Two Very Different Choices You Can Make With $100,000

Two Very Different Choices You Can Make With $100,000

I once read that the average person will experience a financial windfall at some point in their lifetime, and I believe it. Although you may not have this type of money today, it certainly is a good exercise to think about what you would do with it for two reasons:

1) It will help you understand your mindset.
2) It pays to prepare.

So the question is, what would you do with $100,000? There are millions of choices you could make, but each can be categorized into one of two boxes, consuming or investing.

1️⃣ Consumption

When we consume, we buy things that get used, depreciate, disappear and so on. These are liabilities. At the end of the consumption period, they are either worthless, devalued or gone altogether. This includes cars, clothing, furniture and so on. Even as you read this you may struggle for examples of how these things increase in value, and you could be right, but you really do not want to consider personal belongings assets since they do not pay you to own them. On the contrary, they many money to maintain (especially the larger luxury purchases) and most go down in value.

Using an example of a car purchase, let’s say we buy a $100,000 car. To make it fun, we bought a new Chevy Corvette Zr1 and got a great deal at $100,000 out the door. Let’s visit the potential welfare of that investment after 10 years.

Purchase price: $100,000
Annual Maintenance -$5,000
Depreciation: -$40,000
Value of “Asset:” $60,000
Cost of Ownership: -$50,000

When it is all said and done, your new car lost 40% of its value and cost half of its purchase price in maintenance over 10 years. But its a really nice car!

2️⃣ Investment

Now, let’s say that you choose to invest that money in spite of what your friends (who probably own Corvettes) say about how risky investing is. With $100,000 invested as a limited partner in apartment syndication, let’s check out the numbers, assuming a modest 10% annual return(AAR) over 10 years.

Investment: -$100,000
Average Annual Return (AAR): 10%
Future Value: $161,051

After 10 years you turned your $100,000 into $161,051 in the same amount of time that you would have lost 40% of your investment’s value buying a cool car. Now you can buy three used corvettes (but why would you?).

This illustration is not to condemn material purchases, but to highlight the important mindset of wealth creation, which sometimes means forgoing consumption for future wealth. Having a a solid investment plan is essential for getting to where you want your family to someday be.

God Bless Ukraine 🇺🇦

Subscribe to Our Channel 👇🏾

💡Invest Your Retirement w/ eQRP

I Rolled My 401k Into eQRP to Passively Invest In Apartments

Passive Investor Startup Guide

To find out more about what it looks like to invest as a passive investor in multifamily real estate, download our free Passive Investor Startup Guide here!

If you invest in stocks or other assets are seek to diversify your portfolio, achieve higher returns or get educated on the power of real estate, subscribe to my articles for automatic updates on new weekly content. Also, sign up for our newsletter for regular updates on our business and to learn how you can passively invest and grow your wealth through real estate.

Rodney Robinson II

What is Absorption In Real Estate?
As you begin to analyze markets, you will encounter the term absorption. …
The Passive Investor’s Guide to C-Class Apartments
Passive Investors should understand the concept of value-add, which is how sponsors …