Manage financial growth by viewing yourself as a personal banking institution
In a world where interest rates on personal loans and student loans can quickly add up, a new approach to personal finance is gaining traction: the self-loan method. This innovative strategy, which involves treating savings as a loan to oneself, can potentially increase savings over time and help rebuild and retain savings accounts. The self-loan method is simple to implement. By setting up automatic transfers through online banking, you can direct funds from your current account to a savings account, either at the same institution or another. The amount you repay to yourself can be flexible, depending on your financial situation and the size of the emergency. One of the key benefits of this approach is the potential to save significant amounts of money on interest rates. For instance, borrowing $1,000 from your savings instead of a credit card can save you over $170 in interest over 18 months, assuming a credit card rate of 21%. Moreover, the self-loan method sets savings on a path to rebound automatically, resulting in more savings in the long run. You can even choose the interest rates to charge yourself, with a higher rate resulting in more savings once the loan is paid off. The self-loan method can also be applied to larger purchases, such as vehicles. By repaying yourself a larger amount than the calculated repayment, you can accumulate significant savings. For example, a Honda Odyssey purchase where $18,000 was re-saved with the self-loan method demonstrates the potential benefits of this approach. The more you charge yourself, the greater the benefit once the self-loan is paid off in full. This approach provides the benefit of being the lender, which was not available when borrowing from others. The self-loan method can help avoid the need to borrow from a lender, potentially saving you from a new debt payment for years. This approach was inspired by observing the cost of borrowing money while working for a bank. It's important to note that this method requires having sufficient savings to cover a financial emergency. In the event of an emergency, one should avoid borrowing from a bank if possible and instead use the self-loan method to 'borrow' their own capital. A special self-lending method is used by ING Bank to optimize capital and rebuild savings accounts. This method can help you enhance the value of your own capital by treating it as if it's someone else's, such as a business lender. Using the automatic transfers function in online banking can help structure savings repayment like a loan, making it easier to stick to your repayment plan. In conclusion, the self-loan method offers a novel and effective way to boost your savings and rebuild your savings accounts. By treating savings as a loan to oneself, you can potentially save a substantial amount of money on interest rates, rebuild and retain your savings, and avoid the need to borrow from a lender.
