Bank.
The concept itself if rather simple, keep in mind that it will crumble to the ground if you aren't honest with yourself. Often I'm asked by those investigating the idea, "what's the risk?" My answer is always YOU. You are the only reason this concept will not work, if you don't have the discipline to pay yourself back just like you would a bank, the system is worthless. So let's get into an example to show why it makes so much sense to look into Becoming Your Own Bank:
Let's say you are going to buy a $40,000 truck for your business or personal use, normally you would say there are two ways I can purchase this truck, option 1 is to pay cash and option 2 is to finance (we'll leave out the lease option as it usually worse than financing in the long run). If you pay cash for the truck you say goodbye forever to the opportunity that $40,000 had to make you any additional money in the future. 5 years later you've got a truck that has depreciated by at least half it's value leaving you 20k in the hole (spent $40,000 and now own a truck worth $20,000).
If you decide to finance your balance sheet looks even worse after those 5 years. With a car loan at 8% you will have ended up paying $48,663 for the truck, subtract $20,000 from that for the value of the truck you now own and you're left with a negative balance of $28,663.
Here is where Becoming Your Own Bank presents a third option. Over time you save the capital needed to purchase the truck in your private banking system, when the time comes you borrow from your "bank" and pay for the entire truck ( just like you would if you paid cash), only this time instead of that being the end you treat yourself just like the bank would and pay yourself back plus interest. After 5 years not only do you have the $20,000 the truck is worth but you've got the $48,663 (principle + interest) in your pocket, putting your balance sheet at a positive $68,663.
It seems silly not to choose a positive $68,663 over a negative $28,663 or a negative $20,000.
Becoming Your Own Bank is not some "get rich quick" scheme, in fact it is a tool that uses one of the safest, most reliable vehicles available to help build wealth over time by doing what you would be doing anyway....buying things. Not to mention teaching it's users how to save until they are able to afford, something the majority of this country has forgotten how to do.