The finest luxury of wealth isn’t a fancy car or home. It’s the ability to choose

When someone mentions wealth, I’ll bet you think about a few luxury brands like Mercedes Benz or Rolex. Perhaps your mind’s eye wanders to exotic vacations in Europe or Hawaii. Maybe you fantasize about a Learjet jaunt to visit a distant friend.

Those are all good and worthy of mention. But none of them matches choice – more options – as the finest luxury of all. It’s not so much that you will buy a Mercedes Benz but that you can if you want. Or a Cadillac, BMW, or Porsche for that matter.

Lack of choice is the opposite extreme.

I note the vehicles around me as I drive to work each day. There are nice cars, but the ones that make me smile are the junkers. I’m not smiling in laughter; I’m smiling in recollection of earlier days on our journey. Junk cars weren’t ever my goal but they were our reality in days before choice.

In fact, cars provide a great lesson. Everyone needs a car. Car choices are endless, but they are not endless for everyone. On the socioeconomic ladder, choices expand with each rung to the top. Those junkers? Mostly driven by people with little money, poor jobs and bad credit. Their car options are mostly limited to cash or “no credit check” dealers charging ridiculous interest rates.

As you step up a rung, more choices open before you. You might buy a good used car or an inexpensive new one. Now the car dealer can help with financing and so will your banker. You’ll be able to choose from a larger palette of automobiles and compare interest rates and payment terms (three-year, four-year, or more). Don’t like that price from one dealer? Cross the street to find another.

If nothing else, cars can offer some helpful lessons about credit and borrowing:

▪ Credit cards can be helpful for convenience and even for short-term loans. Maybe the washing machine died or you need a new suit for a job interview. Use the card and pay it off quickly. Even credit cards offer better terms and rates as your wealth grows.

▪ As your situation improves, so does your ability to borrow. But the ability to borrow doesn’t guarantee quality choices. Maybe your circumstances allow a $20,000 loan: is it better to buy a used Chevy or a new Kia?

Good borrowing is a choice, too.

Now a brief explanation. In business school, they teach that borrowed money can often be used to make more money. It’s called leverage, and some things we buy hold future value better than others. Borrowing to buy something that holds value is always better than borrowing for something that doesn’t.

Also, buying decent cars and houses provide collateral to your lender. Because of this, interest rates on these are lower than other loans. You’ve earned better choices. This helps answer the question about that used Chevy or new Kia. The right answer is the one that has more value after the loan is paid off.

This also helps explain why mortgages are wealth builders. Houses tend to rise in value, so a loan to buy one often produces long-term positive results.

Borrow to take a step up.

One last concept. Education is a good choice to move up the rungs. It may not be a sure thing but it’s likely to work better and faster than other options. Unfortunately, education costs money and a lack of money is one thing you’re trying to fix.

Borrowing for school can help (and is probably worth it) but there are some ideas to enhance your success:

▪ Choose a field and degree that pay well. It’s dumb to borrow a lot of money and earn a degree without commercial value. Use your electives to study the fun stuff.

▪ Find a respected community or state college and enroll there. I promise it will be meaningful and it will cost a fraction of the prestige party schools.

▪ Get involved with internships, practicum and experiential learning. Potential employers love people with experience, no matter how small. And many full-time staffers started as interns.

Smart borrowing can be a solid financial tool.

Borrowing is unique among financial tools. In a way, it is different from budgeting or coupon clipping or depriving yourself of things you want.

Experience teaches me that success comes from making good decisions. And, oddly enough, better buying and borrowing choices become available with every move up the ladder.

And the fruits of all those good choices? Yes, you guessed it. The finest luxury of all. More choices.

Dan Danford is a CERTIFIED FINANCIAL PLANNER professional and member of the Financial Planning Association of Greater Kansas City. He learned early ideas about money from his late father, Thad Danford, who charged rent on the family lawn mower while Dan cut neighborhood lawns. Danford is a practicing investment adviser at Family Investment Center.

This story was originally published April 28, 2020 at 12:00 AM.