Banks are the only business in the world that uses somebody else's money to build wealth! Congratulations...your compound interest is helping to build a bank on every corner across America...and it's making them filthy rich.
Here's how it works. When a bank receives money from a depositor, the bank then loans out a portion of that money. This is called fractional lending - it’s how banks make money. They loan out a portion of what has already been deposited. We deposit in - they loan out!
Many banks have minimum amounts of liquidity. That means that they only loan out a certain portion of their total deposits.
For example, let’s say a bank has 50% liquidity; that means that they keep at least 50% of their deposited money ready for customers to withdraw at any time.
But, when you leave that much money just sitting there, the bank isn’t making any significant returns. So… what do most banks do? They loan out most of the money that...
No doubt real estate is a great investment, but long-gone are the days where prices soared overnight....a time when even a blind monkey could make a quick dollar on a good flip. But what happens when prices don't soar like you thought they would? Worse yet, what happens when they drop?
What goes up, must come down...including real estate, and it's for this very reason that it's a good idea to build your own equity as fast as you can instead of waiting for the market to build it for you. The idea of bringing money to the table to sell a house may not be familiar to YOU, but it's a common occurrence for people in need of selling when the market hasn't produced the gain sufficient to cover the cost of selling and/or closing.
People investing in the stock market understand that what goes up must (eventually) come down, while people investing in real estate never expect to get caught short. The stock market "resets" itself and the real estate...
To rob Peter to pay Paul means to take money from one source to give it to another. Usually, robbing Peter to pay Paul means taking the money to pay off one debt to pay off another debt. Basically, It is a situation where there is not enough money to go around and one must choose which debt is more urgently in need of payment. Yep, that pretty much sums up the way most Americans are managing their finances these days!
I'm not sure how it happened, but somehow people see debt as a good replacement for cash; in this case, the abnormal has become the norm. They'll open a new credit card account with a better interest rate to pay off another, and before you know it both cards are maxed out because they couldn't resist using plastic when they wanted to spend what they didn't have - they Rob Peter to pay Paul.
Most people refrain from adding anything to a savings account for "a rainy day" as long as they have a little room on a...