Invest First, Then Spend: How to Own a Car Without Losing Your Capital

 

Invest First, Then Spend: How to Own a Car Without Losing Your Capital

Did you know we often lose money simply by doing things in the wrong order? Today, I want to share a powerful financial lesson inspired by Richard Jim’s talk: “How to buy a car without losing your capital?” Very similar to the idea in my latest book The Inverted Tithe: invest first, then donate.

Here’s what most people do: they save for years to buy a new car, pay it in full or take on debt, and then deal with all the associated costs—insurance, maintenance, taxes, repairs, depreciation... And in five years, that car has lost a lot of its value—or it’s worth nothing.

But what if we flipped the order?

The proposal: invest first, then spend

Let’s say you want to replace your car and are thinking about spending $30,000 USD. Instead of buying it outright or going into debt, why not invest that money first and use the income it generates to lease the car?

That’s exactly what Richard did. In 2015, he bought a luxury car — a Mercedes-Benz — for around $40,000 USD. Over five years, he tracked all associated costs: full coverage insurance, regular maintenance, taxes, tires, repairs... In the end, the total cost was $49,000 USD, and when he sold it, he only recovered $16,000 USD.

The net loss? $33,000 USD in five years — about $550 USD per month.

What if you invested that $40,000 USD instead?

Richard tried a different approach: he invested the $40,000 USD into financial instruments that paid monthly income, like high-dividend funds. With an average annual return of 11.24%, his investment generated about $374 USD per month.

After taxes (assuming a 19% rate), the net income was around $303 USD per month—enough to cover more than half the monthly cost of leasing a similar car (about $575 USD/month).

The result? He only had to pay $271 USD out of pocket each month, and he didn’t lose the initial capital—his $40,000 remained invested.
The key?

Change the order of your financial decisions: invest first, then spend. Exactly what I explain in my 2024 ebook, now available in several languages.

So how did he get those returns?

Here’s where it gets interesting: Richard invested in high-dividend closed-end funds (CEFs), very popular in the U.S. but still relatively unknown in Latin America.

Unlike traditional mutual funds or ETFs, these funds are designed to generate recurring cash flow—monthly income for the investor.

What are CEFs (Closed-End Funds)?

• They issue a fixed number of shares through an initial public offering (IPO).

• Those shares are then bought and sold on the secondary market, just like stocks.

• Since there are no forced redemptions, managers can hold long-term positions, creating portfolio stability.

• Many CEFs pay monthly dividends, with annual yields that can exceed 11%, investing in areas like corporate bonds, utilities, real estate, or fixed income.

Also, like REITs (Real Estate Investment Trusts), many CEFs are legally required to distribute at least 90% of their income to shareholders. That’s why their goal isn’t capital appreciation—it’s steady cash flow.

What about the capital?

It’s true that these investments focus more on cash flow than on capital growth. If you invest $30,000 USD today, in 15 years you might still have a similar amount—unless you reinvest some dividends or sell the fund at a higher price on the secondary market.

But if your goal is monthly income—to pay for a car, your children’s education, or even your retirement—this strategy can be much smarter than just spending your capital and ending up with nothing.

Final thoughts

The message is simple: if you change the order of your financial decisions, you can live better, spend less, and build a stronger future. This applies to buying a car, a home, or even making philanthropic donations.

Let me help you with your finances. Request your free, personal, and confidential Financial Needs Analysis today.

Invest first, enjoy later.
Your future self will thank you.

Happy and Healthy Sunday, June 8, 2025, from San José, Costa Rica
By Rafael A. Vilagut
📩 rafaelvilagut@gmail.com