By Rich Clouse, Goldberg, Clouse & Edgell

Most people only think of their credit card balances, car loans, mortgages, and student loans as costs. We see them as an opportunity for you to control your cash, and your cash flow, and reuse those dollars over and over again.

 What is Capitalization?

When you capitalize your business or personal household, you are putting yourself in the position to act as your own bank. In most cases when you need a loan, you go to the local bank or car finance company, fill out all of the paperwork, and are hopefully approved for the loan. That process is not fun and sometimes you are not approved the way you had hoped.  To capitalize your business or personal household, you deposit money into your personal capital account *, and you simply use your money to pay cash, and then make payments back to your own account. You decide how much each month and what interest rate to charge yourself. We suggest you become an “honest banker”, meaning that you pay yourself back at least what the bank would have charged you, or a little more. The questions that we ask our clients are:  Who do you like better, the bank or yourself? And who would you rather send more money to each month?

 Benefits of Capitalization

The end result of capitalizing your business or personal household is your ability to control the cash and payment structure. You could use cash for a car this year, and the same cash again for a college expense four years later. The uses for your capital account are as many as you can imagine. A few uses include: (i) credit cards; (ii) car loans; (iii) college costs; (iv) home improvements; (v) mortgages; (vi) real estate purchases; (vi)  investments; (vii) loans to family members; (viii) loans to your business for equipment purchases; (ix) lines of credit – personal or business; (x) weddings and vacations; (xi) paying down mortgages to avoid PMI charges, and more.

The concept and strategy of capitalization is an uncommon way to look at a very traditional way of debt planning and reduction of debt. We help our clients find the money to capitalize themselves; in many cases, by reviewing areas where they are unnecessarily and unknowingly being inefficient with their cash flow. Our first goal is to keep clients in a “cash flow neutral” position. That simply means allocating the same money as they are spending today more efficiently. As a result, they have the same lifestyle cash flow as before, but are accomplishing more financially.

 We welcome any thoughts or questions on how these concepts & strategies might benefit you and your family or business.   For more information, please contact Rich Clouse by phone at (614) 895-0123, or Rich@gcellc.com.

* Accounts that can be utilized as a personal capital account include: Money Market; Bonds; or cash value in a life insurance policy.