Financial security expert Pamela Yellen, author of Bank On Yourself: The Life-Changing Secret to Growing and Protecting Your Financial Future, believes that business owners are prone to making financial mistakes that undermine their efforts to build wealth. Here is the fourth of the top five mistakes (#4 of 5) she sees and strategies on how to avoid them...
4. Giving Up Control to Financial Institutions
4. Giving Up Control to Financial Institutions
The financial and credit crisis has made us painfully aware of how little control we have when we rely on other people's money. And credit still remains very tight for entrepreneurs who need capital to start or expand their businesses.
Many believe that paying cash for things - rather than leasing or financing them - is the answer. But this ignores an important, but little-known principle of economics - you finance everything you buy.
Let's say you've decided you're going to beat the financing and leasing rackets by paying cash for major purchases. So you start putting money aside into a savings or money market account.
When you hit your savings target, you pull your money out to pay cash for that item. You're earning zero interest on your money at that point, which is why financing, leasing and paying cash are all losing scenarios.
You're either going to pay interest to others to finance things, or you're going to lose the interest or investment income you could have earned, had you kept your money invested instead.
Specially designed dividend-paying whole life policies can be used to "Bank On Yourself" and become your own source of financing by answering just one question: How much do you want?
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