Help the client visualize the Debtor, Saver, Wealth Creator concept using this graphic visual |
This is called the Zero Line which represents the position where one has nothing and owes nothing. Let's take a look at the debtor. Now the debtor doesn't have any savings so they are forced into borrowing. They borrow the money and work toward paying it back and getting back to zero. They make payments to try to get back to zero knowing that they are going to be forced to borrow every time a major expense comes up because they have no savings. Let's look at the saver. Now the saver postpones gratification and they do not like paying interest. They save until they have enough capital to pay cash and then they consume that savings to pay for the expense - again moving back to zero. They continue that cycle, conceptually making payments to themselves until they are able to fund the next major expense. The wealth creator is also a saver but uses a different approach. When they make the purchase, they collateralize it. They allow their savings to continue to compound and finance the purchase. They do pay interest, but their money is earning interest and as they get the loan repaid, they find themselves with more in their account than before. |
No math presented on this screen. |