I was once advised not to save up for my dream car, but to buy a cheapie, then buy a house, then use my home equity to purchase the dream car, extending my bond/mortgage, and not to close my bond because its easier to get a loan on my open bond, and take advantage of my house being an asset....basically Im taking all my equity (its my money) and transferring it to liability (its someone elses money) and keeping my bond open (so it remains someone elses house, hence, someone elses asset) to purchase my dream car, which will also belong to someone else....my only equity then, will be the cheapie, unless I trade it in for a deposit on the dream car, then my equity (what I actually own) will be zero, because if I default on the loans, I will lose the house AND the dream car...unless I keep the cheapie....then perhaps I will still have it... This guy is well known in the church for preaching....but I dont really know him financially....but it sounds like he was trained by someone to measure HIS wealth by someone elses money, which is a violation of the accounting equation: Assets = Equity + Liability....or to put it in a way that illustrates my point better, Assets (either money, or what I can either use or sell to make money) - Liabilities (debt) = Equity (the amount of my wealth in cash, either on hand or owing to me from debtors, that is actually mine)....dont measure your wealth by your liabilites, neither by your assets (of which liabilities forms a part...you shrink your assets to pay your liabilities)...your equity (what is actually yours after your liabilities are paid off) is your true wealth....thats not just accounting, its common sense too :p.
Posted on: Tue, 22 Apr 2014 02:56:03 +0000
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