The above is a quote from the famous financial philosopher, Jay-Z.
But what does it really mean in all practicality? Does it mean you shouldn’t buy something until you have 2x what something costs sitting in your bank account? You should have 2x the net worth? This post will give a practical example of how I or a Robert Kiyosaki influenced person might look at the situation with everyone’s favorite money topic: Cars.
Buying a New Car
Let’s say you’re a financially responsible person not wanting to eat $10k in depreciation as soon as you drive a new car of the lot. So you chose a gently used red 2014 Audi A5 for $20k off of the CarLotz website (disclosure: I own $LOTZ for my growth portfolio).
If you finance it the numbers come close to $400/mo. It’s a tidy sum but affordable within your salary.
Financing Debt Payments with Cash Flow from Assets
But as a financially woke person you want to finance your purchase with cash flow from assets. How much would you need to invest in cash flowing dividend stocks to finance your gently used car? If you were to go the traditional route of dividend growth stocks at a 2-3% yield you would need $160k to fund your car. While it would be nice to have that amount of money sitting around paying for your assets, it most likely isn’t going to happen.
But what if you found a relatively safe way to boost your yield though?
That’s where something like $QYLD comes in. $QYLD is a relatively a safe 11% net yielding ETF that generates cash flow from covered call income. How much $QYLD would you need to finance the Audi?
The math works out like this: ($360 * 12) / .11 = $39,272
Only ~$40k or “buying it twice”
Obviously this is still significantly more than going to the car dealer for a “Buy Here, Pay Here” loan. Much more achievable than the lower yield growth focused dividend stocks. Another benefit of this approach is that when you pay off your loan you still get to keep the stocks and cash flow. If you’re lucky $QYLD will have appreciated in value. Of course there are other ways to buy cash flow like real estate, vending machines, websites and more. What matters is that you try to find the highest safe yield available to you and fits your investing style.