Borrowing money actually makes you richer? Cracking the myth of 'debt'

        If you suddenly need NTD 1 million, would you directly use the funds in your account? Let's first calculate which funding source is more cost-effective? The first reaction of most people may be: 'Of course, if you have money, use your own.' After all, 'zero debt' is often seen as the highest standard of financial health. However, for those with stable income and considerable asset allocation, the answer may not be so simple. In the highly developed digital financial instruments and rapidly changing market environment, the flexibility of fund allocation often determines the ceiling of wealth appreciation. This issue of 'Finance Column' shares the financial management strategies of high-income groups, demonstrating how to calculate the cost of using money and make good use of 'fund selection rights'.

        Invisible costs are the most expensive: getting rid of the myth of "interest"

                In behavioral economics, there is a concept called 'mental accounting', which refers to people's habit of viewing money from different sources and purposes separately. When faced with large expenditures, most people will prioritize using their 'deposit accounts' and strongly reject opening' loan accounts' to avoid 'generating loan interest'.

        However, one's own money may already have tasks. For example, a certain fund is continuously accumulating returns in stocks, funds, or fixed deposits, or is reserved as a family reserve for next year's taxes, premiums, children's education, or even as a reserve fund waiting for the next investment opportunity. At this point, it may be helpful to first compare the opportunity cost of using self owned funds with the actual cost of using external funds. The former is the cost of interrupting compound interest and losing elasticity, for example:

        1. Forced to take profits at non optimal times: If stocks or funds are originally intended for long-term allocation, but must be sold for cash during market fluctuations or even troughs due to short-term funding needs, the loss will be potential future returns.

        2. Default discount for fixed income: If a large fixed deposit is only a few months away from maturity but must be terminated in advance, it not only discounts interest, but also disrupts the original cash flow plan.

        3. Loss of the option to enter the market during a crisis: When there is a sudden correction in the market and high-quality assets emerge, if all the cash in hand has been used to cover living expenses, one can only sigh in despair.

        The thinking of high asset groups: actuarial "total cost"

        On the other hand, if the purpose of the funds is clear, the required period is limited, and the income is stable, the future cash flow is sufficient to cover monthly repayments, and the expected value and liquidity of the original assets are retained, which is indeed higher than the total cost of borrowing funds, then credit loans can be regarded as "financial leverage tools". Taking the innovative Bankee Challenge Credit in the market as an example, if the borrower pays the full amount on time during the loan period, they can receive a 50% rebate on the total interest paid after the loan is fully repaid. For example, if the actual loan interest rate is 4%, after returning 50% of the interest feedback, it is essentially only necessary to bear about 2% of the interest cost, which is worth keeping our own assets in their original position and achieving benefits greater than 2%.

        It is worth noting that this must be based on rigorous risk management. Because in actual borrowing, it is still necessary to comprehensively consider handling fees, annual percentage of total expenses, loan period, restricted repayment conditions, and individual loan approval results, and cannot use a single interest rate to determine the total cost of borrowing.

        Layered management of funds: choosing tools that combine returns and flexibility

        When we decide to keep our cash, or when we happen to have a large amount of cash in our account, such as stock profit taking, maturity of fixed deposits, year-end bonuses, or completing a real estate transaction... another challenge arises: keeping all of it in general living stock is obviously not as strong as inflation; All converted into fixed deposits, in case of new investment opportunities, large expenditures, or other funding needs in the short term, it will lose its flexibility due to the funds being locked in.

        Far Eastern International Bank Bankee's latest "flexible deposit" has solved the dilemma of "wanting to earn profits from fixed deposits but afraid of losing flexibility", creating the core advantage of "higher interest rates for live deposits than fixed deposits":

        1. Fixed deposit+active deposit one-time configuration, no longer choosing between two: Users can open a one-year "flexible deposit" fixed deposit through the Bankee App, with a minimum NTD of 10000 per transaction and an interest rate of 1.78%. The system will automatically grant a high interest active deposit limit of 50% of the fixed deposit principal.

        2. Breaking the ceiling with high interest savings: Within 50% of the derivative limit, eligible new funds can enjoy a reward of up to 2.435% annual interest rate.

        3. Self determination of credit limit and long-term follow-up: This high profit active deposit is not a short-lived short-term experience activity, and its preferential credit limit will continue to exist with the one-year fixed deposit. More importantly, the upper limit of active deposit is determined by the user's fixed deposit principal and does not require it to be fully filled. Funds can be deposited and withdrawn at any time according to personal needs.

        4. Optimized comprehensive benefits: If we consider the configuration of NTD 1 million fixed deposit and NTD 500000 high interest active deposit, the overall comprehensive annual interest rate can reach about 2%, surpassing most single active or fixed deposit products in the market.

        From a case study, we can see the 'capital flywheel effect' - borrowing money to invest and using interest to support liquidity

        Alex has a high-quality stock holding position of NTD 3 million, generating a stable dividend cash flow of approximately 5% (NTD 150000) annually. This year, he has identified a rare overseas real estate investment opportunity and requires an initial investment of NTD 1.5 million in cash.

        Traditional approach vs. flywheel effect:

        The intuition of most people is to sell half of their stock holdings (NTD 1.5 million) to cash in, but this means Alex will lose NTD 75000 in passive dividend income every year and miss out on the potential for stock price growth. If all the cash in hand is used, it seems to lack the ability to respond urgently. Therefore, Alex chose another path: not selling stocks or using cash, but applying for a "challenging credit" of NTD 1.5 million. Relying on good credit and repayment discipline, this loan can receive a 50% interest rebate upon settlement, with an annualized cost of approximately 2%. Its logical thinking is as follows:

        1. Retain high interest assets: Keep NTD 3 million in stock and record the annual NTD 150000 dividend as usual.

        2. Create a fund pool: Deposit a portion of the emergency reserve funds into Bankee's "Flexible Deposit" one-year fixed deposit, enjoying a fixed annual interest rate of 1.78%. As for the NTD 150000 dividends and other investment income received each year, they will be fully deposited into the high-yield active deposit account of "Flexible Deposit".

        3. Maximization of benefits: Dividends deposited in flexible deposits not only continue to increase in value through the high interest rate of 2.435%, but also become a "buffer reservoir" for Alex to use to pay monthly credit payments at any time.

        The next time you face a large expenditure, why not ask yourself: "What will I lose if I use my own assets today?" and "What would be the cost if I switch to other sources of funding?" When you have a large amount of cash in hand, ask yourself: "How much of this money can be used to pursue returns? And how much should be reserved for future freedom?" Allowing division of labor and cooperation among funds to maximize overall financial efficiency is the true "choice of funds" to control wealth.

        Far Eastern International Bank Bankee reminds that currently 2.435% of high interest active deposits are composed of a flexible annual interest rate of 1.435% plus a fixed annual interest rate of 1.00% for activities. When the flexible interest rate is adjusted, the total preferential interest rate will also change accordingly; Fixed deposits and active deposits also have new funding recognition conditions, and actual allocation should still be evaluated based on the activity method and one's own funding needs.

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